Everyone needs to understand Social Security so that they can properly plan for their retirement. People who are nearing retirement should be aware of the fact that Social Security comprises an essential part of their retirement income and that this income is guaranteed for life if they meet certain criteria. The Social Security program provides more than just financial resources; it also offers disability and survivor benefits, so those with a family should consider how these programs may help in times of need.
Understanding Social Security can help individuals save money by providing them with options to choose the right retirement plan depending on their circumstances. Read on for our crash course guide to social security so that you have a better understanding of how it applies to your circumstances.
How Social Security Works
Social Security is a program funded by taxes that working Americans pay throughout their lifetimes, intended to help those facing financial insecurity due to retirement or disability. It provides income and benefits to qualifying disabled workers, retirees, their families, and legal dependents in the event of death. To receive Social Security income, individuals must meet certain criteria, typically related to both past earnings and age. Eligibility can also be determined based on a spouse’s benefit instead of one’s own.
The amount of Social Security income an individual will receive largely depends on the number of credits they have earned throughout their lifetime; the longer a person has worked and contributed to Social Security, the higher their benefits are likely to be when they retire or suffer from a disability.
Eligibility requirements include filing an application with the government and providing proof of citizenship status as well as evidence of past earnings and other financial information. Once all documents have been submitted, applicants must wait for a determination regarding whether they qualify for Social Security benefits or not. Those who do qualify are eligible to receive monthly payments according to the specific terms outlined in their application process.
Types Of Social Security Benefits
Social security benefits are a form of insurance provided by the United States government that provides financial protection to workers, their families, and those with disabilities. The three main types of social security benefits include retirement benefits, disability benefits, and survivor benefits.
Social Security retirement benefits are a form of financial assistance offered to individuals aged 62 and over who have worked and earned at least 40 credits. Benefits are determined by calculating the average earnings from the individual's highest 35 years. If an individual has periods of low or no income, those years can still be counted, allowing them to reach the 40-credit minimum. Social Security is integral to the retirement plans of many Americans, with roughly two-thirds of all retirees depending on it as a primary source of income. Those nearing retirement age need to understand just how much Social Security will be contributing to their overall financial plan and retirement goals. Even though Social Security may not provide a complete answer for an individual's retirement needs, it can still play an invaluable role in helping to supplement other forms of income that may be available such as investments, pensions, or other private forms of insurance.
Social Security Disability benefits are a financial resource available to people who have been rendered unable to work due to a physical or mental disability that is expected to last at least 12 months or result in death. Eligibility for the program depends on the age of the applicant and average lifetime earnings. Individuals who earned more over their working years will receive higher payments. Recipients must provide evidence of their prior work history, their medical condition, and any other relevant documents when filing for Social Security Disability benefits. The Social Security Administration reviews all applications and makes determinations about eligibility based on the information provided. This program provides those in need with an income while they manage their disability, allowing them to live life with greater security and peace of mind even when they are unable to work.
Social Security Survivors Benefits are a form of financial assistance provided to families of deceased workers who were eligible for Social Security. Surviving spouses over the age of 60 may claim these benefits, as can surviving spouses of any age if they are caring for the deceased worker's minor child or a disabled child under the age of 16. Ex-spouses may also be eligible as long as they were married to the deceased worker for at least 10 years and have not remarried. The deceased worker's children under 18, or up to 19 if still enrolled in high school, may also qualify for benefits, with disabled children of any age being eligible if their disability was established before reaching the age of 22. Even parents may receive these survivor benefits if the deceased was providing 50% or more of their financial support before passing away. These survivor benefits are designed to help ease some of the financial burden placed upon family members after losing a loved one who provided an essential source of income.
Social Security FAQs
What is social security?
Social Security is a federal government program that provides financial benefits to eligible individuals. The program is funded by taxes paid into a trust fund, and those who want to receive benefits must have a valid Social Security number. These payments can help provide supplementary income for people who may need it due to retirement, disability, or other life events.
How do benefits work and how can I qualify?
To be eligible for Social Security benefits, you need to earn enough credits based on the amount of time you've worked and paid taxes into the system. Generally, most people need 40 credits or 10 years of work. As long as you meet that minimum requirement, you can qualify for benefits when it's time to retire. Additionally, those who have disabilities or are the surviving spouse or children of a worker that has died may also be eligible for certain benefits.
What is a social security card?
A Social Security card is an official document issued by the US government that contains a unique nine-digit number. This number, known as a Social Security Number (SSN), is assigned to individuals and used to verify their identity for purposes such as employment, benefits, and tax purposes.
What happens if I work and get Social Security Retirement benefits?
If you are under full retirement age and work while receiving Social Security retirement benefits, your benefit amount may be reduced if you make more than the yearly earnings limit set by the SSA. Once you reach full retirement age, your benefits will no longer be reduced regardless of how much you earn from working. It is important to note that taxes may still apply to some or all of your Social Security benefits.
What does COLA stand for?
COLA stands for Cost-Of-Living Adjustments, a system introduced in 1975 to ensure Social Security benefits are linked to the rate of inflation, measured by the Consumer Price Index. This adjustment allows Social Security beneficiaries to keep pace with the rising costs of goods and services over time.
How is COLA decided?
COLA, or Cost-of-Living Adjustment, is determined by taking the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was set, to the third quarter of the current year. This number is then used to adjust Social Security benefits for inflation, allowing those receiving Social Security benefits to keep up with rising prices.
Flagstaff’s Resource For Social Security
No matter where you are in your retirement planning journey Social Security is an important program to understand. However, you need to do so to take full advantage of the income and benefits provided to qualifying individuals and families.
To learn more about Social Security, turn to the experts at Benefit & Financial Services. Our experienced staff will offer comprehensive information that explores the different factors involved with Social Security and how they can be used to make the most of retirement income sources – including Social Security. If you are ready to learn more, contact us today!