Contrast With Private Pensions
Although Social Security is sometimes compared to private pensions, the two systems are different in a number of respects. It has been argued that Social Security is an insurance plan as opposed to a retirement plan. Unlike a pension, for example, Social Security pays disability benefits. A private pension fund accumulates the money paid into it, eventually using those reserves to pay pensions to the workers who contributed to the fund and a private system is not universal. Social Security cannot âprefundâ by investing in marketable assets such as equities, because federal law prohibits it from investing in assets other than those backed by the U.S. government. As a result, its investments to date have been limited to special non-negotiable securities issued by the U.S. Treasury, although some argue that debt issued by the Federal National Mortgage Association and other quasi-governmental organizations could meet legal standards. Social Security cannot by law invest in private equities, although some other countries and some states permit their pension funds to invest in private equities. As a universal system, Social Security generally operates as a pipeline, through which current tax receipts from workers are used to pay current benefits to retirees, survivors, and the disabled. When there is an excess of taxes withheld over benefits paid, by law this excess is invested in Treasury securities as described above.
A You Can Continue Working And Start Receiving Your Retirement Benefits
If you start your benefits before your full retirement age, your benefits are reduced a fraction of a percent for each month before your full retirement age.
You can get Social Security retirement benefits and work at the same time before your full retirement age. However your benefits will be reduced if you earn more than the yearly earnings limits.
After you reach your full retirement age, we will recalculate your benefit amount to give you credit for any months you did not receive a benefit because of your earnings. We will send you a letter that explains any increase in your benefit amount.
If you delay filing for your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit. If you also continue to work, you will be able to receive your full retirement benefits and any increase resulting from your additional earnings when we recalculate your benefits. Once you reach full retirement age, your earnings do not affect your benefit amount.
If you start receiving retirement benefits before age 65, you are automatically enrolled in Original Medicare when you turn 65. If you or your spouse are still working and covered under an employer-provided group health plan, talk to the personnel office before signing up for Medicare Part B. To learn more, read our Medicare publication.
How To Calculate Social Security Benefits
Lets say your FRA is 66. If you start claiming benefits at age 66 and your full monthly benefit is $2,000, then youll get $2,000 per month. If you start claiming benefits at age 62, which is 48 months early, then your benefit will be reduced to 75% of your full monthly benefitalso called your primary insurance amount. In other words, youll get 25% less per month, and your check will be $1,500.
That reduced benefit wont increase once you reach age 66. Rather, youll continue to receive it for the rest of your life. It may go up over time due to cost-of-living adjustments , but only slightly. You can do the math for your own situation using the Social Security Administration Early or Late Retirement Calculator, one of a number of benefits calculators provided by the SSA that can also help you determine your FRA, the SSAs estimate of your life expectancy for benefit calculations, rough estimates of your retirement benefits, individualized projections of your benefits based on your personal work record, and more.
Although the cost-of-living adjustments announced each year are usually only slight increases, Social Security benefits will increase by 5.9% in 2022, marking the largest increase since 1982.
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Social Security Cola History
Today, the Social Security COLA is determined using an automatic formula based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.
Social Security computes the COLA by averaging the CPI-W figures from the third quarter of each year and then comparing that with the previous years figure.
Before that, Congress awarded COLAs only periodically and generally in large amounts. For example, there was a 10% increase in 1971, a 20% increase in 1972, and two increases in 1974 totaling 18%.
Congress has made numerous changes to Social Security over the years, most often expanding benefits. For example, the pool of covered workers was expandedthe program initially covered only employment in commerce or industry, which was equal to about half of the jobs in the country. The disability insurance program was also created, survivor and dependent benefits were added, and the minimum age for receiving benefits was reduced. Importantly, benefit levels also were indexed to reflect wage growth over the workers lifetime, although getting that change right required more than one attempt.
To pay for these changes, payroll tax rates were increased along the way. The rate paid by both employers and employees was just 1% in the early days of the program, rising gradually to 5.35% in 1981. The rate has been 6.2% since 1990.
How We Deduct Earnings From Benefits
In 2022, if youre under full retirement age, the annual earnings limit is $19,560. If you will reach full retirement age in 2022, the limit on your earnings for the months before full retirement age is $51,960.
Starting with the month you reach full retirement age, there is no limit on how much you can earn and still receive your benefits.
Let’s look at a few examples. You are receiving Social Security retirement benefits every month in 2022 and you:
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Are under full retirement age all year. You are entitled to $800 a month in benefits.
