Millions of Americans receive Social Security but are not knowledgeable regarding some important aspects of this beneficial program. It is important that you clearly understand this program in detail if you are to receive maximum benefits from it when you retire. Here are some considerations you need to take into account.
- Does Social Security cover everyone? The answer is, no. This federal program has eligibility rules and many people do not meet them and thereby fail to get retirement benefits. To receive the benefits based on one’s work history, one has to have at least 40 credits with the SSA (Social Security Administration). For the year 2015, you receive a credit for every $1220 you earn via wages or other earnings. You can earn up to a maximum of four credits every year. Most people will have to work for 10 years to receive retirement benefits on the basis of their own work history. Spousal benefits can be claimed by married people on the basis of their spouse’s work history. Survivors’ benefits are paid to those whose spouses have died, in which case the spouse, whose work history is being used to apply for benefits, has to meet the eligibility rules.
- Another mistaken belief people have is that the amount of taxes they pay has a direct impact on the amount they receive as Social Security benefits. SS’s progressive benefit formula pays a high percentage of one’s monthly earnings up to a certain point. However, as one’s income grows, lower percentages apply to bring down one’s overall benefit as a percentage of one’s career income. For the current financial year, while 90% of the first $826 in earnings goes towards one’s Social Security only 32% of the next $4154 and 15% of the earnings above $4980 goes towards SS. This means that lower income workers receive a greater percentage of income from the Administration. This is in keeping with the SS program’s purpose to function as a safety net.
- The SS Trust Fund can invest only in U.S. Treasury bonds. However, this is a special type of bond available only for the SS program. The bond price isn’t affected by interest rate changes and therefore the bond prices will not fall. The Trust Fund can redeem its bonds at full value any time. Fluctuating interest rates may however, have an impact on the Trust Fund. Low rates may reduce the income available to help pay benefits. The good news is that low inflation has kept the cost-of-living increases to a minimum.
Social Security retirement benefits and Social Security disability benefits are beneficial to Americans, ensuring them security and independence. It is important to make the right decision as to when to begin taking the benefits, because it has a direct impact on the people directly involved as well as family members and potential claimants.