How To Receive Benefits
You must apply in person. The family must present the child’s birth certificate, the parents’ Social Security numbers, and the child’s Social Security number. There may be additional documents required, as well. In relevant cases, the applicant must provide a parent’s death certificate and/or evidence of disability from a doctor.
If your child is disabled, the Social Security Administration offers a Disability Starter Kit that can help you navigate the process of applying for benefits.
If you are taking care of a child and are receiving Social Security benefits for that reason, their benefits may stop at a different time from your own. For example, if your child is not disabled, your benefits will end when the child turns 16 years old. If the child is disabled and you have responsibility for them, your benefits may continue. For these types of specific circumstances, its best to contact the Social Security Administration for guidance.
What We Mean By Disability
The definition of disability under Social Security is different than other programs. Social Security pays only for total disability. No benefits are payable for partial disability or for short-term disability.
We consider you disabled under Social Security rules if all of the following are true:
- You cannot do work that you did before because of your medical condition.
- You cannot adjust to other work because of your medical condition.
- Your disability has lasted or is expected to last for at least one year or to result in death.
This is a strict definition of disability. Social Security program rules assume that working families have access to other resources to provide support during periods of short-term disabilities, including workers’ compensation, insurance, savings, and investments.
What To Consider Before Filing For Social Security
A larger benefit check sounds great, but there are tradeoffs, and soon-to-retire folks should consider multiple issues before they decide one way or the other on when to file. If you really want to consider all the avenues, then youll have to think about your finances and longevity two issues that people have a hard time grappling with.
But heres the key tradeoff: you can file early and take a reduced benefit, expecting that a shorter lifespan will mean you receive more now, or you could file at full retirement age or later and claim a bigger check, and eventually live long enough to claim more than the first approach.
Social Security is like longevity insurance, says Brent Neiser, a certified financial planner and former chair of the Consumer Advisory Board at the Consumer Financial Protection Bureau. Its a stream of payments that will not stop throughout your life, so delaying your benefits to keep those payments as large as possible forms a helpful base to your retirement plan.
Neiser urges those who have not saved enough for retirement to use whatever means possible to postpone their Social Security benefits until after their full retirement age to help boost their future income.
You can use personal savings to help bridge the gap, but ideally you should plan to work a little longer , Neiser says.
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Watch Out For Hidden Costs
Youll also want to consider other lifestyle factors, especially Medicare. Americans become eligible for federal health insurance coverage at age 65, well after when you can begin to file for Social Security.
If you stop working at age 62 and lose health insurance, you have to get supplemental insurance to bridge the gap until you turn 65 and Medicare kicks in, Neiser says.
If you work during retirement, you have another incentive to delay collecting Social Security. Earning too much at a job after you begin collecting your benefit can reduce your payout, but only if you have yet to hit full retirement age.
However, when you hit full retirement age, your benefit will increase to account for any benefit that was withheld earlier due to working. Heres how much you can earn and not get hit.
If youre younger than full retirement age for all of 2021, the Social Security Administration will deduct $1 of your monthly check for every $2 you earn above $18,960 per year.
If you reach full retirement age in 2021, the administration deducts $1 of your monthly check for every $3 you earn above $50,520 until the month you reach retirement age.
Youll also owe Social Security and Medicare tax on your earnings, even if youre already receiving benefits.
So those are some potential pitfalls to claiming Social Security early.
How Are Social Security Disability Benefits Calculated
In a few words, the SSDI benefit amount you may receive monthly is calculated based on the average lifetime earnings that you have accumulated up to the point when you became disabled. You cannot be denied SSDI benefits because you have too many assets or unearned income however, the amount you receive may be affected by other income sources.
The benefits are calculated using your average indexed monthly earnings over a period of time. If you received paychecks from an employer and a portion of your check was withheld for Social Security taxes, those may count as covered earnings. If your employer was not required to collect Social Security taxes from your paycheck, your wages from that employer do not count as covered earnings and may reduce the amount you will receive for your SSDI benefits.
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If You’re Not Sure Why You Received A Payment
Contact the authorizing agency directly to find out why they sent the payment. You may be able to find the authorizing agency in the memo line of the check. View this diagram of a sample Treasury check to help you locate the authorizing agency contact information on your own check. Scroll about half way down the page to see the diagram.
If you’re unable to find which agency authorized the payment, . They can help you determine which government agency you need to contact. To find which RFC you need to call, look for its city and state at the top center of the check.
