There are numerous misconceptions regarding Social Security benefits.
Knowing about Social Security, whether you are about to retire or are already receiving benefits, is essential to receive the full benefits you are entitled to.
In this post, we’ll go over the Social Security fundamentals you’ll need to know in 2023.
See below our list of the Top 12 Facts about Social Security you should know.
Social Security consists of two insurance programs.
Most people are familiar with Social Security’s retirement benefits.
However, Social Security is more than just retirement benefits.
The payroll taxes paid by American workers and employers to fund Social Security are divided into two trust funds:
The Federal Old-Age and Survivors Trust Fund pays retirement and survivors benefits, while the Federal Disability Insurance Trust Fund pays disability benefits.
These programs are referred to collectively as Social Security.
In addition, the Social Security Administration is in charge of another program known as Supplemental Security Income (SSI).
SSI benefits are given to low-income families.
While the SSA administers SSI, it is not a Social Security program because it is funded by general tax dollars rather than Social Security taxes.
Employees contribute only half of the Social Security tax.
The “payroll tax,” also known as FICA, is used to fund Social Security benefits.
While Social Security recipients pay into the system through payroll taxes, employees only pay half of the Social Security tax.
The current Social Security tax rate is 12.4% on the first $127,200 of wage income.
Employees, on the other hand, only pay half of this amount. The Social Security payroll tax that is deducted from your paycheck is only 6.2%.
Employers pay the remaining 6.2%.
Many people are unaware that Social Security benefits are much lower than they think.
Benefits from Social Security are modest.
This may come as a surprise given that many retirees rely on Social Security for a significant portion of their monthly income.
According to Fool.com, At full retirement age in 2023, the maximum Social Security benefit is only $4,555 per month.
And according to CNBC, In 2023, the average Social Security retirement benefit will be approximately $1,827 per month or $21,924 per year.
Besides that, the average disabled worker and elderly widow received even less money.
If you worked at an average wage your entire adult life and retire at the age of 65 in 2020, Social Security benefits will replace roughly 40% of your previous earnings.
This “replacement rate” will fall to around 35% for a middle-income retiree at 65 in the future.
This is primarily due to the full retirement age, which has already risen to 67 and is expected to remain the same in the next year.
Seniors rely heavily on Social Security benefits as a source of income.
Social Security benefits are a major source of income for beneficiaries with lower lifetime earnings and lower rates of pension coverage.
For more than half of the 65-and-up population, Social Security accounts for at least half of their income.
Furthermore, for the same age group, Social Security accounts for at least 90% of income for approximately 36% of recipients.
The rate is even higher for minorities, with Social Security accounting for 90% of income for 53% of Hispanics, 46% of African Americans, and 44% of Asian Americans aged 65 and up.
Moreover, Social Security keeps nearly one-third of all older Americans from falling into poverty.
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Taxes are levied on Social Security benefits
If you earn money from sources other than Social Security, you may be required to pay federal taxes on your benefits.
Single filers with a combined annual income of more than $34,000 may be required to pay income tax on up to 85 percent of their Social Security benefits.
Couples filing jointly may also pay tax on up to 85 percent of their combined income if it exceeds $44,000.
Furthermore, depending on where you live, there are state taxes to consider.
At the moment, 13 states tax Social Security benefits.
Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, North Dakota, Rhode Island, Utah, Vermont, and West Virginia are the states in question.
Disability Benefits from Social Security Protects from Catastrophic Income Loss
Social Security is more than just a source of retirement income. Disability Benefits is, in fact, one of the most important programs run by the Social Security Administration.
Social Security Disability Insurance protects 150 million Americans from a catastrophic loss of income due to disability.
This includes disabled workers, their spouses, and their dependent children.
Approximately 90% of workers aged 21 to 64 in Social Security-covered employment have worked and paid into the program long enough to earn disability insurance, which protects them from severe hardship if they become unable to work due to disability.
Being a spouse provides Social Security benefits
When it comes to Social Security benefits, marriage gives couples an advantage.
A spousal benefit, worth up to 50% of the other spouse’s benefit, can be taken by one spouse.
