Social Security Entitlement Requirements
Many people who are eligible for Supplemental Security Income may also be entitled to receive Social Security benefits. In fact, the application for SSI benefits is also an application for Social Security benefits. We often need to obtain additional information from the person before we can award Social Security benefits.
The following sections provide information on who may be entitled to Social Security benefits.
TO BE ELIGIBLE FOR SOCIAL SECURITY BENEFITS AS A WORKER YOU MUST BE:
Age 62 or older, or disabled or blind and
“Insured” by having enough work credits.
For applications filed December 1, 1996, or later, you must either be a U.S. citizen or lawfully present alien in order to receive monthly Social Security benefits.
HOW MUCH WORK DO YOU NEED TO BE”INSURED”?
We measure work in “work credits”. You can earn up to four work credits per year based on your annual earnings. The amount of earnings required for a work credit increases each year as general wage levels rise.
To be eligible for most types of benefits , you must have earned an average of one work credit for each calendar year between age 21 and the year in which you reach age 62 or become disabled or blind, up to a maximum of 40 credits. A minimum of six work credits is required, regardless of age.
The rules are as follows:
|Born After 1929
WHO CAN RECEIVE BENEFITS ON YOUR EARNINGS RECORD?
If you are receiving retirement or disability benefits, your spouse may qualify if he or she is:
What Is The Maximum Benefit
The allowed Social Security retirement benefit for a spouse starts at 32.5% at age 62 and gradually increases to 50% of the amount that their spouse is eligible to receive at full retirement age, which is 66 or 67 depending on their birth year. Even if the spouse delays collecting Social Security until age 70, he or she still gets only 50% of their spouses full amount. So, it is important to claim benefits at your full retirement age, because that will be the most you are eligible to receive.
Note that the maximum benefit for a spouse is 50% of their spouses benefit. That means that your spouse would have had to earn a substantial amount more over his or her working life to make that benefit higher than your own individual benefit. Thus, if both partners are eligible for relatively similar benefits, it makes more sense for each partner to file individually at full retirement age or at age 70, if possible.
Widows and widowers may be able to receive up to 100% of the deceased spouse’s Social Security benefit. Social Security uses a formula for families with more than one eligible dependent to calculate maximum benefits.
Is Social Security Based On The Last 5 Years Of Work
Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or indexed to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most.
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When You Can’t Claim The Maximum Benefit
You might be able to put in 35 years in the workforce, and you may be willing to delay your Social Security filing until age 70. It’s the earnings component that’s harder to control.
If you’re not in a very high-paying industry, then earning the equivalent of the yearly wage cap may not be feasible. And all the side-hustling in the world may not boost your income enough for you to reach that cap.
But if you’re not eligible for the maximum Social Security benefit, don’t stress. Instead, think of the different things you can do to supplement those benefits so you wind up with a comfortable retirement income.
One option, of course, is to consistently fund an IRA or 401 plan during your working years. You might also consider investing in assets that generate ongoing income, such as buying a home that you rent out.
You can also consider working part-time in retirement if you want more money than what Social Security is looking to pay you. And if you don’t want to go out and get a boring job, find a hobby you can monetize, like baking or crafting.
The reality is that most seniors on Social Security collect a lot less than $4,194 a month. If you end up being one of them, don’t beat yourself up over it. Instead, focus on the things you can do to increase your retirement income and enjoy a more satisfying lifestyle.
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Myth #: Your Benefits Are Based Only On Wages You’ve Earned Before Age 65
How your Social Security benefit is calculated can seem mysterious. However, it’s important to know a few essential facts to aid your claiming strategy. You can use the tools on SSA.gov to do the calculations.
- Your benefit is calculated based on your highest 35 years of earnings they don’t have to be consecutive years or before age 65.
- If you work past age 65, those earning years will be included, so long as they are high enough to be part of your highest 35 years.
- Even working part-time after turning 65 may be part of your highest 35 years of earnings.
- To be eligible for Social Security, you must have a minimum of 10 years of covered employment , which equates to 40 credits in the Social Security system.
- If you don’t have 35 years with earnings, zeros will be included in the calculation.
Read Viewpoints on Fidelity.com: Social Security tips for working retirees
What Is Social Security
Social Security is a federal program that issues benefits to retirees who paid into the program during their working years, people unable to work due to a physical or mental condition, spouses and children of beneficiaries, and surviving family members of beneficiaries.
Effect Of Delaying Retirement Benefits
1Represents Full Retirement Age based on DOB January 2, 1960
2PIA = The primary insurance amount is the basis for benefits that are paid to an individual
That higher baseline would last for the rest of your retirement and serve as the basis for future increases linked to inflation. While it’s important to consider your personal circumstancesâit’s not always possible to wait, particularly if you are in poor health or can’t afford to delayâthe benefits of waiting can be significant.
