If you are considering applying to receive Social Security benefits, you must ensure that you are well-educated on the Social Security system. As with any program, the more you know, the more successful you are likely to be with receiving benefits.
Knowing how Social Security income works and having a good understanding of the most important components of the benefits will help you immensely with the application process. Therefore, before you apply, it is a good idea to read the information explained in the following sections so you can expect a less confusing and overall more efficient process.
How Social Security Works
Social Security income benefits are provided to a variety of workers depending on their situation. In most cases, the benefits are given to retirees. This is not always the case, since those with disabilities, survivors of workers who have died, and the dependents of Social Security beneficiaries may receive Social Security income as well.
The funding for Social Security benefits comes directly from the paychecks of everyone lawfully employed in the United States. You may have noticed that a portion of your paycheck is taxed, and some of those taxes go towards the Social Security program. Currently, all taxes paid to the Social Security system are paid out to existing beneficiaries. This means that the taxes you pay are not reserved specifically for you. In contrast, they are distributed to those who are currently receiving Social Security benefits. Therefore, the Social Security income that you receive will be funded by those employed when you are receiving benefits.
The breakdown of the funding administered to the program is as follows: presently, for each Social Security tax dollar that you pay, 81 cents will go toward a Social Security trust fund that pays out monthly benefits to beneficiaries that are either retired or the surviving dependents of workers who have died. The other 19 cents are administered to a Social Security trust fund that pays the benefits of disabled beneficiaries and their families. It should also be noted that at the current time, less than 1 cent of every tax dollar goes toward the administrative costs for running the Social Security system, and that amount is projected to decrease even further in the future.
History of the Social Security System
President Roosevelt originally started the Social Security program in 1935. Originally, the program paid out a one-time lump sum payment to beneficiaries, although that changed to regular ongoing monthly payments in January 1940. The program was first designed to provide financial assistance to those who had worked until retirement age, and the money was only provided to the primary worker. However, as the program evolved to meet the needs of workers to allow benefits to be provided to the retiree’s dependents along with survivors of deceased workers and individuals with disabilities.
Learn About Social Security Benefits
The benefits you will receive once you retire or become disabled will only replace a portion of your earnings from when you were employed. The Social Security benefits are not designed to completely replace the money you were earning before, so it is important to either make changes in your budget or establish an alternative savings plan before you stop working. This is important because the benefit amount you receive will likely be lower than the amount of money you earned when you were steadily working, so financial changes may need to be made.
The exact Social Security income benefit amount that you earn is determined by several factors. One of those factors is the age in which you receive benefits if you are claiming Social Security income because you are retiring. The amount you receive decreases if you opt to retire before your full retirement age. You have the ability to start receiving benefits at 62 years old if applying as a retiree.
The full retirement age also varies depending on when the retiree was born. Anyone born in the year 1960 or later must be 67 years old to receive their full retirement Social Security benefits, and anyone born before 1960 must be between 66 years old and 67 years old. It is good to note that the full retirement age may continue to rise in future years, so you must ensure that you are aware of what the current full retirement age is for your birth year.
If you opt to delay receiving Social Security income beyond your designated full retirement age, you may receive an increased benefit amount. A small percentage increase will occur each month that you wait after your full retirement age and this percentage will continue to rise until you start receiving benefits or until you reach the age of 70.
Additional Important Information
Your Social Security Number links you to the Social Security system. If you are a United States citizen, your Social Security Number was assigned to you at birth. Otherwise, non-citizens are granted a Social Security number when lawful U.S. status is established.
This number is unique to each person, and therefore it is very confidential. It is important that you always ensure that your Social Security Number is kept safe, and that you make sure you are cautious with who you provide your number to. In addition, you must be sure to keep your Social Security card in a safe place and not carry it with you. Identity theft can occur if your Social Security Number falls into the wrong hands and that can affect your ability to receive Social Security benefits in the future.
Also, the Social Security program is identical in every U.S. state and territory. This is because the Social Security system is administered on a federal level rather than by state governments. Therefore, the only changes you may notice in the administration of Social Security benefits are dependent on the individual situation of the applicant.
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