An Intro to Social Security

Video courtesy of PBS Newshour





Types of Benefits

Social Security offers benefits for Individuals:

Benefits for Spouses:

And benefits for Families:

Retirement Benefit

Your base monthly benefit (with no deductions, credits, or adjustments) is called your Primary Insurance Amount (PIA).

Kiplinger looks at strategies for maximizing your Social Security benefits:


IMPORTANT NOTE: As of April 30, 2016, the file-and-suspend strategy is no longer available.
Click here to read more.


Primary Insurance Amount "PIA"

Your PIA is based on the average of your 35 highest earnings years.
Everyone's earnings are indexed (compared to the national average),
to determine a monthly PIA amount.

• 2017 maximum PIA: $2,888 / month.
• Average PIAs are about $1,300 / month.

Estimate your PIA now at SSA.gov ▸


Retirement Age

graph of benefits accrued vs retirement age

Assuming a birth year between 1943 and 1954.





Full Retirement Age

social security full retirement age

Early retirement later than 62 does not incur the full reductions noted above. It scales approximately linearly.



Eligibility

• Almost all working people are easily eligible for retirement benefits.
• All income on which you pay FICA tax can earn you “credits”.
• E.g., in 2016, one credit was recorded per $1,260 in earnings.
• Up to 4 credits are recorded each year, and 40 credits are needed to qualify.
• If you receive a pension from a government or other employer that did not withhold Social Security taxes, your retirement and/or disability benefits may be reduced.


Other Considerations

• Retiring sooner may keep you from dipping into retirement savings, allowing them to continue growing.
• Money (and reduced pressure to work) may be more valuable when you are younger.
• Laws may change to reduce your benefits without warning.
• Social Security is running out of money, so some change is inevitable.


 

Working while receiving benefits

If you work while receiving benefits before reaching FRA, your benefits may be reduced.


 


Taxation of Benefits

Up to 85% of Social Security benefits may be counted as taxable income, depending on combined income from all sources.

Behavioral Finance Venn Diagram



Disability Benefit

A person may qualify for disability benefits if all three conditions are met:



In order to qualify for disability benefits, each individual must have worked enough years according to their age.





Spousal Benefits

loss aversion
 

Survivors and Divorcees

  • If your spouse dies, you may be eligible to receive their full PIA plus DRCs as a monthly benefit.

    You may start as early as 60, but there is a reduction if you start before your FRA.
    You may be eligible for a death benefit of $255 to help with funeral costs.
  • If you are divorced, you may be eligible to receive spousal or survivor benefits based on your former spouse’s work record.

    The marriage must have lasted 10 years. You must be at least 62 and unmarried.

Family Benefit


 
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