Social Security is the term for the Old Age, Survivors, and Disability Insurance program (OASDI). The program was signed into law by Franklin Roosevelt.
The Social Security Act has been amended several times over the years. The program is always one of the most hot-button political issues of the day. There are many who believe the program is in danger of running out of funding. Today, Social Security includes several social and welfare insurance programs. It pays benefits to disabled workers, retirees, and survivors of deceased employees. Medicare, Medicaid, survivor benefits, disability benefits, and retirement income all fall under the programs of Social Security. This program is considered one of the largest in the United States. They distribute hundreds of billions of dollars each year to their recipients. Each individual's benefits will be determined by certain factors. No one will earn the same amount. Marital status, retirement income, age, home state, and lifetime earnings all play a factor in calculating benefit awards.
How Does Social Security Work?
Social Security was established by the Social Security Act in 1935. This program is a financial benefit that helps many older Americans. Before the law was enacted, elderly services were mainly the responsibility of local or state agencies. The Social Social Administration (SSA) oversees all the benefits of the program. Federal retirement, disability, and survivors' benefits are distributed by the SSA. Social security works like a big pool. All employed people contribute to it in the United States. Workers pay into the system throughout their working career. For those employed, there is a mandatory Social Security tax deducted from each paycheck. These deductions are commonly known as the Federal Insurance Contributions Act (FICA). When a worker is ready to retire, they can receive their contributions as retirement benefits. As a result of receiving benefits, the retiree no longer pays into the system. Medicare benefits are also a part of Social Security. However, they are under a different program in the Social Security Administration. FICA taxes fund both the Medicare and Social Security programs.
Who Qualifies for Social Security?
Social security benefits are based on an employee's earnings and their taxes. These taxes convert into a credit. Workers can earn up to four credits per year. When an employee has reached 40 credits, they are eligible to collect their retirement benefits. Typically, people become eligible for retirement at age 62. This estimated age varies depending on each individual's earnings history. There are a few things to remember for collecting at 62 though. There may be reasons to delay Social Security benefits until after the age of 62. Payments are reduced for those who want an early retirement. Today, most retirees choose to start their benefits around age 67. Social Security considers 67 to be the full retirement age. A person can collect 100 percent of the benefits at this age as well. For those who want to wait, retiring at 70 offers even more benefits. There are special qualifications for those collecting disability, spousal, and survivors’ benefits.
Popular Uses of Social Security Benefits
Many retirees do wait until full retirement age to collect their benefits. This will all depend on the senior's financial situation. Social Security uses vary from person to person. For some people, the waiting option may not be feasible. Social Security has strict rules about how much someone can make in a year once they receive benefits. Full-time employment might not be a reality for those who collect at 62. Many seniors use these benefits as a replacement for their full-time income. Careful planning must be done to ensure that the retiree can live within a budget. Spousal benefits do give an advantage to some retirees. A spouse can collect their deceased partner's benefits while leaving their own Social Security benefits untouched. This option can help the spouse either put the money away for savings or invest it for a bigger benefit. When the spouse reaches their retirement age, they can choose to collect their benefits or continue collecting the spousal ones. Most retirees have a workplace retirement plan in addition to their Social Security benefits. These seniors might invest their extra income into a nice vacation, new home, or even spending on luxuries they couldn't enjoy while working full time. There are many options available for seniors. It is important to carefully plan for retirement and learn how to maximize Social Security benefits.