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|This Life Advice pamphlet about Social Security was produced by the Metlife Consumer Education Center and reviewed by the Social Security Administration. Editorial services provided by Meredith Integrated Marketing.|
|What is Social Security?
Security is a method of providing a continuing income to you and your
family if your earnings stop or are reduced by retirement, disability
or death. Social Security payments will not replace all lost income,
however, and you should be prepared to supplement it with savings, investments,
other insurance or pensions.
When Social Security took effect in 1937 it applied to workers in industry
and commerce, which accounted for only 60 percent of all working people.
With a goal of universal coverage, the Social Security Act has been
amended over the years.
|Who is Covered?
Today Social Security protects more than 145 million workers and their families, and pays benefits to nearly 44 million people. Although most people associate Social Security with retirement funds, it also includes the Medicare hospital and supplementary medical insurance programs, which cover a portion of health care expenses for beneficiaries who are over 65. It pays survivor benefits to the families of deceased workers. It also pays benefits to blind and disabled persons and their families.
Today almost everyone in the United States is paying Social Security taxes or receiving benefits. Major exceptions include:
| Do I Need a
Social Security Card?
Everyone is required to have a Social Security number in order to work, to file a federal income tax return, or to be claimed as a dependent on someone else’s return. In most states, the application for a birth certificate also serves as an application for a Social Security number. Others should contact their nearest Social Security office.
| How You Earn Social
In order to be eligible for Social Security and Medicare benefits, you must have worked long enough and in some cases, recently enough, to qualify. As you work and pay taxes, you earn Social Security quarters of coverage or credits. A maximum of four credits can be earned within one calendar year. The amount of money you must earn each quarter to obtain one credit goes up every year based on wage inflation.
Social Security and Medicare are financed by taxes, paid by you and your employer. When you work as a salaried employee, your employer withholds a percentage of your earnings (up to the maximum taxable amount), adds a matching amount as the employer's contribution and pays the total to the Internal Revenue Service (IRS) as a payroll tax. It's called FICA (Federal Insurance Contributions Act) on your check.
If you are self-employed, you pay all the tax (15.3 percent) as SECA (Self-Employment Contributions Act) to the IRS yourself. Although self-employed people pay double the Social Security taxes of a salaried person, half of their tax is deductible on their tax return as a business cost.
| How Do I
Qualify for Retirement Benefits?
The number of credits needed to qualify for benefits also depends upon the type of benefit. A general “rule of thumb” is that people need 40 credits (or 10 years of work) to obtain retirement benefits. It does not matter when the credits are earned, nor is the dollar amount of the benefit based on the number of credits. All credits that you have earned remain on your record, even if you have not worked for a period of time. Your benefit amount is based on your earnings averaged over most of your working career—higher lifetime earnings result in higher benefits. If you have some years of no or low earnings, your benefit amount will probably be lower than if you worked steadily.
| When Can I Begin Receiving
Social Security Retirement Benefits?
You can retire as early as age 62 and receive benefits the rest of your life. However, the age at which you choose to retire is a very important consideration and can have a substantial impact on how much money you receive each month. Consider these possibilities:
If you decide to delay your retirement, be sure you sign up for Medicare at age 65. In some circumstances, medical insurance costs more if you delay applying for it.
| How Much Will I Receive In
The Social Security law includes a complex formula for determining your retirement benefits. In general, the formula will be applied to your record of lifetime earnings through the year before your retirement. Since October 1999, Social Security has been sending personalized benefit statements to all workers over age 25 not now receiving benefits. The annual Social Security Statement contains a complete earnings history along with estimates of benefits payable at age 62, full retirement age (now age 65), and at age 70. You should receive it three months before you birthday; if not, you should call Social Security and request one. When you receive the statement, you should check for errors so they can be corrected promptly. Verify that the amounts listed equal your own record of earnings, from pay stubs or income tax records. Call the Social Security helpline at 800/772-1213 to report any inaccuracies.
WHEN YOU RETIRE, BENEFITS MAY BE PAID TO:
IF YOU BECOME DISABLED, BENEFITS MAY BE PAID TO:
WHEN YOU DIE, BENEFITS MAY BE PAID TO:
| Can I Work After I Begin
Receiving Social Security Retirement Benefits?
You may wish to work in some capacity after you retire. In April 2000, the law that determines what happens when you work and get benefits at the same time changed. While you’re working, your benefit amount will now be reduced only until you reach your full retirement age, not up to age 70. You can use the following formula to determine how much your benefit will be reduced:
If you are under full retirement age (currently age 65) when you start collecting Social Security payments, $1 in benefits will be deducted for each $2 you earn above the annual limit (the annual limit, or retirement earnings exempt amount, is determined by an automatic adjustment procedure that will be adjusted periodically). In the year you turn full retirement age, $1 in benefits will be deducted for every $3 you earn above a different limit, but only counting earnings before the month you reach the full benefit retirement age. Starting with the month you reach full retirement age, you will receive your benefits with no limit on your earnings.
When figuring out how much is deducted from your benefits, only the wages you make from a job, or your net profit if you’re self-employed is counted. This includes bonuses, commissions and vacation pay, but not pensions, annuities, investment income, interest, veterans or other government or military retirement benefits. It is important to remember that when you continue to work while you get benefits, Social Security will check your record every year to see if those additional earnings will increase your monthly payment. If there is an increase, they will send you a notice of your new benefit amount.
