Social Security

Social Security is a government program that helps Americans fund their retirements. Social Security is a “pay-as-you-go” program, because you pay taxes into the program out of each paycheck, and that money gets paid out to current beneficiaries. When you reach the age where you can apply for Social Security (you’re first eligible at age 62), you receive benefits from current workers who are paying into the program.

Social Security is a complex program with many variables and considerations. It’s important to know before you apply if you are making the best financial decision for you and your family.

Social Security benefits are payments that qualified retirees (and sometimes their dependents) and disabled people receive each month from the Social Security Administration. First signed into law on August 14^th, 1935, it is designed to help older Americans meet their expenses and fund their retirements. These benefits are meant to augment your retirement income and are not intended to be your only source of income.

Your Social Security benefit amount is calculated based on your highest 35 years of earnings. (If you did not work for at least 35 years, the years in which you received no income are calculated as zero.) The Social Security Administration has a benefits calculator, but, generally, Social Security calculates your highest 35 years of earnings, adjusts for inflation, then applies a formula to those earnings to come up with a percentage of your income that the program will replace during your retirement.

The age at which you apply for benefits will impact your benefit amount.

The three key ages for Social Security are age 62, full retirement age (FRA, currently just over age 66), and age 70, when no further increase to your benefit will accrue.

Calculating the age at which you should apply for Social Security is complex, and based on factors such as your health, your other income and savings, your life expectancy, your tax bracket, and others. 

Generally, the longer you wait to apply, up until age 70, the more you will receive per month. After age 70 no further benefits accrue. Individuals who wait to apply until age 70 will receive a 32% higher monthly benefit (8% per year) than people who apply at age 66. If you elect to start receiving benefits at age 62, you will only receive a portion (75%) of your full retirement age benefit amount.

Yes, you can receive Social Security (or survivor’s benefits) and work at the same time. However, if you're younger than full retirement age, and earn more than a certain amount, your benefits will be reduced.

For example, if you are collecting Social Security, and you are younger than your FRA, the Social Security Administration will deduct $1 from your benefits for each $2 you earn above $18,240 (as of 2020).

If you’re already taking Social Security and you’ll reach FRA at some point during 2020, the Social Security Administration will deduct $1 from your monthly benefit amount for every $3 you earn over $48,600.

However, if you have reached FRA, and you work, you can earn as much as you are able to and still keep all your Social Security benefit.

According to the SSA, the disability insurance program pays you (or qualified family members) benefits if you worked for enough years and paid into the Social Security program but are unable to work due to health problems. Your adult child also may qualify for benefits on your earnings record if he or she has a disability that started before age 22.

There are numerous conditions which may allow you to qualify to receive Social Security disability benefits. They include, but are not limited to:

• Some mental disorders
• Neurological issues
• Immune system disorders
• Some skin disorders
• Some digestive problems
• Some back injuries
• Cardiovascular disease
• Vision or hearing loss
• Cancer
• And many others