When most people talk about “Social Security” they are usually referring to the program that provides benefits to individuals in the later part of their lives. There are also other programs under the Social Security umbrella, including long-term disability benefits and the Temporary Assistance for Needy Families program. Here is some advice about Social Security’s retirement benefits program.
U.S. Workers fund Social Security (and Medicare) through payroll deductions. This deduction is known as the FICA tax. The portion of the FICA tax that goes to fund Social Security is currently 6.2% of an employee’s gross earnings, up to $6,324 in taxes. Self-employed individuals are also responsible for making contributions to the Social Security program, through a tax similar to FICA.
You can elect to begin receiving benefits any time after you reach age 62. But if you wait until you reach the full retirement age (which ranges from age 65 to age 67, depending on the year you were born), you’ll receive a higher monthly benefit amount.
By electing to receive benefits early, you’re foregoing up to 30% of the monthly amount that you would otherwise receive if you waited until full retirement age. But you receive benefits during those extra months, of course, so you need to fully evaluate your own situation and circumstances before deciding what’s the best thing for you to do.
The amount of your social security benefits payment depends on several factors, including your Primary Insurance Amount (relating to the amount you’ve paid in FICA taxes over the years), and the age at which you start receiving benefits. The maximum benefit amount that an individual can receive is currently set at approximately $2,300 per month. Cost of living adjustments are made to benefit amounts from time to time.
Depending on your filing status and your other income sources, your Social Security benefits may be taxable. But in general, if Social Security is your only source of income, you won’t have to pay taxes on it.
There are also some Social Security provisions that are not very well known. For example, when a couple has been married for at least ten years, the spouse who earns less can receive retirement benefits equal to half of the other spouse’s Social Security benefits, even if the lower earning spouse has never worked outside the home, and would not otherwise be eligible to receive Social Security.
When the lower-earning spouse receives this benefit, the other spouse does not suffer any reduction in their benefits. In addition, the lower-earning spouse can choose to receive this benefit without the other spouse taking part in the process, so this often occurs as part of divorce proceedings.