If you lot’re thinking near retiring soon or are nearing your 60th altogether, you’re probably also starting to wonder more virtually Social Security benefits. There’s a lot to learn and some of the rules can get complex, which tin make understanding how and when to get benefits — and what they include — somewhat of a claiming. Before y’all begin the process of applying for Social Security, go started by reviewing some of the basics well-nigh the plan to reply some mutual questions you lot might accept.
Commencement things first: What is Social Security? Originally signed into constabulary by President Franklin D. Roosevelt in 1935, what we call Social Security actually refers to what’s officially known equally Former Historic period, Survivors and Disability Insurance. It’s funded by payroll taxes — money paid out by employees via paycheck deductions and by employers — and is a form of social insurance administered by the U.Due south. federal authorities. This ways that it’s a programme that involves the government participating in the insurance market to provide extra assistance to sure groups and protect them against financial bug that ascend later on emergencies.
Perhaps the best-known and largest component of Social Security is the retirement benefits it pays out. In that case, these payments are intended to keep people who worked lower-wage jobs throughout their lives from living in relative poverty when they leave the workforce every bit they historic period. However, the Social Security Assistants (SSA) also makes payments to people with disabilities who cannot work and to survivors of workers who’ve died. According to the SSA, the purposes of these payments are “to provide for the textile needs of individuals and families, “to protect aged and disabled persons against the expenses of illnesses that may otherwise use up their savings” and “to keep families together.”
It’s important to note that Social Security benefits are intended to exist supplemental — that is, they’re non supposed to serve as someone’s sole source of income when they retire. The benefit payments are meant to provide a heave to other retirement income, such as a alimony.
Social Security Eligibility: The Credit System
Depending on your life circumstances, you could exist eligible to receive Social Security benefits at whatsoever age — not just the traditional retirement age of 62. For example, to receive disability benefits, yous may be eligible at almost any age as long as y’all’ve worked long enough and recently enough and have a qualifying medical condition that limits your ability to work. You may also be able to receive survivors benefits in some circumstances if y’all’re a surviving family fellow member of a deceased person who “worked long enough in jobs insured under Social Security to qualify for benefits.”
Disability and survivors benefit payments accept relatively straightforward eligibility requirements to run across. Social Security retirement benefits do too, but the ways eligibility and amounts are determined and the details involved can look somewhat complicated at first glance. Agreement eligibility for Social Security benefits involves learning about credits starting time.
Your eligibility for receiving Social Security is based in office on credits that you earn while working. When you’re employed and Social Security taxes are deducted from your paycheck for receipt by the Internal Revenue Service (IRS) yous start earning credits. These credits are based on the amount of money y’all earn each year, and yous can earn up to 4 credits per yr. For example, in 2020, earning $1,410 in wages at your chore earns you one credit. Using this number as another example, one time you’ve earned $v,640 ($1,410 x 4) in wages from your job, yous’ve earned your four credits for the year and cannot earn more than credits until the next year. The base corporeality of money you need to earn from your job to earn one credit increases slightly each year to business relationship for inflation.
To qualify to receive Social Security retirement benefits, yous must earn at least forty credits, which equates to ten years’ worth of piece of work. Yous don’t need to work 10 consecutive years to earn the credits, however. Any credits you receive remain on your Social Security tape, and if you lot exit a job and render to the workforce years later, you can begin accumulating credits again until you reach xl and become eligible for benefits payments.
The number of credits needed to determine your eligibility for disability or survivors benefits depends on your historic period; generally speaking, the younger you are, the fewer the number of credits is that you demand to become eligible. The age tabular array on the Social Security Administration’s website can give y’all a better idea of the number of credits relative to your age that you’ll need to accept earned to determine eligibility for disability or survivors benefits.
What Function Does Your Age Play?
Every bit mentioned, age can be a determining factor in the number of credits you lot’ll need for eligibility for ii types of payments. However, when it comes to retirement benefits, your age can as well play a role in not but when you’re eligible to start receiving payments but besides in the amounts of those payments. In detail, yous’ll want to think about the age at which you decide to get-go claiming your Social Security retirement payments.
The age when yous start claiming determines whether you receive 100% of your Social Security benefits. If y’all’re eligible to receive Social Security retirement benefits, you can start getting them as early on as age 62. However, your payment amounts will be less than they are if y’all wait until what’s chosen your “full retirement historic period.” This is the age at which you lot’re eligible to receive 100% of your benefit amount every month, and it’s typically between ages 66 and 67, depending on the year you were born. And so, drawing before than your full retirement age results in y’all receiving a reduced amount in benefits — the Social Security Administration notes that you’ll get about 28% less than you would if you lot wait until age 66.
Waiting until you’re older than total retirement historic period to quit working and draw benefits can also touch the corporeality you receive every calendar month. Because yous’re working longer, you lot’ll receive a larger monthly amount than if y’all retired at 66. For each month you delay claiming benefits, the amount yous can receive monthly increases slightly, and if yous wait until age 70, you’ll go 132% of your Social Security benefit amount. Once you turn 70 and haven’t started claiming yet, your benefit amount won’t continue increasing, so that 132% is the most yous can get each month if you delay claiming to continue working.