An Overview of How Social Security Benefits Work

For many Americans, Social Security benefits provide 50 percent or more of their income in retirement. By learning how you qualify for Social Security benefits, you can make decisions that help you get the most out of the program.

Social Security benefits are available to most people who work and earn income in the United States. There are three main types of benefits; retirement benefits, disability benefits, and survivor benefits.

How to Qualify for Social Security Retirement Benefits

While you work and earn income, you and your employer each pay 6.2 percent of your earnings into the Social Security system. If you are self-employed, you pay both the employer share and your employee share. Although you pay into the system while working, your benefit amount in retirement is not determined by how much you and your employer contribute. Instead, the following three factors determine how much you’ll get:

  • How long you work
  • How much you earn
  • What age you file for benefits

Let's take a look at how each of these factors impact how much you'll get.

1. How Long You Work

While you work and pay into the Social Security system you accumulate “credits.” A credit is approximately equivalent to one calendar quarter of work. To qualify for Social Security retirement benefits, you must have 40 credits or 10 years of work where you paid into the Social Security system. You can earn up to four credits a year by earning $5,200 during the year (this is the 2017 amount and it adjusts up each year based on inflation).

Your highest 35 years of earnings are used in the calculation that determines your retirement benefit amount, so to get more benefits, make sure you have a full 35 years where you work and pay into the Social Security system.

Note: There are many government employers who have their own retirement system and when employed by these agencies you do not pay into Social Security, and thus your work for these agencies does not count toward accumulating Social Security benefits. This most commonly affects postal workers, teachers and others in the education system, firefighters, and law enforcement employees.

2. How Much You Earn

The higher your earnings, the higher your retirement benefit is likely to be, but there is a cap. Social Security is designed to replace more income for lower earner’s than for higher earner’s, so each year you pay into the system only up to the amount of earnings defined as the Social Security Wage Base, which is $127,200 in 2017. This amount is increased each based on inflation.

If you want to see how many years of earnings you have in the Social Security system, look at your Social Security statement, which you receive every five years from age 25 to age 60 (and each year after 60), or create a my Social Security Account online.

3. The Age You Claim Benefits

You can claim retirement benefits as early as age 62, but you get a higher benefit amount if you wait until age 70 to file. Exactly how much you get at what age depends on your full retirement age (FRA) which varies by year of birth. For those born January 2, 1943, or later your FRA will be in the age 66 to age 67 range.

If you file before you have attained FRA, and you continue to work, a portion of your benefits will be held back due to something called the earnings limit. Once you attain FRA, the earnings limit no longer applies. If you are married and you have a higher potential Social Security benefit than your spouse, the age you claim will also impact your spouse’s survivor benefits.

Putting all this together, you can get the highest benefit amount by working and paying into the system for 35 years, earning up to the Social Security Wage Base each year, and waiting until age 70 to begin your benefits.

Social Security Disability Benefits

The Social Security disability program is meant to cover long-term disability that is expected to last one year or more or expected to result in death. It is not a short-term disability program and so does not cover you if you are out of work for a few weeks or months due to illness or an accident.

To be eligible for disability benefits, you must also have worked and paid into the system and accumulated the minimum amount of credits needed based on your age, and you must meet Social Security’s definition of disabled.

Minimum Credits Needed for Disability

The number of credits you need to be eligible for disability benefits depends on your age. If you become disabled at age 24 you need to have at least six credits earned in the three years prior to your disability, and if you become disabled at age 50 you must have at least 30 total credits, with 20 of them earned in the ten years prior to your disability. The Social Security website provides a table that shows you exactly how many credits you need at each age.

Definition of Disability

Before you can receive a disability benefit, you must meet Social Security’s definition of disabled. The Social Security Administration provides a comprehensive listing of impairments and explains how they evaluate whether an impairment meets the criteria for long-term disability. In general, your impairment must prevent you from doing the work you did before your disability, and it must prevent you from adapting to a different kind of work.

Social Security Survivor Benefits

For your survivors to be eligible for a benefit upon your death, as with other benefit types, you must have worked and paid into the Social Security system.

The number of credits required depends on your age at death. A special rule allows survivors of young workers to be eligible for benefits if the worker had at least six credits of work in the three years prior to death.

There are two main types of Social Security survivor benefits:

  • Benefits paid to your spouse in retirement
  • Benefits paid if you have minor children or other dependents such as a disabled adult child or dependent parent

1. Retirement Survivor Benefits for a Spouse

If you and your spouse are both already receiving retirement benefits, at death, your spouse (if married at least nine months) will continue to receive either the larger of your benefit or their own. For a spouse who didn’t work, this survivor benefit is important. To make sure a spouse receives the highest possible survivor benefit it usually makes sense for the higher-earning person to delay the start of their benefit to age 70.

If you have not started your benefits, the rules on how much a surviving spouse can receive are more complicated, but in general, if you have earned enough credits to qualify for a retirement benefit, then a surviving spouse would be eligible for a survivor benefit which they could start as early as age 60.

If you have a prior marriage that was at least ten years in length, an ex-spouse is also eligible for survivor benefits and when they file for this benefit it does not impact the benefits that a current spouse or other dependent may receive.

There are a few situations where a surviving spouse may receive a benefit before age 60; for example, a disabled spouse can be eligible for survivor benefits as early as age 50, and a surviving spouse of any age who is caring for your child who is under the age of 16 can be eligible.

2. Survivor Benefits for Dependents

Survivor benefits may be paid to three types of dependents; minor children (under the age of 18, or up to age 19 if attending elementary or high school), a child who was disabled before reaching age 22, or a dependent parent age 62 or older.

If you or someone you know think you may be eligible for a Social Security survivor benefit, it is best to contact the Social Security Administration either online or by visiting your local Social Security office.

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