(AscendHealthy) – For many older Americans, social security represents the underpinning of their fixed income in their later years. After working for most of their lives, those who have paid into the social security system are able to receive benefits. Over 65 million Americans are beneficiaries of social security, but a recent survey indicates that over half of them still aren’t sure about how the program works for them.
Understanding social security can help you understand how to access and maximize your benefits when you need and receive them. This will also help you plan for your retirement if you are still an American in the workforce.
Social Security: More Than Just Retirement Income
While most people understand the general idea about social security benefits — that retirees receive checks once they are no longer working — there are many other benefits guaranteed by this program. These benefits include disability insurance, survivor’s benefits, and life insurance. Retired citizens do make up most of those who receive social security benefits, but 20 percent of the beneficiaries receive social security services for reasons other than retirement.
- Disability insurance is there to help you if you become disabled and unable to work. If this happens, you can go through an evaluation process and eventually receive benefits as you will be unable to work.
- Survivor’s benefits are there to help the children and spouses of someone who has died. If you and your spouse are both recipients of social security, you will not receive retirement benefits AND survivor’s benefits if they die. However, you can choose the bigger payout, regardless of who dies first. Additionally, if you’re supporting your parents, they may receive survivor’s benefits in the event of your death.
What Does Retirement Eligibility Mean?
Despite popular belief, retirement eligibility doesn’t necessarily indicate being fully retired. You can claim benefits prior to your full age of retirement. Everyone’s different, and this option is there in case your life situation requires you to claim disability early. If you apply after 65 years, you’ll be able to get more, but the Social Security Administration (SSA) will let you apply for social security on a reduced benefit basis as early as age 62.
If you claim your benefits early, you can still work, but the SSA reduces your benefits in this situation by $1 for every $2 earned above the annual limit. This happens until you reach full retirement age. The SSA limit in 2021 was $18,960.
In short, the longer you can hold out before claiming your social security benefits, the more you get. If you’re 65, you get 100 percent of your benefits, but if you’re able to hold out until 70 years of age, you get a whopping 132 percent. For some, this may feel like a gamble depending on health and finances. If you claim early, your benefits won’t go up over time.
How Your Social Security Benefits Are Calculated
Your benefits are determined with a formula calculating your highest 35 years of earnings, among other factors such as when you decided to start claiming your benefits. A major factor in your benefit amount is how much you earned during your 35 highest earning years. They average that to help determine your monthly benefits.
For those who claimed retirement benefits in 2022, the maximum was over $3,300 and the average was $1,360.
Lastly, it’s important to note that social security has protections against inflation. From 1975 onward, the SSA provides cost of living adjustments to account for the rising cost of housing, groceries, and other everyday expenses.
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