Be aware that if you decide to wait past age 65, you may still need to sign up for Medicare. In some circumstances your Medicare coverage may be delayed and cost more if you don’t sign up at age 65. If you start Social Security benefits early, you’ll automatically be enrolled into Medicare Parts A and B when you turn age 65.
Your annual Social Security statement will list your projected benefits between age 62 to 70, assuming you continue to work and earn about the same amount through those ages. If you need a copy of your annual statement, you can request one or view it online on the Social Security Administration portal.
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What If I Take Benefits Early
If you choose to take your own Social Security benefit before your full retirement age, be aware that the benefit is permanently reduced by five-ninths of 1% for each month. If you start more than 36 months before your full retirement age, the worker benefit is further reduced by five-twelfths of 1% per month for the rest of retirement.
For example, let’s assume you stop working at age 62. If your full retirement age is 67 and you elect to start benefits at age 62, the reduced benefit calculation is based on 60 months. So, the reduction for the first 36 months is 20% and then another 10% for the remaining 24 months. Overall, your benefits would be permanently reduced by 30%.
But Things Get Really Bad Over Time
Compounding this over a 20-year retirement makes things far worse. If the next 20 years see inflation averaging at its long-term historical 3.5 percent a year, prices 20 years from now would be about $199 per current $100. If the average increases slightly to just 4 percent, 20 years from now, prices would be $219 per current $100. Over that time, CPI-W-based COLAs would increase $100 of current benefits to $188 for 3.5-percent average inflation and $205 for the 4-percent case.
In those 20 years, the average retired couples benefit would thus increase in those two cases from $34,046 to $56,486 or $61,594, respectively, while $34,046 worth of expenses would have increased to $59,792 or $65,801, respectively. Thus, the retired couple would have a $3,306 benefit shortfall with 3.5-percent average inflation or a $4207 shortfall with 4-percent average inflation.
As you can see, the higher inflation goes, the worse the shortfall caused by using CPI-W instead of CPI-E. Changing over to the C-CPI-U would make things vastly worse for retirees.
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How Does The Social Security Administration Calculate Benefits
Benefits also depend on how much money youâve earned in life. The Social Security Administration takes your highest-earning 35 years of covered wages and averages them, indexing for inflation. They give you a big fat âzeroâ for each year you donât have earnings, so people who worked for fewer than 35 years may see lower benefits.
The Social Security Administration also makes annual Cost of Living Adjustments, even as you collect benefits. That means the retirement income you collect from Social Security has built-in protection against inflation. For many people, Social Security is the only form of retirement income they have that is directly linked to inflation. Itâs a big perk that doesnât get a lot of attention.
Criticism Of Social Security
A primary criticism of Social Security is that at some point in the futureâperhaps as early as the year 2034âthe Social Security trust funds will no longer be able to pay full benefits scheduled under current law.
Although the trust fundsâ projected shortfalls are typically attributed to lower birth rates and increased life expectancies for workers, some groups criticize the management of the trust funds themselves.
The Social Security Advisory Board, for example, has pointed out that the trust funds are invested solely in Treasury bonds, which have historically underperformed compared to the stock market. The board noted that if the trust funds were invested in stocks, the heightened returns could significantly mitigate their projected funding shortfalls.
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The maximum Social Security retirement benefit that you can receive depends on the age when you begin collecting and your earnings history, among other factors. In 2022, the maximum is $3,345 per month for someone who files at full retirement age at age 66. But $4,194 is the absolute highest benefit for those who qualify and delay claiming until age 70.
When Does Social Security Benefits Recalculate
Social Security benefits are evaluated each year. That is, the Social Security Administration reviews benefits each year for the previous years income. If the latest year is one of your highest-earning years, your benefit is recalculated to reflect the increased benefit duewhich is retroactive to January of the year after you earned the money.
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When Will I See The Increase In My Social Security Check
The annual increase goes into effect with December benefits, which appear in checks dated January 2023.
Social Security payments follow a rollout schedule based on the beneficiary’s birth date: If you were born from the first day through the 10th day of the month, your benefits are paid on the second Wednesday of the month.
If your birthday falls between the 11th and 20th, your check is paid on the third Wednesday, so you’ll see your first COLA increase on Jan. 18, 2023.
Retirees born between the 21st and the last day of the month receive benefits on the fourth Wednesday. In that instance, your first increase would appear on Jan. 25, 2023.
Beneficiaries should then receive letters detailing their specific benefit rate in December. You can also check your rate on the My Social Security website.
Are There Retirement Benefits For My Family Members
Once you start collecting Social Security, other family members may be entitled to collect benefits as well, based on your work history. If youve been married for at least one year, your spouse may be entitled to collect spousal benefits. Under certain conditions, your children may also be entitled to benefits.
