What Is Social Security?
The Old Age, Survivors, and Disability Insurance (OASDI) program in the United States is called “Social Security.” It is overseen by the federal Social Security Administration (SSA). Although retirement benefits are its most well-known feature, it also provides income to disabled workers and survivor benefits.
In 2023, more than 71 million Americans will get benefits.1. Let’s examine the operation of Social Security and the potential benefits that you may get from it.
How Social Security Works
Social Security is a scheme for insurance. Employees contribute to the scheme by withholding their wages from their paychecks. When self-employed individuals submit their federal tax returns, they also pay Social Security taxes.
Up to four credits may be earned by employees annually. One credit was awarded for each $1,640 earned in 2023, up to a maximum of $6,560, or four credits total. The figures are $1,730 and $6,920 for 2024, respectively.
The Old-Age and Survivors Insurance Trust Fund (OASI) for pensioners and the Disability Insurance Trust Fund (DI) for disability recipients are the two Social Security trust funds that receive the cash. Benefits to those who are presently eligible are paid out of these two sources. The trust funds hold the money that is not spent.
The board of trustees supervises the funds’ financial operations. The commissioner of Social Security and the secretaries of the Departments of Labor, health, human services, and Treasury make up four of the six members. The president appoints, and the Senate confirms the appointments of the remaining two members, who are public representatives.
For Americans 65 and older, as well as others who get Medicare benefits because of a handicap, Medicare is the government health insurance program. Payroll withholding is another way that it is backed. The Centers for Medicare & Medicaid Services (CMS) oversees a third trust fund that receives funding.
Benefits from Social Security are available to retirees, their surviving spouses, and disabled workers.
Benefit eligibility for spouses and ex-spouses may also depend on their partner’s or ex-partner’s income history.
Who Is Eligible for Retirement Benefits?
At age 62, workers who have contributed to the Social Security system for ten or more years are eligible for early retirement benefits.
Higher monthly payments are obtained by delaying benefits until your full retirement age (FRA), which is between 66 and 67 (depending on your birth year). If you wait until 70 to receive retirement benefits, you’ll get even more, but payouts stop increasing after that point.
Additionally, couples may file claims for benefits using their own or their spouse’s wage records. If the marriage lasted at least ten years, a divorced spouse who is not married now may be eligible for benefits based on the earnings history of their ex-spouse. Retirees’ children are likewise eligible for payments up to 18 or a more extended period if they are students or handicapped. The age limit to apply if you are looking after a kid who is not your own is sixteen.
How Much Social Security Benefit Am I Entitled To?
The amount of your Social Security retirement benefit varies greatly across retirees since it is based on your average indexed monthly earnings (AIME) throughout your 35 highest-earning years. As of September 2023, the average monthly benefit is $1,841, or $22,092 yearly.
If you postpone receiving benefits for a year, beginning from the year you reach your full retirement age and ending at age 70, your yearly amount rises by 8% for people with retirement ages of 66 to 67. For instance, those who began receiving Social Security benefits at 66 fully got their principal insurance amount (PIA). They got 108% of their PIA if they postponed payments until the following year. They would have gotten 132% if they had waited until age 70.
Therefore, the benefit changes based on when you start taking it. For those 62 or older, the maximum monthly benefit in 2023 is $2,572 ($30,864 yearly). It is $4,555 ($54,660 per year) for those over 70. Specifically, the sums for 2024 are $2,710 ($32,520 per year) and $4,873 ($58,476 annually). To keep up with inflation, Social Security payouts are also adjusted annually for the cost of living. In 2023, it was 8.7%; in 2024, it was 3.2%.
Social Security offers a minimum payment for long-term poor workers, which was first implemented in 1972. You must have earned money for at least 11 years to be eligible. Starting in December 2023, the monthly minimum benefit is $50.90 ($610.80 yearly). It rises with every year of low-income employment, reaching a maximum of $1,066.50 ($12,798) for those with thirty years of employment.
Employees may use a calculator available on the Social Security Administration website to receive an estimate of their benefits at various retirement ages.
Are those Eligible for Disability Benefits?
Individuals may be eligible for Social Security disability payments (SSDI) if they are unable to work as a consequence of a physical or mental impairment that is anticipated to endure for a year or longer or cause death. To be eligible, you usually have to pass specific income requirements. Moreover, family members of disabled workers may be qualified.
How Much Disability Benefits Am I Entitled To?
As of September 2023, over 8.5 million Americans were receiving SSDI benefits. The average benefit was $1,350.00 per month, or $16,200 per year. The average monthly wage for disabled workers was $1,486.89 ($17,842.68 annually). The average monthly income for disabled workers’ spouses was $407.72 ($4,892.64 annually), while the average monthly income for their children was $472.89 ($5,674.68 yearly).
Who Is Eligible for Survivor Benefits?