You work and earn $29,560 during the year. Your Social Security benefits would be reduced by $5,000 . You would receive $4,600 of your $9,600 in benefits for the year.
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Reach full retirement age in August 2022. You are entitled to $800 per month in benefits.
You work and earn $63,000 during the year, with $52,638 of it in the 7 months from January through July.
- Your Social Security benefits would be reduced through July by $226 . You would still receive $5,374 out of your $5,600 benefits for the first 7 months.
- Beginning in August 2022, when you reach full retirement age, you would receive your full benefit , no matter how much you earn.
If you are eligible for retirement benefits this year and are still working, you can use our earnings test calculator to see how your earnings could affect your benefit payments.
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Records Pertaining To Spouses
If you plan to apply for spousal benefits from the Social Security Administration, there will be specific documents that need to be submitted. You will need to show that you are married before anything else. This can often be done through the use of your birth certificate, a photo ID, and a marriage license.
Those who have lost their marriage license can ask for a replacement to meet these requirements. Get in touch with the register of deeds in the county where your marriage took place. If you plan to apply for spousal benefits from an ex-spouse, you will need to have access to the appropriate divorce records. If these arent available, replacements can be provided from the county offices where the divorce occurred.
For individuals applying for Social Security survivor benefits, you will need to show a copy of your spouses death certificate. You will also need to provide this persons Social Security number. If you do not have the death certificate in your possession, the vital records office in the county of the death can provide you with one.
Information For Tricare Beneficiaries
If you have TRICARE and your withdrawal includes your Medicare Part A coverage, you may lose your TRICARE coverage. If you do not withdraw your Medicare Part A coverage, you may need to stay enrolled in Medicare Part B to keep your TRICARE coverage. For more information, visit TRICARE’s Beneficiaries Eligible for TRICARE and Medicare.
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Social Security Disability Insurance
For SSDI, the document requirements are considerably broader and the application is lengthier. Along with the usual personal data , youll need to provide extensive documentation of your medical history and treatment and file an Adult Disability Report.
The SSDI process also includes an interview, in person or by phone. Youll find detailed information in Social Securitys Adult Disability Starter Kit.
When you can file: There is no minimum age for SSDI but you must have done at least some work in which you acquired Social Security credits.
Where to file:Online, by phone or in person.
Do We Pay Death Benefits
A one-time lump-sum death payment of $255 can be paid to the surviving spouse if they were living with the deceased. If living apart, they were receiving certain Social Security benefits on the deceaseds record.
If there is no surviving spouse, the payment is made to a child who is eligible for benefits on the deceaseds record in the month of death.
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Required Information About Your Present And Past Employment
In addition to providing a wide range of information about yourself, you will also need to know numerous things about your employment history for your retirement benefits application. When applying, you will need to disclose who you worked for over the last two years and where those businesses are located. The amount of money that you earned over the last two years will also be required.
Other information regarding employment that is required to apply for benefits includes either a record of your earnings or a copy of your Social Security Statement. Individuals who dont have a copy of the statement can get one online by creating an account with the SSA. Other factors that will need to be disclosed on the application include:
- The dates you started and ended U.S. military service before 1968 if applicable
- Whether you or your spouse have even been employed with the railroad industry
- Whether youve been unable to work at any point in the last 14 months due to injuries, illnesses, or conditions and what dates work was not possible
- Whether you have received any Social Security credits in another country under its system
- Whether you expect to get or qualify for an annuity or pension from your employment under the Federal government or a state or local subdivision
If You Are The Survivor
Just as you plan for your family’s protection if you die, you should consider the Social Security benefits that may be available if you are the survivor that is, the spouse, child, or parent of a worker who dies. That person must have worked long enough under Social Security to qualify for benefits.
How Your Spouse Earns Social Security Survivors Benefits
A worker can earn up to four credits each year. In 2022, for example, your spouse can earn one credit for each $1,510 of wages or self-employment income. When your spouse has earned $6,040 they have earned their four credits for the year.
The number of credits needed to provide benefits for survivors depends on the worker’s age when they die. No one needs more than 40 credits to be eligible for any Social Security benefit. But, the younger a person is, the fewer credits they must have for family members to receive survivors benefits.
Some survivors can get benefits if the worker has credit for one and one-half years of work in the three years just before their death. Each persons situation is different and you need to talk to one of our claims representatives about your choices.