Use the Treasury Check Verification System to verify that the check is legitmate and issued by the government.
How A Social Security Break
Figuring out the right time to start taking Social Security benefits isnt always a straightforward process. A Social Security break-even calculator can help you get some perspective on the numbers so you know what you stand to gain or lose by taking benefits earlier versus later.
Social Security break-even calculators help you find the best age to start taking retirement benefits. They do this by comparing your cumulative Social Security retirement benefits paid at age 62, your full retirement age and at age 70 and estimating how long it would take the benefits paid at age 70 to break even with benefits paid starting at age 62.
Heres a simple calculation to give you an idea of how a Social Security break-even calculator works. Say that you have the option to begin receiving $1,200 a month in benefits at age 62. Youd receive $1,700 in benefits if you wait until full retirement age at 66. Or you could receive $2,200 a month in benefits by delaying them until age 70.
The break-even point represents when the cumulative benefits even out. So if you wait until age 70 to start taking benefits, it would take you until age 79 to break even with the benefit amount youd receive if you started taking them at age 62. If you were to start receiving benefits at age 66, it would take you until age 75 to break even with the benefits youd receive if you started them at 62.
When Can You Collect Social Security
Many people still think of age 65 as the age to retire, but that has changed. To collect full benefits, you cannot apply for Social Security until you are:
- 65, if born in 1937 or earlier
- 65 and 2 months, if born in 1938
- 65 and 4 months, if born in 1939
- 65 and 6 months, if born in 1940
- 65 and 8 months, if born in 1941
- 65 and 10 months, if born in 1942
- 66, if born in the 19431954 range
- 66 and 2 months, if born in 1955
- 66 and 4 months, if born in 1956
- 66 and 6 months, if born in 1957
- 66 and 8 months, if born in 1958
- 66 and 10 months, if born in 1959
- 67, if born in 1960 or later
If you delay retirement beyond these limits , then you will receive increased Social Security benefits, up to 32% more. You can also choose to start collecting Social Security benefits as early as age 62, but your benefits will be reduced.
Chapter : Maximizing Your Benefit
Many people ask can I collect my deceased spouses social security and my own at the same time? In fact, you cannot simply add together both a survivor benefit and your own retirement benefit. Instead, Social Security will pay the higher of the two amounts.
Did you Know?
If the benefit you would receive as a survivor is higher than your own earned benefit, Social Security pays the higher of the two amounts not the two combined.
While it can seem unfair to not be able to claim both full benefits, there are claiming strategies you can use to maximize the total Social Security benefits you receive. This includes switching from one benefit to the other. See an example from one of our users directly below.
Making the right decision on how to maximize your own benefits depends on how much your own retirement benefit vs. survivor benefit would be, and how long you think you will be living and needing the money. It also depends on whether youre working.
- If you are already receiving spousal benefits when your spouse dies Social Security will convert your benefit to survivors benefits, which are up to 100% of your late spouses full retirement benefit .
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Qualifying For Social Security Disability Insurance
First, lets consider eligibility requirements for SSDI. The person must meet the definition of disability established by the Social Security Administration . This includes that the condition has lasted or is expected to last at least 12 months , the individual is unable to perform previous work, and is unable to adjust to other types of work.
The mental or physical condition must be severe enough and be found in the SSA Listing of Impairments. Finally, the individual must have worked long enough and recently enough to have earned an adequate number of work credits.
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Why Youll Never Get As Much In Benefits After 2021
For years weve used nice round numbers when calculating the impact of filing for social security benefits early, or later. Weve said if you file at 62 youll get 75% of your FRA benefit amount and if you wait until 70 youll get 132% of your benefit amount.
Well, guess what? Not anymore!
Because the increases and reductions are calculated on a monthly basis, once FRA increases, there will not be as many months for benefits to increase by.
The inverse will also be true, the reductions for filing at the earliest age will be steeper because there will be more months between age 62 and full retirement age.
This is why I stress understanding how to calculate the reductions and increases on a monthly basis.
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Early Benefits Can Still Pay Off
However, taking early benefits can still pay off despite the reduced monthly check. But youll want to be sure you budget for a reduced benefit.
No one can predict how long youll live, but if youre facing a potentially significant reduction in life expectancy and are short of income, taking Social Security early may be appropriate, says Neiser.
