There is no better time than now to prepare for retirement. The Social Security system can be complicated and is revised nearly every year.
What is Social Security?
Social Security is a group of programs available to help eligible individuals in times of need. All U.S. citizens are eligible for Social Security benefits if they have paid into the right programs through their Federal Insurance Contributions Act (FICA) taxes. By paying those taxes, you earn 1 credit for every $1,200 in earnings, up to 4 credits in a year, and 40 credits in 10 years. All of those credits go into a Primary Insurance Account (PIA). From there, there are five different programs to help everyone’s unique needs.
These programs include:
- Disability Benefits
- Survivor’s Benefits
- Medicare Benefits
- Supplemental Security Income
- Retirement Benefits
Disability benefits can be defined as an insurance that pays you and certain members of your family if you are “insured,” meaning that you have worked long enough and paid Social Security taxes. Supplemental Security Income pays benefits based on financial need. Government studies show that a 20-year-old worker has a 25% chance of having a disability by the time they reach full retirement age. The government has set up two programs to help those people: the Social Security Disability Insurance (SSDI) program and the Supplemental Security Income program (SSI). These are options for people who meet an earning requirement and are unable to work .
Survivor’s benefits is the amount paid to a beneficiary from an annuity or policy when the policy holder passes away. This illustrates that Social Security is not just a retirement or disability program. In fact, 98% of children could receive benefits if a working parent passed away. Additionally, survivor’s benefits apply to widows, widowers, and dependent parents. To qualify for these benefits you only need a 10 year work history. A qualified widow/widower can receive benefits at any age if they are taking care of a child that is younger than 16. Unmarried children can receive benefits if they are 18 or younger, or have a disability. A dependent parent may also receive benefits if they are 62 or older.
Medicare is a health insurance program for individuals 65 or older as well as for the disabled. This government program helps with the cost of health care, but it does not cover all medical expenses or long-term care. Purchasing a supplemental policy, Medigap, from a private insurance company helps cover the expenses not provided for by the government.
Medicare has four parts:
Hospital insurance (Part A): This helps pay for a hospital or nursing facility care (following a hospital stay), as well as some home health care and hospice care.
Medical insurance (Part B): This helps pay for services from doctors, health care providers, home health care, durable medical equipment, and some preventive services.
Medicare Advantage plans (Part C): Independent plans that individuals with Medicare Parts A and B can choose instead of standard Part A and B health care services.
Medicare Prescription drug coverage (Part D): This helps pay for the costs of prescription drugs.
SUPPLEMENTAL SECURITY INCOME (SSI)
The SSI program provides stipends to low-income individuals who are either 65 or older, blind, or disabled.
Individuals qualify for this program when their resources total $2,000 or less. Couples must have resources less than $3,000. Once a program has been selected you will fall into one of two categories. “Fully Insured Status” means you have earned the required 40 credits in 10 years, and can receive full available insurance benefits based on your age at application. The other category is “Currently Insured Status” which means you have partial coverage and very few benefits. Under this program you will have attained at least 6 credits in a period of 3 years.
You can visit the official website at www.ssa.gov to set up an account and find out how many benefits you are eligible for. You can also use a retirement estimator tool, found here,to calculate all income possibilities.
For program updates and more information, the retirement and benefit calculators are a great tool.
Remember, these income programs have already been paid for through hard work and you are entitled to the benefits the system has to offer.