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Your Social Security Benefits

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Get prepared for life: Things You Need to Know About Social Security

Social Security was introduced after the Great Depression to help senior citizens who were unable to collect sufficient retirement savings. The 1935 Act was never meant to be the primary income source after retirement. Initially, most of the citizens never gave it much importance because of lower lifespans and guaranteed pensions. However, it is not the case anymore. Today, Social Security benefits have become a significant element in post-retirement planning. Due to the expansive scope of the Social Security net in the U.S., it touches the lives of nearly every American family.

It not only provides a social safety net for older Americans, but also to disabled workers, dependent children, and families with a deceased parent or spouse.

According to the Social Security Administration, about 63 million beneficiaries received Social Security benefits as of 2018. Seventy percent of them were retired workers, while 14 percent of the beneficiaries received disability benefits. The remaining were young survivors or spouses and children of disabled and retired workers. Source

Social Security benefits have replaced a significant percentage of the workers’ pre-retirement income. In 2018, the average monthly benefit was around $1,413 per month, replacing about 40 percent of the average beneficiary’s past earnings.

COVID-19 Impact

As the global economy heads towards another recession due to the COVID-19 crisis, there is a need to maximize Social Security benefits to help average Americans plan a comfortable retirement life. This is possible only if you have a proper understanding of Social Security and how the program works.

In this guide, we will walk you through all the important things that you need to know about Social Security. For better comprehension, here is a breakdown of the topics that we will cover in this blog.

  • How to apply for Social Security 
  • Eligibility for Social Security benefits
  • Types of Social Security benefits
  • Full Retirement Age (FRA)
  • When can you claim for benefits?
  • Social Security Trust Fund
  • Future of Social Security

After reading this blog, you will have all the information required to take full advantage of your Social Security benefits.

Social Security benefits
Image by Gerd Altmann on Pixabay

Eligibility for getting Social Security benefits:

To qualify for Social Security benefits, you will need to earn 40 social security credits. You can earn a credit for each 1,410 USD you earn in 2020. However, you can’t receive more than four credits in a single calendar year.

It means that you will have to earn $5,640 for a total of 10 years to get 40 credits and qualify for social security benefits.

To be able to receive benefits, you must be at least 62 years old, three months away from 62nd birthday, to be precise. You must also be ready to start receiving your benefits within four months before applying for social security.

How to apply for Social Security?

There are a few methods to apply for your social security benefits. They include:

  1. Online application at ssa.gov
  2. In-person at the local social security office
  3. Via phone by calling the number toll-free 1-800-772-1213

Among the three methods, online application is the easiest and fastest. You will need to visit the official Social Security Administration website and enter personal information such as name, address, and social security number. The entire process shall take no more than 15 minutes to complete.

Application over the phone is a good alternative to the online process. You can also apply in person, but the process will not be the fastest. It is advised to make an appointment before you apply in person.

Required information:

The application process is simple, but you will need to gather the necessary information so that the process goes smoothly. The information that you will require may include:

  • Date & place of birth
  • Military service information (if applicable)
  • Employment information for the current year and previous two years
  • Information about marriage and divorce
  • Names and dates of birth of children who are 18 or younger, unmarried, or disabled.
  • Bank deposit information

The form will also ask for information about Medicare or other social security benefits. If you are married, your spouse will be required to provide personal information to qualify for spousal benefits. If you are divorced, you’ll have to provide your ex-spouse’s information as well.

Sitting together
Photo by Elien Dumon on Unsplash

Full Retirement Age?

Full retirement age (FRA), also known as normal retirement age, is the age at which you become eligible for social security benefits. The normal retirement age had been 65 years under the 1935 Act, but it has been amended due to the increase in lifespan and improvements in health facilities.

FRA was raised in the Social Security Amendments of 1983 to reduce the financial burden on Social Security. As a result of the amendments, FRA increased from 65 to 67 between 2003 and 2006. However, there will be an eleven years gap during which FRA will remain at 66.

Here is a detailed overview of the normal retirement age for different years of birth.

Year of birthfull retirement age
1937 OR earlier65 years
193865 + 2 months
193965 + 4 months
194065 + 6 months
194165 + 8 months
194265 + 10 months
1943-195466 years
195566 + 2 months
195666 + 4 months
195766 + 6 months
195866 + 8 months
195966 + 10 months
1960 or later67 years


Types of Social Security benefits:

Social Security benefits can be of four types, based on the beneficiary. Below, we present a summary of each type.

Retirement benefits:

Retirement benefits are the most common type of social security benefits. They are available to people who are 62 years or older with a work history of at least ten years. Retirement benefits depend on your salary before retirement and the age at which you start receiving the benefits. 

As per the recent publication of Social Security Administration on benefits, the average estimated monthly social security benefit for all retired workers will be around $1,503 in 2020. Retired workers with an aged spouse are eligible to receive $2,531 each month.

