SOCIAL SECURITY EXPLAINED: HOW IT WORKS AND TYPES OF BENEFITS
What Is Social Security?
Social Security is a government program that provides financial assistance to individuals in various life situations, such as retirement, disability, or death. In the United States, the program is administered by the Social Security Administration (SSA). It is primarily funded through payroll taxes that workers and employers contribute to.
Over 72 million Americans will collect benefits from Social Security in 2024
How Social Security Works:
Social Security is essentially a safety net that provides income to eligible individuals. Workers pay into the system through payroll taxes, which are automatically deducted from their wages. These contributions go into the Social Security Trust Fund, which is used to pay benefits to those who qualify. The amount of benefits you are eligible to receive is based on your earnings history and the number of credits you’ve earned throughout your working life.
To qualify for Social Security benefits, individuals must earn “credits” by working and paying into the system. Generally, you need to work for at least 10 years to qualify for retirement benefits, although there are exceptions for disability and survivor benefits.
Types of Social Security Benefits:
Retirement Benefits:
These benefits are for individuals who have worked long enough and reached the eligible age for retirement. The full retirement age varies depending on when you were born, but it is typically between 66 and 67 years old. You can begin collecting benefits as early as age 62, but your monthly benefit amount will be reduced if you claim before your full retirement age.
Disability Benefits:
If you become permanently disabled and are unable to work, you may qualify for Social Security Disability Insurance (SSDI). To be eligible, you must have worked for a certain number of years and paid Social Security taxes. Your medical condition must be severe enough to prevent you from doing substantial gainful activity.
Survivor Benefits:
If a worker passes away, their family members (spouse, children, or sometimes parents) may be eligible for survivor benefits. These benefits are meant to help support dependents after the death of a breadwinner. The amount depends on the deceased worker’s earnings history.
Family Benefits:
Family members of a worker who is receiving Social Security benefits may also be eligible for benefits. This includes spouses, children, and sometimes even ex-spouses. For instance, children under the age of 18, or up to 19 if they are full-time students, can receive benefits based on a parent’s work record.
Supplemental Security Income (SSI):
SSI is a need-based program designed to provide financial assistance to low-income individuals who are either 65 or older, blind, or disabled, and who have limited income and resources. Unlike other Social Security benefits, SSI is not based on work history but on financial need.
Social Security is an essential program that provides financial support to millions of Americans in times of need, whether for retirement, disability, or the death of a family member. By contributing to the system throughout their working years, individuals can access benefits that help provide income security during challenging life events.