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Examples Of Deemed Filing Rules
Example 1: Maria turns age 62 after January 1, 2016. Her husband, Joe, is 65. They have each worked enough years to earn a retirement benefit. In March of 2020, Maria has reached her full retirement age and files for benefits. Maria is eligible for a spousal benefit on Joes record. Maria must file for both benefits. She can no longer file only for the spousal benefit and delay filing for her own retirement. She will receive a combination of the two benefits that equals the higher amount.
Example 2: Jennie is a 62-year-old widow. She is eligible for retirement benefits based on her work history, and she is also eligible for survivor benefits based on her deceased husbands record. She starts her survivor benefit this year and only applies for widows benefits. She does not start her own retirement benefit, allowing it to grow. At age 70, she starts her own increased retirement benefit, which she will receive for the rest of her life. The new law does not affect her because deemed filing does not apply to widows and widowers. Jennie will receive the higher of the two benefits
How Your Earning History Affects Your Monthly Benefit
Social Security is calculated based on a few factors, chiefly your life expectancy and your income historyspecifically, your top 35 earning years. The higher your income history, the higher your benefit will be in retirement.
But, just as theres a cap on earnings subject to Social Security tax each year , theres also a maximum monthly Social Security benefit. In 2022, that max was $3,345 if you start drawing at your FRA. See the chart below for a rundown of average benefits and maximum benefits depending on your age when you first claim Social Security.
For illustrative purposes only.
How do your expected benefits stack up against the averages? If you havent done so already, create a free, personalized account on the SSA.gov website. From there, you can see your entire work historyspecifically each years wages used to calculate your Social Security taxes. Youll also see a chart just like the one above, except it will show your benefit at each age. These amounts will be adjusted each time a new COLA is announced, but this can give you an idea how your benefits would look relative to todays world.
If you begin taking Social Security early, youll likely be shortchanging your future self, regardless of your work status. Consider two scenarios:
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Social Security: The Pros And Cons Of Increasing Eligibility To Age 70
This weeks midterm elections didnt bring the massive red wave many expected, but it seems likely Republicans will control the U.S. House when all the votes are counted, and they are still in play for the Senate. When the GOP does take control of at least part of Congress, many Americans will keep an eye on what they plan to do about Social Security.
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A plan released over the summer by the Republican Study Committee, titled Blueprint to Save America, proposes realigning the Social Security full retirement age to account for increases in life expectancy since the program was first established more than 80 years ago.
As noted in the RSC plan, the average life expectancy for men reaching 65 increased from 77.7 years in 1940 to 82.9 years in 2016. For women, the average life expectancy increased from 79.7 years to nearly 85.5.
Linking full retirement age to longer life expectancies means the FRA for Social Security would increase to age 70 from the current FRA of 66 and 67 years old, CBS News reported. The full retirement age is when you can collect full Social Security benefits. Claiming them earlier means you will get a smaller monthly payment.
U.S. Rep. Steve Scalise , the second-highest ranking House Republican, said the GOP wants to help save a program that is likely to run out of funds by the middle of next decade.
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What Happens When You Withdraw Your Application
There are a few things to know before deciding to withdraw your application.
- Anyone else who receives benefits based on your application must consent in writing to the withdrawal.
- You must repay all the benefits you and your family received from your retirement application. This includes:
- Benefits your spouse or children received, whether they live with you or not.
- Money withheld from your Social Security retirement checks for:
- Medicare Part B, Part C, and Part D premiums.
- Voluntary tax withholding of federal income taxes for closed tax years. Contact the Internal Revenue Service or your tax advisor about any tax implications.
- If you are already entitled to Medicare, you may choose to also withdraw your Medicare coverage.
If you are also entitled to railroad or veterans benefits, you should check with the Railroad Retirement Board and the Department of Veterans Affairs about how your withdrawal affects those benefits. The RRB and the VA make their own determinations and are responsible for their own programs.
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Social Security Disability Benefits Faq
Social Security benefits are most commonly used to help retirees cover expenses. But the Social Security Administration also has disability benefits available to those who meet certain strict requirements.
In this context, a disabled person is someone who is medically unable to work for at least a year or has been diagnosed with a medical condition that will result in death. To qualify for disability payments, youll need to have worked for a specified period of time before being declared disabled. A medical provider will also have to certify that your disability exists.
Lets go over some of the most commonly asked questions about Social Security disability benefits.