Disability benefits:

Disable people who are unable to work, get disability benefits. To be eligible for disability benefits, you need to have a work history for a certain number of years. The number of working years depending on your age, while the benefit amount is determined from your pre-disability salary. 

The average benefit for disabled workers will be around $1,258 per month in 2020. If the recipient has a young spouse and one or more children, the benefit rises to $2,176. 

However, it is recommended to acquire the services of a Social Security Disability Lawyer before claiming the benefits. They can not only help you speed up the process but can also help you maximize your disability benefits.

Survivors benefits:

Survivors’ benefits help the survivors or dependents of workers and retirees. The beneficiary may include widows, widowers, children, and divorced spouses. Same-sex couples are also eligible for social security survivors’ benefits. The benefits amount depends on various factors. Some of them include:

  • Age of the worker at death
  • Age of the survivor
  • Relation of the survivors to the worker
  • Salary of the deceased worker

SSA estimates the average monthly benefit amount for an aged widow or widower to be around $1,422 this year. If the widow or widower is young but has two children, he or she may receive $2,904 each month.

There is also a one-time ‘death benefit’ of $255 for the spouse or children of the deceased worker. Further details about the survivor benefits can be found in the later section of the blog.

SSI benefits:

Supplemental Security Income, or shortly SSI, benefits are designed for individuals who cannot earn sufficient wages on their own. SSI benefits are available to adult workers with disabilities or senior citizens. 

In addition to disability benefits, individuals with a significant work history can access Supplemental Security Income benefits. The benefit amount will depend on the recipient’s current sources of income and the place they live.

Social Security funding:

Social Security is funded primarily through the Federal Insurance Contributions Act (FICA) and Social Security taxes. More than 177 million people paid the Social Security taxes as of June 2019. These are all dedicated payroll taxes, and the method of funding has remained unchanged since the inception of the program.

The process of Social Security funding is quite simple. People pay the taxes, and the Social Security Administration uses the money to pay benefits to the retired workers, people with disabilities, survivors, and dependents of the beneficiaries. The money that remains unused goes to the Social Security Trust Fund and is invested by the U.S. Treasury to finance government operations.

Retirement age
Image by Gerd Altmann from Pixabay

At what age can you claim Social Security retirement benefits?

Although there is a specific FRA, workers can claim retirement benefits between the ages of 62 and 70. If you claim the benefits before reaching the normal retirement age, you can expect a considerable reduction in your social security benefits. 

To be more specific, if you claim your social security three years before the retirement age, your benefits will be reduced by 6.67 percent per year. If the gap between the claim and retirement age is more than three years, you may see a reduction of 20 percent, plus an additional 5 percent reduction per year until you reach the full retirement age. In short, the earlier you claim your retirement benefits, the fewer benefits you will receive.

Conversely, people who do not claim their benefits even after reaching the normal retirement age will see a permanent increase in their benefits. There is generally an 8 percent increase in benefits for every year that you wait beyond the normal retirement age. However, the increment stops after you reach the age of 70.

Here is a chart for a better understanding of the concept:

Age at which you claim the benefitsPercent of monthly benefits
70124 percent
69116 percent
68108 percent
67100 percent (full benefit)
6693.3 percent
6586.6 percent
6480 percent


Can you work and still get Social Security benefits?

The short answer is ‘Yes.’ You can claim Social Security benefits as long as you are 62 years old. However, the Social Security Administration sets a yearly limit on your earnings.

If you are getting the benefits before FRA, but earn more than the limit, your retirement benefits will be lowered depending on how much you earn. However, the reduction is only temporary as you receive all the withheld amount once you reach FRA.

How much does a survivor receive in Social Security benefits?

The Social Security survivors’ benefits program can be quite confusing for a lot of people. If a beneficiary dies, the family members can collect the benefits based on the conditions mentioned earlier in the blog. Below, we present a rundown of the amount of money that a certain survivor can get of your benefit.

Survivor’s relation to the beneficiaryLevel of benefit
Widow/widower who has reached FRA100 percent
Widow/widower who is at least 60 years old71.5 – 99 percent
Widow/widower aged 50 to 59 and disabled71.5 percent
Widow/widower caring for a child under 1675 percent
your qualifying child75 percent
parents72 percent each
one of your parents82.5 percent


Taxes on Social Security benefits:

Most people are familiar with Social Security taxes, but many are still unaware of the fact that the Social Security benefits are taxable. Benefits were considered tax-free up until 1984, but as the financial burden on the program intensified, it was decided to tax the beneficiaries. The amount of tax, among other things, depends on your earnings and benefits.

What lies ahead for Social Security benefits?

Many people believe that the Social Security program will go bankrupt due to changes in demography and increased life expectancy. However, these concerns are misplaced because Social Security has two recurring sources of income.

The 6.2 percent (for employers) or 12.4 percent (for self-employed individuals) payroll tax and the tax on Social Security benefits ensure that money continues to flow into the program. This money will be enough to pay out around 77 percent of the benefits. So, the possibility that the program will go bankrupt is practically zero.