There is a limit on the amount of benefits that family members receive on the earnings record of one worker. The limit varies between 150% and 188% of the workers PIA. If the total benefits owed to your spouse and children push your familys benefits above the limit, their benefits will be reduced proportionately to bring the total within the limit. Your benefits will not be affected. Any benefits payable to an ex-spouse arent included in the family maximum.
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Can I Still Collect Spouse And Survivor Benefits After Divorce
You may be eligible for spousal benefits based on your ex-spouses earnings history if you were married for at least 10 years, have been divorced for at least two years, and both you and your ex-spouse have reached age 62.
These benefits include the same 50% that applies to married couples. But as with survivor benefits, if you earned a government pension while not paying into Social Security, your benefit could be reduced as a result.
Should your ex-spouse pass away, you may also be eligible for survivor benefits. You could receive the same benefits as a widow or widower, without affecting the benefits of other survivors. Similarly, if your ex-spouse remarries, you can still receive benefits without impacting the benefits of his or her current spouse.
Can I Collect My Retirementbenefits Early
You can start collecting Social Security as early as age 62 but theres a catch. If you collect before you reach your full retirement age , youll receive a lower monthly payment permanently. For example, if your FRA is 67, but you begin to claim benefits at 62, youre signing up to get 30% less. However, this reduction will decrease for each month you wait after age 62, up until your FRA. Think of your FRA as your break-even point.
Age to receive full Social Security benefits2
65 + 2 months for every year after 1937
66 + 2 months for every year after 1954
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Provision For Disability And Incapacity
Disability and incapacity are often confused, but the benefitsintended to respond to them depend on different criteria, and thecircumstances need to be dealt with distinctly. The kind of disabilitywhich is generally being responded to by benefits systems – which isnot the full range of circumstances by any means – is likely to beeither a physical impairment, or a functional limitation in ordinaryactivity. Provision for disability in these senses is made manyreasons, including
- compensation for disability
- meeting the extra financial costs of disability
- providing for people who are likely to be on low incomes in thelong term
- rehabilitation ,
- equal opportunities, or
- social inclusion and participation in society.
Incapacity, by contrast, refers to the situation where people aretoo sick to work, or unable to do work that they did previously.Disability might be one reason for incapacity, but so might besickness, or a range of fluctuating conditions which affect people fromday to day or month to month. The aims of provision for incapacityinclude
- social protection and insurance
- income maintenance, and income smoothing
- economic efficiency, by excusing some people from work, or
- early retirement.
Social Security Number Theft
Because Social Security Numbers have become useful in identity theft and other forms of crime, various schemes have been perpetrated to acquire valid Social Security Numbers and related identity information.
In February 2006, the Social Security Administration received several reports of an email message being circulated addressed to “Dear Social Security Number And Card owner” and purporting to be from the Social Security Administration. The message informs the reader “that someone illegally is using your Social Security number and assuming your identity” and directs the reader to a website designed to look like Social Security’s Internet website.
“I am outraged that someone would target an unsuspecting public in this manner,” said Commissioner Jo Anne B. Barnhart. “I have asked the Inspector General to use all the resources at his command to find and prosecute whoever is perpetrating this fraud.”
Once directed to the phony website, the individual is reportedly asked to confirm his or her identity with “Social Security and bank information”. Specific information about the individual’s credit card number, expiration date and is then requested. “Whether on our online website or by phone, Social Security will never ask you for your credit card information or your PIN,” Commissioner Jo Anne B. Barnhart reported.
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What Else Affects Your Retirement Benefits
Everyones retirement is unique. Beyond deciding when to begin receiving retirement benefits, other factors that can affect your benefits include whether you continue to work, what type of job you had, and if you have a pension from certain jobs.
Continuing To Work
You can choose to keep working beyond your full retirement age. If you do, you can increase your future Social Security benefits. Each extra year you work adds another year of earnings to your Social Security record. Higher lifetime earnings can mean higher benefits when you choose to receive benefits.
Specific Types Of Earnings
While Social Security earnings are calculated the same way for most American workers, there are some types of earnings that have additional rules.
Earning types with special rules include:
Pensions And Other Factors
Pensions and taxes have the potential to impact your retirement benefit. Review the resources below on pensions and other factors you should consider:
- Windfall Elimination Provision : If you have a pension from a job for which you didnt pay Social Security taxes, this policy may lower your retirement benefits.
- Government Pension Offset : This policy affects benefits as a spouse, widow, or widower if you have a pension from a government job for which you didnt pay Social Security taxes.
- Income Taxes And Your Social Security Benefits: You might have to pay federal income taxes on your Social Security benefits in certain situations.