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The
amount of benefits to which you are
entitled under any Social Security
program is not related to need, but is
based on the income you have earned
through years of working. In most jobs,
both you and your employer have paid
Social Security taxes on the amounts you
earned. Since 1951, Social Security
taxes have also been paid on reported
self-employment income. Social Security
keeps a record of these earnings over
your working lifetime, and pays benefits
based on the average amount earned.
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| The specific
requirements vary depending on the type of
benefits, the age of the person filing the
claim and, if you are claiming as a
dependent or survivor, the age of the
worker. There is one general requirement,
however: The worker on whose earnings record
the benefit is to be paid must have worked
in "covered employment" for a sufficient
number of years -- that is, earned enough of
what Social Security calls work credits --
by the time he or she claims retirement
benefits, becomes disabled, or dies. This
usually means a total of at least ten years
of work at which you or your employer paid
into Social Security. To find out about your
eligibility, call the Social Security
Administration at 800-772-1213.
Note that
Social Security has separate eligibility
rules for some specific types of workers,
including federal, state, and local
government workers, workers for nonprofit
organizations, members of the military,
household workers, and farm workers. If you
have been employed for some time as one of
these types of workers, check with the
Social Security Administration for the rules
that may affect your eligibility.
Since its
inception in 1936, Social Security
considered 65 to be full or normal
retirement age for the retirement benefit.
Benefits amounts were calculated on the
assumption that most workers will stop
working full time and will claim retirement
benefits when they reach age 65. While the
system has long provided for early
retirement, to give incentive for people to
delay making their retirement claims, Social
Security offers higher benefits for people
who wait to make their claims after reaching
full retirement age.
Now that
people are generally living longer, however,
the Social Security rules for what is
considered full retirement age are changing.
Age 65 is still considered full retirement
age for anyone born before 1938. However,
full retirement age gradually increases from
age 65 to 67 for people born in 1938 or
later.
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| The amount
of any benefit is determined by a formula
based on the average of your yearly reported
earnings in covered employment since you
began working. To further complicate
matters, Social Security computes your
average earnings differently depending on
your age. If you reached age 62 or became
disabled on or before December 31, 1978, the
computation is simple: Social Security
averages the actual dollar value of your
total past earnings -- and bases the amount
of your monthly benefits on that amount.
If you turn
62 or become disabled on or after January 1,
1979, Social Security divides your earnings
into two categories: earnings from before
1951 are credited with their actual dollar
amount, up to a maximum of $3,000 per year;
and from 1951 on, yearly limits are placed
on earnings credits, no matter how much you
actually earned in those years.
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No. You may
qualify for more than one type of Social
Security benefit, but you can collect just
one. For example, you might be eligible for
both retirement and disability, or you might
be entitled to benefits based on your own
retirement as well as on that of your
retired spouse. You can collect whichever
one of these benefits is higher, but not
both.
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| You are
eligible for dependents benefits if both you
and your former spouse have reached age 62,
your marriage lasted at least ten years, and
you have been divorced for at least two
years. This two-year waiting period does not
apply if your former spouse was already
collecting retirement benefits before the
divorce.
You can
collect benefits as soon as your former
spouse is eligible for retirement benefits.
He or she does not actually have to be
collecting those benefits for you to collect
your dependents benefits.
If you are
collecting dependents benefits on your
former spouse's work record and then marry
someone else, you lose your right to those
benefits. You may, however, be eligible to
collect dependents benefits based on your
new spouse's work record. If you divorce
again, you can return to collecting benefits
on your first spouse's record, or on your
second spouse's record if you were married
for at least ten years the second time
around.
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| Yes, and
many people do just that. People who are
past full retirement age may work and earn
any amount without losing any of their
Social Security benefits. However, people
who collect Social Security before the year
in which they reach full retirement age will
lose one dollar of those benefits for every
two dollars they earn over a set yearly
limit. For the year 2004, that limit is
$11,640. The limit applies only to earnings
from work; it does not apply to income from
such things as savings, investments,
pensions, or rental property.
The Social
Security Administration has added a special
twist for the year in which you reach full
retirement age. During the months of that
year that are prior to your birthday, you
will lose one dollar of benefits for every
three dollars you earn over a set yearly
limit. For the year 2004, that limit is
$31,080 (counting only earnings from the
months prior to your birthday). After your
birthday, you can earn any amount of money
without losing benefits.
