Money Talks....
Thanks for joining us in Money Talks….today is our last blog on “You don’t know what you don’t know” series. Today we are talking about Social Security. Here’s what you need to know.
Social Security is a comprehensive U.S. government program that provides economic security to millions of Americans through various benefits. It's funded through payroll taxes paid by workers and their employers. While often associated with retirement, Social Security also provides benefits to those with disabilities and to survivors of deceased workers.
Types of Social Security Benefits:
Retirement Benefits: These are the most well-known. Workers who have earned enough work credits (typically 40 credits, equating to 10 years of work) can begin receiving retirement benefits as early as age 62. However, claiming before your full retirement age (which varies from 66 to 67 depending on your birth year) will result in a reduced monthly benefit. Delaying retirement beyond your full retirement age can increase your benefit amount up to age 70.
Disability Benefits (Social Security Disability Insurance - SSDI): If you become disabled and unable to work, you may be eligible for SSDI benefits if you have a sufficient work history and meet the Social Security Administration's (SSA) definition of disability. The required work credits depend on your age at the time you become disabled.
Survivor Benefits: Certain family members of a deceased worker who had earned enough work credits may be eligible for survivor benefits. This can include a surviving spouse, dependent children, and in some cases, dependent parents.
Supplemental Security Income (SSI): While administered by the Social Security Administration, SSI is a separate program that provides financial assistance to aged, blind, and disabled individuals with little or no income and resources, regardless of their work history.
Eligibility for Social Security Benefits (General Guidelines):
Eligibility for Social Security benefits generally depends on your work history and age or disability status.
Work Credits: You earn work credits based on your earnings in jobs covered by Social Security. In 2025, you earn one credit for each $1,810 in earnings, up to a maximum of four credits per year. Most people need 40 credits (10 years of work) to qualify for retirement benefits. Fewer credits may be needed for disability or survivor benefits, depending on your age.
Age: You can typically start receiving retirement benefits at age 62, but your full retirement age depends on your birth year (ranging from 66 for those born between 1943-1954 to 67 for those born in 1960 or later).
Disability: To qualify for disability benefits, your condition must prevent you from doing substantial gainful activity, and it must have lasted or be expected to last for at least one year or result in death.
Relationship to a Worker: Spouses, divorced spouses, children, and dependent parents of eligible workers may also qualify for benefits based on the worker's record, even if they haven't worked enough to qualify on their own record.
How Social Security Benefits are Calculated:
Your Social Security retirement benefit is based on your average indexed monthly earnings (AIME) over your working years. The SSA considers up to 35 years of your highest earnings, adjusted for changes in the average wage over time. A formula is then applied to your AIME to determine your primary insurance amount (PIA), which is the benefit you would receive at your full retirement age.
Early Retirement: If you claim benefits before your full retirement age, your monthly benefit will be permanently reduced. The reduction amount depends on how many months early you claim. For example, if your full retirement age is 67 and you claim at 62, your benefit could be about 30% lower.
Delayed Retirement Credits: If you delay claiming benefits past your full retirement age, you will earn delayed retirement credits, which increase your monthly benefit. The credit is 8% per year for those born after 1942, up to age 70.
Important Points to Remember:
Social Security was never intended to be the sole source of income in retirement. Most financial advisors recommend having additional savings and investments.
The Social Security Administration provides annual statements that estimate your future benefits based on your earnings history. You can access this information online through a "my Social Security" account on the SSA website.
The maximum Social Security benefit changes each year. For those retiring at age 70 in 2025, the maximum monthly benefit is $5,108.
Social Security benefits are subject to federal income tax under certain circumstances.
For detailed and personalized information about your potential Social Security benefits, it's best to create a "my Social Security" account on the official SSA website (https://www.ssa.gov/) or contact the Social Security Administration directly at 1-800-772-1213.