Social Security… a complicated topic that most don’t ever want to discuss. To be fair, it is a complicated topic, and it’s understandable if you prefer to just push it to the side, but you should know the basics considering it is a critical form of retirement income for many.
First, what is Social Security?
Social Security is part of the Old-Age, Survivors, and Disability Insurance (OASDI) program. This social welfare program was enacted by the U.S. federal government as a way to pay benefits to retirees. There are many benefits to Social Security including: retirement income, disability income, Medicare and Medicaid, and death and survivorship benefits.
Social Security is a fund that you pay into over the course of your life, leading up to retirement. It pays out hundreds of billions of dollars a year which makes it one of the largest government programs in the world.
Here are 5 things you probably don’t know about Social Security:
1.It could be your most critical source of retirement income
For many, Social Security is actually their greatest source of retirement income. Many people falsely think that Social Security is a small, side income when they retire, but the reality for many is it is the greatest. According to the Social Security Administration, Social Security replaces 40% of an average person’s wages after retiring.
It is also important to remember that the cost of living determined by Social Security is adjusted depending on the Consumer Price Index, which changes each year.
2. You decide when you take Social Security
Most people are unaware that you can, in fact, decide when you want to start receiving your benefits from Social Security. The chart at the bottom of this section shows that the age where full benefits are payable depends on the year you were born.
You can start receiving benefits as early as age 62, but this will reduce your benefits each month until you reach the retirement age.
You can also do the opposite and delay receiving benefits until after your retirement age, in which they will increase annually.
Side note: It is important to plan ahead for retirement. You may want to consider looking at your Medicare benefits besides your Social Security benefits to see what is to be expected.
Unsure of how to do this? Or feeling behind on retirement plans? Contact us and we can help.
The Ages for Receiving Social Security Benefits
3. You can use Social Security as a family benefit.
This is also something most people are unaware of! Spouses and children are both eligible to receive benefits from Social Security when you start receiving payments. Even if your spouse never earned income, they can qualify for benefits. If they are 62 years of age or older, they can receive benefits. They can also receive benefits if they are taking care of your child, who is 16 years or younger, or disabled.
As for your children, they can receive benefits as long as they are unmarried and younger than 18. An exception is if they are between the ages of 18 and 19 and enrolled in school full-time. Another exception is when they are severely disabled.
What are the benefits, you might be asking?
There is a varied family limit, but your family member could be eligible to receive benefits each month that can equal half of your benefit amount.
4. If you die, your family is also eligible to receive your benefits
If you die, the ones you live behind will receive a varied percentage of what would have been your Social Security benefit. This can range from 75% to 100% but is paid usually 150% to 180% of your rate.
The benefits can include:
● A widow or widower
○ age 60 or older;
○ age 50 and older if disabled; or
○ any age if he or she is caring for your child who is younger than 16 or disabled and entitled to Social Security benefits on your record.
● Unmarried children can receive benefits if they are:
○ under 18 years of age;
○ between 18 and 19 and are full-time students in a secondary school; or
○ age 18 or older and severely disabled (the disability must have started before age 22).
5. Divorced spouses can also be eligible to receive benefits
This one always comes as a surprise! Yes, you can qualify to receive Social Security benefits, even if you are divorced. There are a few specifics with this the first being your ex-spouse must first reach the age where they are able to receive benefits. Even if they are not receiving the benefits, you can.
● have been married to your ex-spouse for at least 10 years;
● have been divorced two years or longer;
● be at least 62 years old;
● be unmarried;
● not be entitled to a higher Social Security benefit based on your own work history.
As you can see, there are a variety of things about Social Security that are not common knowledge! Unfortunately, they don’t teach these things in school, unless, maybe, you go as a Finance major. Luckily, we are here to help! If you have any questions, or need clarification, let us know and we can help you.