Survivor benefits may be available to a dead worker’s spouse and children, depending on the worker’s earnings record. This covers surviving spouses who are disabled or 50 or older. These payments may also apply to a surviving spouse who is raising a disabled or under-16-year-old kid.
For a child to be eligible for benefits, they must usually be under 18 or handicapped. Benefits may also be available to a stepchild, grandchild, step-grandchild, or adoptive child in certain situations.
Benefits may also be available to parents 62 years of age or older if they relied on a dead worker for at least half of their income. In some situations, surviving spouses and minor children may also be eligible for a one-time payment of $255 upon the death of a qualifying worker.
How Much Will Survivor Benefits Be Allowed to Me?
As of August 2023, 5.8 million individuals were receiving survivor benefits. The average benefit was $1,454.48 per month or $17,453.76 per year. Benefits for survivors are divided into five groups. In August 2023, the average payouts were:
- Workers’ children who have passed away: $1,067.20 per month ($12,806.40 yearly)
- Parents who are widowed: $1,241.27 per month ($14,895.24 yearly)
- Widow(ers) without disabilities: $1,715.77 per month ($20,589.24 yearly)
- Widow(ers) with disabilities: $895.66 per month ($10,747.92 per year)
- Parents of workers who have passed away: $1,538.65 per month ($18,463.80 per year)
Social Security’s Past
President Franklin D. Roosevelt signed the Social Security Act into law on August 14, 1935, establishing the Social Security system in the United States. On January 1, 1940, the first benefits checks were issued every month. Retired Vermont legal secretary Ida M. Fuller was the first to get one. She wrote a check for $22.54.
Since 1935, the system and its regulations have changed. By 2023, Social Security will rank among the most significant government programs globally, disbursing hundreds of billions of dollars annually.
181 million
The total number of individuals that paid taxes to Social Security in 2022.
Social Security’s Future
Concerns over the aging of the American population, the sustainability of a system where a smaller number of working-age people would sustain a more significant number of pensioners, and rising living expenses have been voiced by certain commentators.
In its 2023 report, the Social Security Board of Trustees projects that, one year ahead of schedule from 2022, the reserves in the retirement fund (OASI Trust Fund) would run out in 2033. After that, ongoing tax receipts will cover 77% of planned benefits.
Additionally, the trustees predicted that the Hospital Insurance (HI) Trust Fund’s reserves, which support Medicare Part A, would run out in 2031—three years later than anticipated in 2022. Afterward, program revenue will be sufficient to fund 89% of planned benefits.
If such forecasts come true, Congress must determine how to close the deficit. This might include increased worker taxes, reduced benefits, raised retirement age restrictions, or any combination.
Which Benefits Are Offered by Social Security?
Social Security offers monthly payments to eligible retirees, disabled individuals, and their surviving spouses, children, and parents. Your past earnings history is one of the many elements that determine the benefit amount.
What Distinguishes Supplemental Security Income (SSI) From Social Security?
Social Security and Supplemental Security Income (SSI) are two different programs. It helps elderly or disabled persons with little or no income fulfill their basic requirements by giving them monthly cash handouts. You can qualify for both SSI and Social Security payments.
Full Retirement Age (FRA): What Is It?
The age at which you must become eligible to receive Social Security full retirement benefits is your full retirement age (FRA). Depending on when you were born, your FRA changes. For those born in 1955, it is 66 years and two months; for those born in 1960 and beyond, it progressively rises to 67 years and two months.
The Final Word
One of the most notable accomplishments of President Franklin Delano Roosevelt’s administration was the establishment of Social Security in 1935. Serving around 71 million individuals, the program remains a mainstay of retirement for most Americans.
The quantity of benefits varies based on years of work and income. Benefits may also be payable to retired workers’ surviving wives, children, parents, disabled workers, and their families.
The program shouldn’t be your only source of retirement income since the average payout for retired workers is above $20,000. It’s critical to augment it with additional retirement savings from other sources. Individual retirement accounts (IRAs), employer-sponsored plans like 403(b) and 401(k) plans, and other savings and investment alternatives are some examples of these possibilities.
Updated on May 17, 2023: The beginning age at which postponing the receipt of Social Security payments raises them was incorrectly reported in an earlier version of this article.
Conclusion
- In the United States, Social Security is a government program that offers qualifying individuals, their spouses, children, and survivors retirement benefits and disability income.
- To be eligible for Social Security retirement benefits, employees must be at least 62 years old and have contributed to the system for at least ten years.
- Employees who postpone taking their Social Security payments until after they turn 70 will be paid more each month.
- Each person’s benefit amount differs since it is determined by averaging your indexed monthly earnings (AIME) over your 35 highest-earning years.
- Benefits may also be available to surviving spouses and children and anyone unable to work due to a handicap, provided they fulfill specific criteria.