This is how it works:
For example, if your benefit is $2,000 but your spouse’s benefit is only $500, your spouse can switch to a $1,000 spousal benefit.
This will increase monthly earnings by $500.
If spousal benefits are claimed before reaching full retirement age, the spouse will receive a lower amount.
That is, if you claim your spousal benefit before reaching full retirement age, you will not be entitled to the full 50%.
If you take your own benefit first and then switch to a spousal benefit later, your spousal benefit will be reduced.
Furthermore, you cannot apply for spousal benefits until your spouse has applied for his or her own.
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Even if they did not work, spouses are eligible for benefits
Another benefit of being a spouse for Social Security is that you can receive spousal benefits even if you never worked.
To receive Social Security benefits, most people must contribute to the system.
There is, however, an exception to this rule.
You can receive spousal benefits in retirement if your husband or wife is eligible, even if you have never worked or paid Social Security taxes.
Your ex-spouse is entitled to a portion of your Social Security benefits
Yes, if you are divorced, you may be eligible for Social Security benefits based on your ex-earnings. spouse’s
You can collect spousal benefits based on the earnings record of a living former wife or husband as long as:
- The marriage was at least ten years long.
- You haven’t married again.
- You must be at least 62 years old.
- Your ex-spouse may be eligible for Social Security retirement or disability benefits.
Furthermore, your ex-spouse does not have to be receiving retirement benefits in order for you to claim ex-spousal benefits.
In this case, however, the divorce must be at least two years old.
If your ex is already receiving benefits, there is no such requirement.
Furthermore, the maximum amount you can receive in divorced-spouse benefits is 50% of your ex-benefits.
Both children and parents may benefit
Unmarried children can receive Social Security benefits if a parent worker dies, retires, or becomes disabled.
This applies to children who are:
- Under the age of 18
- Those aged 18 to 19 who are enrolled full-time in high school, as well as certain older disabled children
The goal is to provide basic necessities and to assist those children in completing high school.
Furthermore, if you financially support a parent on Social Security, you may be able to receive at least one-half of their benefits if that worker dies.
However, the parent receiving Social Security must demonstrate that the child provided at least half of their financial support.
Widows and widowers can remarry and continue to receive survivor benefits
If you are a widow(er) under the age of 60, or disabled but under the age of 50, remarriage terminates any Social Security benefits you may be receiving based on your deceased spouse’s record.
However, if you remarry after the age of 60 (or after the age of 50 and are disabled), you can continue to receive benefits based on your deceased spouse’s record.
If you choose to receive spousal benefits through your new spouse (at age 62 or older), your benefits based on your deceased spouse’s record will be terminated.
Furthermore, if your second marriage ends in less than 10 years due to death, divorce, or annulment, you will be eligible to collect benefits on your first spouse’s record once more.
Remarriage has no effect on Social Security benefits paid to a disabled widow(er).
You can work and Collect Social Security Benefits
Yes, you can work and receive Social Security benefits at the same time.
However, if you begin receiving benefits before reaching your full retirement age and your earned wages exceed a certain threshold, a portion of your benefits may be withheld.
If you were born between January 2, 1959, and January 1, 1960, your full Social Security retirement age is 66 and 10 months.
As a result, if you work and are of full retirement age or older, you may keep all of your benefits regardless of your earnings.
However, if you are under the age of full retirement, there is a cap on how much you can earn while receiving full benefits.
Here’s what you can expect if you’re under the age of full retirement in 2021:
For every $2 you earn above $18,960, the Social Security Administration (SSA) will deduct $1 from your benefits.
It is, however, not the case for those who reach full retirement age in 2021.
The SSA will deduct $1 from your benefits for every $3 you earn above $50,520 until you reach full retirement age.
Conclusion
Social Security is a government-run program that provides financial assistance to retired and disabled workers, as well as their families. In 2023, the full retirement age will be 66 years and 10 months, and the maximum benefit for a worker retiring at this age will be $3,148 per month. The program’s solvency is currently a concern, and various options such as raising the retirement age and increasing the payroll tax rate are being considered to address this issue. The Social Security Administration also offers a range of online resources and services to beneficiaries.
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