If you are the family member of a deceased worker, you may be able to apply for Social Security survivor benefits. Social Security now pays monthly survivor benefits to over seven million Americans, including almost two million children. Family members who may qualify for all or a portion of a deceased worker’s benefits include:
Note:A lump-sum death benefit of $255 is payable to any surviving spouse living with the deceased at the time of death. Children who are eligible for benefits are also eligible for the lump-sum death payment of $255 if there is no surviving spouse. Otherwise, the benefit is not payable. You must apply for this one-time payment within two years of a worker’s death. The number of credits needed for earnings to be eligible for survivor’s benefits depends upon the age of the deceased. The younger a person is when he or she dies, the fewer credits needed for his or her family to be eligible. In general, a worker must have 11/2 to 10 years Social Security-covered work in order for his or her family to receive benefits.
| If You Become
More than 4 million disabled workers under 65 and 1.6 million dependents (including over 1 million children) are currently receiving disability benefits. Social Security does not pay for partial disability or for short-term disability. Generally, working families have other resources to provide support during periods of short-term disabilities (such as sick pay, worker’s compensation, insurance, savings and investments).
Disability payments cannot begin until after a five-month waiting period from the first full month of disability has expired. When a worker has received disability benefits for two years, he or she becomes eligible for Medicare.
You can file a disability claim at your local SSA office. The process is lengthy and requires a review by the State Disability Determination Service to decide if you qualify. You will be required to provide:
| Supplemental Security
Supplemental Security Income (SSI), which should not be confused with Social Security disability, pays monthly benefits for people who are in financial need and are blind, disabled or over age 65. It is supplemental support paid for by the U.S. Treasury, not Social Security taxes. Blind, mentally challenged or disabled children also may be eligible for SSI, regardless of their age.
Eligibility and the amount received depends upon your assets, income, living arrangements, and whether your state government supplements the federal payment. Those people eligible for SSI are almost always eligible for Medicaid—another needs-based program. Medicaid provides significant hospital, physician, nursing home, and community-based long-term care benefits.
Medicare is our country’s national health insurance program for people age 65 or older, certain people with disabilities who are under age 65, and people who have permanent kidney failure. It is administered by the Health Care Financing Administration. After you become 65, you will be eligible for Medicare whether you continue to work or not. Medicare has two parts:
Medicare will not pay for 100 percent of your medical expenses. Therefore, you should:
| How Do I Apply for
Go to your local SSA office three months before your 65th birthday and complete an application. Ask for a copy of the Medicare Handbook. If you are already receiving Social Security benefits when you turn 65, you will automatically be enrolled in Medicare. If you are disabled, you will automatically be enrolled in Medicare after you have been getting disability benefits for 24 months.
| How Do I Sign Up for Social
Social Security will not start your benefits until you file an application. You can start the process by telephoning (800-772-1213) or by going to a Social Security office. You will need to bring the following information with you:
| When Should I Contact the
Social Security Administration?
| Where Does Your Money
Few people really know exactly where their Social Security tax dollars are going. Payroll taxes are credited to the two Social Security trust funds: the Old Age and Survivors Insurance (OASI) and the Disability Insurance (DI) trust funds. Money not used to pay benefits and administrative costs is invested in U.S. government bonds. The government uses the money invested in savings bonds to pay for all the services and the projects it provides to U.S. citizens.
For the most part, out of every dollar you pay:
| What Does the Future
While Social Security has been a part of life for most Americans for 60 years, it has been modified many times to meet the changing economic needs of the public. It will undoubtedly have to change again to meet the needs of people in the 21st century. Today, Social Security is taking in more than enough money to pay benefits and continues to save money in trust funds. While there is no immediate crisis, demographic and economic changes, such as longer life expectancies and the impending retirement of the baby boomers, will undoubtedly lead to new financing challenges that will have to be addressed.
| For More Information
If you have not received one in the mail, you can get a personalized Request for Earnings and Benefit Estimate Statement by calling Social Security at 800/772-1213. Complete the appropriate paperwork and receive a complete earnings history along with estimates of your benefits for early retirement, full retirement and when you reach age 70.
You can get recorded information 24 hours a day by calling Social Security’s toll-free number: 800/772-1213. Service representatives are available from 7:00 A.M. to 7:00 P.M., E.S.T., Monday through Friday. The following are just a few of the publications available free of charge.
You can also access Social Security information on the Internet at www.ssa.gov. Information includes:
Social Security e-news, a free electronic newsletter. Go to www.ssa.gov/enews and select the monthly newsletter and any of 10 subjects for regular updates. You will receive the newsletter by e-mail. The newsletter can help you keep up with changes in Social Security programs that may affect you and your family.
The Social Security Retirement Planner will let you compute estimates of your future Social Security benefits online. And you can get important information on factors affecting your retirement benefits, such as military service, household earnings, and federal employment.
Plus other valuable information, such as the location of the nearest Social Security offices, copies of publications, and copies of your Form 1099 benefit statement showing the benefits you received during the year.
Comprehensive Guide to Social Security and Medicare
Social Security, Medicare and Pensions: Get the Most Out of
Your Retirement and Medical Benefits
Related Life AdviceŽ pamphlets
For Information on Special Needs Estate Planning, call 1-800/MET-DESK
Social Security Administration: www.ssa.gov This site provides the most current information and up-to-date services to help you understand the history, benefits, and financing of our Social Security system.
Center for Medicare and Medicaid Services: www.cms.hhs.gov/default.asp?/ - The federal agency that administers Medicare, Medicaid and the State Children's Health Insurance Program.
National Council on Disability (NCD): www.ncd.gov - NCD's overall purpose is to promote policies, programs, practices, and procedures that guarantee equal opportunity for all individuals with disabilities.
Metropolitan Life Insurance Company
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