Social Security Retirement Benefits

Overview

The Social Security Administration (SSA) is federally run, government organization that provides a variety of programs to help support American citizens. The SSA is known quite well for their Social Security Retirement program but also offer other programs such as Social Security Disability and Survivor benefits. All legally employed and self-employed Americans pay into taxes when they receive income and a part of these taxes are known as Social Security taxes. These taxes fund all of Social Security’s benefit programs as well as cover their costs to continue operations.

The Social Security Retirement program is designed to support Americans as they enter retirement age with benefit checks. In the past, many individuals found they were unable to work due to old age and could no longer support themselves or (if applicable) their significant other. To solve this issue, the Social Security Administration created the retirement program.

How Social Security Retirement Works

After an American reaches the age of 62, he or she may file for retirement benefits. Retirement benefits are provided once a month at a fixed amount for the rest of the recipient’s life. To qualify for retirement benefits, an applicant must have earned enough “work credits” throughout his or her lifetime.

Work credits are earned when an individual works and pays into Social Security taxes. The Social Security Administration will not give benefits to someone who doesn’t have the necessary amount of credits. Americans are required to earn at least 40 credits before they will qualify for retirement benefits. As of 2016, one credit is awarded for every $1,260 earned and only a maximum of 4 credits can be earned per year. In other words, an American will qualify if they have 10 years of full credits.

How much a recipient may receive per month depends on that individual’s entire work history. There is an official formula the SSA uses to determine an applicant’s monthly benefit amount. The formula will take 35 years of an applicant’s highest earning throughout their life. If an applicant has less than 35 years of earnings, the rest of the remaining years will be set to 0 earned credits. The more income an individual has earned and paid taxes on, the larger the monthly benefit amount will be and vise versa.

Early Retirement

The full retirement age is the age in which an individual may receive full or unreduced retirement benefits. Typically the full retirement age for an American citizen is between 65 and 67 years old but an applicant may choose to file for retirement benefits as soon as they turn 62 years of age. This is the earliest an individual may file and comes at a bit of an expense. The Social Security Administration (SSA) will reduce a recipient’s monthly benefit amount by approximately 25% for taking retirement early.

The reason this is offered is because some individuals may be forced to stop working due to health complications or personal reasons and may need financial assistance. People who are under the age of 62 and can’t work because of health problems should consider applying for Social Security Disability benefits.

Delayed Retirement

Americans also have a choice to take retirement at a later date than their full retirement age to increase their monthly benefit amount. Depending on the year an applicant was born, the SSA will increase their benefit amount by a particular percentage for every year they wait up until 70 years of age. Also, the extra years provide the applicant a chance to work more and add a few more years of earnings to their work history resulting in a larger benefits amount.

Retirement Benefits & Social Security Disability Benefits

An American is unable to receive both Social Security retirement benefits as well as Social Security Disability benefits at the same time (with an exception). If an individual is already receiving disability benefits before the age of 62, the SSA will convert his or her disability benefits into retirement benefits. If an individual decides to take early retirement at 62 and then afterwards becomes approved for disability benefits, the SSA will make up the difference between the full disability amount and the early retirement amount. Basically this would recover the 25% reduction from taking early retirement since the full disability amount is the same as the max retirement amount.