Married women are also good candidates for claiming early benefits because they are likely to outlive their husbands. Those widows then become eligible to receive the greater of either their benefit or their late husbands benefit.
However, this scenario works only if the husband does not claim his benefits early. By not claiming early benefits, the husband effectively increases the monthly benefit his wife eventually receives. So youll want to calculate how filing early will affect your spousal benefit here.
Clarifying Disability And Ssi
If your child is disabled, be aware that the Social Security Administration uses different definitions of disability for SSI evaluation. A childâs disability from birth to age 18 need not be permanent, but it must be expected to last at least one year or be fatal. At age 18, disabled children must qualify for SSI under the adult definition. Adult disabilities must last at least 12 months, potentially result in death or make the individual unable to work.
The SSA regards blindness as a unique disability. Children and adults are considered blind if their best eye has 20/200 vision or their field of vision is 20 degrees or less with corrective lenses.
Survivors Benefits If You Are Divorced
An ex-spouse is eligible to receive the same benefits as a current spouse if they were married to the deceased worker for at least 10 years and are not currently married. However, if the living ex-spouse remarries before age 60, they forfeit their right to their deceased former spouses Social Securityunless that subsequent marriage ended in death, divorce, or annulment. If the living ex-spouse remarries after age 60, this rule doesnt apply.
How much a spouse or former spouse receives depends on several factors including when they file for benefits and whether they are still working and earning money.
Governments Obligation To Pay Social Security Benefits
Some elected officials have warned that it may run out of funds, leaving young contributors to worry that they wont get paid back in their retirement.
Lets just nip that one in the bud right here. Social Security cant run out of money. Even if the Social Security fund does run out of cash, the Federal Government still has to pay out Social Security payments to eligible recipients. The Treasury Department will essentially just write the checks from a different bank account. The government is obligated by law to pay Social Security payments to eligible Americans. Without an act of Congress to eliminate Social Security, the government has to pay.
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Lower Social Security Payments Today Mean Lower Future Benefits
When you run an LLC taxed as an S-Corp or an S-Corp, you have a option to lower your taxes that many business owners dont know about. Because it is complex, you may want help from a tax expert or accountant when putting this together for your business.
When taxed as an S-Corp, you can pay yourself a regular paycheck and take all additional profit as an owner draw or dividend. In this case, you only owe payroll taxes on the portion of your income that comes from the paycheck. In my case, I am a W-2 employee of my company, Narrow Bridge Media, Inc.. I get a weekly paycheck from an online payroll management service. That service withholds my FICA taxes for me and remits to the IRS. Any income I earn above that level is only taxed at my regular income tax rate.
Case Study: How Social Security Works for Business Owners
Lets say you run a business that makes $100,000 per year in profit. If you were to pay yourself a paycheck of $40,000 per year, that means you dont have to pay Social Security taxes on $60,000 of your income or more than half of what you bring in. Thats huge! Just beware that the IRS requires you to pay yourself a reasonable salary. Therefore, look at the average income for someone in your field and try to be honest. If you make your paycheck $5,000 and take $95,000 in owner draws, you can expect the IRS to come a-knocking.
Social Security: 10 Smart Ways To Get More Benefits
Without Social Security benefits, 22 million Americans would be poor per a report from the Center on Budget and Policy Priorities. About 21% of married elderly beneficiaries and 44% of unmarried ones get fully 90% or more of their income from Social Security, while about 48% of married elderly beneficiaries and 69% of unmarried ones get 50% or more of their income from it, according to the Social Security Administration.
How much money are we talking about? Well, the average Social Security retirement check was recently $1,417, or about $17,000 annually. If that doesn’t seem like much, know that there are ways to increase your benefits. Here are 10 strategies to consider:
Let’s examine each in more detail.
How Social Security Works For Business Owners
Social Security is a government-backed retirement program. Workers across the country pay a Social Security tax each year in exchange for a payment each month in retirement, or if disabled in some cases. This retirement fund isnt quite a guarantee. For the most part, workers from all backgrounds can count on social security. Still, there is a very special way as to how social security works for business owners. This is important to understand in order to get the most from your social security
Social Security is a sometimes controversial program. It seems a decade doesnt go by without a government leader threatening that Social Security may run out of money. Some think the program should be canceled. For now, it is the law of the land. Plus, its something that would be incredibly unpopular to eliminate or reduce. As a business owner, how does Social Security work? Lets dig in and find out.