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Social
Security most commonly refers to four
programs financed through Social Security
(FICA) payroll taxes: retirement pensions
(frequently called old-age insurance),
survivors insurance, disability insurance,
and Medicare for the aged and disabled.
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As the
single largest source of income for the
elderly, accounting for two of every five
dollars older Americans receive, Social
Security has been extraordinarily successful
in reducing poverty among America's 65 plus
population. Likewise, Medicare has been
instrumental in making health care available
to all elderly Americans, as well as
preventing high medical bills from depleting
their lifetime savings.
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As a
pay-as-you-go system, the solvency of Social
Security is directly tied to the ratio of
workers to those receiving benefits. The
rapid population growth of the post-World
War II "baby boom" created a huge generation
- some 77 million strong - which now, as
active workers, pays far more in taxes than
the benefits paid out to retirees from
previous generations. However, after 2010
this huge population bulge of boomers will
begin to retire and the taxes from the
workers available to support them will be
increasingly unable to fully pay their
Social Security benefits.
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Since its
inception, taxes from current workers have
exceeded the benefits paid out to retired
and disabled workers, as well as their
survivors and eligible dependents. However,
by 2013, benefits paid out are projected to
begin exceeding Social Security tax income,
with the balance made up from the federal
government's general budget (as it begins
paying back money borrowed from the Social
Security trust fund during the many years
that it ran a surplus). By 2032, the trust
fund surplus is expected to be exhausted as
the deficit between taxes paid and benefit
costs reaches its peak.
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By 2030, the
Social Security entitlement shortfall is
projected to reach massive proportions as
retirement benefits increase from 4 to a
whopping 6 percent of the gross domestic
product (GDP) and Medicare costs increase
from less than 3 to 6 percent of the GDP. As
the benefit shortfall increases after 2013,
politicians will be faced with the difficult
choice of raising taxes, increasing deficit
spending, cutting non-Social Security
expenses and programs, and/or cutting Social
Security benefits.
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| Although the
U.S. has continued to steadily grow since
the baby boom generation, three factors have
combined to create Social Security's future
dilemma. First, the cost of Social Security
benefits has continued to rise due to
cost-of-living adjustments, the skyrocketing
costs of medical care and the fact that
Americans are living longer. Second, as the
baby boomers entered the work force in the
1970s they had fewer babies (future workers)
in what some called the "baby bust."
The third
factor involves the changing source of
growth, as high immigration replaced
native-born births as the driving force
behind U.S. population growth. In general,
new immigrants have less education, lower
skills, a higher tendency to avoid taxes,
and overall lower earnings with consequently
lower Social Security tax contributions.
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| Insuring the
long-term solvency of Social Security, as
well as our nation's broader social safety
net, requires the kind of solid foundation
provided by a stable population with an
evenly balanced age-structure.
Getting off
the population growth treadmill and
beginning the necessary and gradual
transition to a smaller, optimal population
is essential to this long-term
sustainability. Such an optimum population
would feature an even distribution among all
age groups with a solid ratio of working
Americans (aged 18-64) to both the young and
old. Our rapid population growth has played
a major part in creating the Social Security
dilemma, it is now time to recognize that
continued growth is part of the problem, not
the solution.
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More
population growth, especially through high
immigration, would be an illusory approach
that will only pass the problem along to
future generations. More workers today will
inevitably result in more retirees tomorrow,
thus requiring the addition of ever more new
workers to support them. Realistically,
increasing the ratio of workers to retirees
could only be done through massive increases
in our already historically high immigration
levels. This perpetual growth treadmill
would create many more additional costs that
would far out weigh any benefits to Social
Security.
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Guaranteeing
the long-term solvency of Social Security as
part of a broader commitment to the
financial and medical well being of
America's elderly is absolutely crucial to
any transition to a smaller, optimum
population. Any society that seeks to
stabilize its population size must go
through a period where a larger group of
elderly move through retirement. Taking the
steps necessary to stop our current
population growth —like an all-inclusive cap
on immigration at 100,000 per year— will
help insure that any measures to protect
Social Security really do bring about
long-term solvency. By working together to
save Social Security and stop population
growth, we can make sure that the aging of
America in the next century will be the
welcome beginning of a necessary transition
to a smaller, more sustainable America.
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Portions
of this information has been taken from the website of
the
Social Security Administration
www.ssa.gov. |
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The information
provided is intended for informational purposes only and
does not necessarily reflect your particular situation.
This website does not nor does it intend to dispense legal,
tax or financial advice.
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