What You Need To Know About Social Security Even If Youve Opted Out
Many pastors;dont have a solid understanding of how Social Security works and dont think they need to because they have opted out. However, there are some things everyone should understand about Social Security, even pastors.
This year, an insurance company called MassMutual surveyed about 1,500 people between ages 55 and 65 to find out how well Americans nearing retirement understand Social Security. You probably wont be surprised that 33% of the people could not pass the quiz and another 19% only passed with a D. Only 3% of the people surveyed answered all of the questions correctly. You should try your hand at the survey to see how well you do.;
Most people dont know a lot about how Social Security works and many pastors think they dont need to because they have opted out. That is a big mistake. Even if you have opted out, you may be eligible for benefits and need to understand how the system works.
Myth #: Your Benefits Are Based Only On Wages You’ve Earned Before Age 65
How your Social Security benefit is calculated can seem mysterious. However, it’s important to know a few essential facts to aid your claiming strategy. You can use the tools on SSA.gov to do the calculations.
- Your benefit is calculated based on your highest 35 years of earnings; they don’t have to be consecutive years or before age 65.
- If you work past age 65, those earning years will be included, so long as they are high enough to be part of your highest 35 years.
- Even working part-time after turning 65 may be part of your highest 35 years of earnings.
- To be eligible for Social Security, you must have a minimum of 10 years of covered employment , which equates to 40 credits in the Social Security system.
- If you don’t have 35 years with earnings, zeros will be included in the calculation.
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What Is A Social Security Card
Your Social Security card is an important piece of identification. You’ll need one to get a job, collect Social Security, or receive other government benefits.
When you apply for a Social Security number , the Social Security Administration will assign you a nine-digit number. This is the same number that is printed on the Social Security card that SSA will issue you. If you change your name, you will need to get a corrected card.
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How Do Social Security Credits Work If Im Self
Those who work for someone else, have the luxury of having their employers taking the taxes out of every paycheck for them. With taxes automatically taken out of their paychecks, most employees dont have much to worry about at tax time. If you are self-employed, however, its a different story.;
Without the company boss taking your taxes out one paycheck at a time, its up to the self-employed individual to do it for themselves. Unless the self-employed worker arranges to make quarterly payments, they will have to pay their taxes all at once at the end of the year. Having to deal with this huge bill, many self-employed workers are encouraged to create as many deductions as possible to reduce the load.
While beneficial in the short-term, this will have an impact on the amount of Social Security benefits that might be paid upon retirement. Self-employed individuals have a heavy tax burden to bear because from the standpoint of the IRS they are considered both the employee and employer.
This then means that they are expected to hold back Social Security taxes for their own personal contribution as well as what is considered their business contribution. It is for this reason that many try to reduce the amount with itemized deductions.;
Who Is Eligible For Social Security Retirement Benefits
Social Security retirement benefits are not based on need but rather on income earned during your earning life. The Social Security Administration keeps a record of earnings over your working life and pays benefits that are based on the average amount earned, provided a minimum number of work credits have been accumulated. Only income on which Social Security tax is paid is considered in calculating these work credits.
To be eligible for Social Security retirement benefits, a worker born after 1928 must have accumulated at least 40 quarters of work in “covered employment”.; A “quarter of coverage” generally means the three-month calendar quarter. In addition, you must earn at least $1,470;in a quarter for it to count. However, the SSA looks at how much you earned in a year and divides that figure by the minimum amount required to earn credit for a quarter. Thus, if you earn at least $5,880 in January and February of 2021 and don’t work the rest of the year, you will receive credit for four quarters of work .
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Checking Your Social Security Earnings Record
How confident are you that your Social Security earnings record is accurate?
Unless youve checked it recently, you shouldnt be too sure.
Mistakes in an individuals Social Security earnings record are actually much more common than most people think.;In tax year 2012 alone, the Social Security Administration reported $71 billion in wages that could not be matched to an individuals earnings record!;The good news is that the Social Security Administration has a system for sorting out some of these mistakes and assigning the earnings to the correct record.;But nearly half of the mismatches are never corrected. That means that in 2012 there were approximately $35 billion in wages that was never credited to an individuals Social Security history.
How Much Will Your Retirement Benefit Be
Your retirement benefit is based on your average earnings over your working career. Higher lifetime earnings result in higher benefits, so if you have some years of no earnings or low earnings, your benefit amount may be lower than if you had worked steadily. Your age at the time you start receiving benefits also affects your benefit amount. Although you can retire early at age 62, the longer you wait to retire , the higher your retirement benefit.
You can find out more about future Social Security benefits by signing up for a my Social Security account at the Social Security website, www.ssa.gov, so that you can view your online Social Security Statement. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivor’s, and disability benefits. If you’re not registered for an online account and are not yet receiving benefits, you’ll receive a statement in the mail every five years, from age 25 to age 60, and then annually thereafter. You can also use the Retirement Estimator calculator on the Social Security website, as well as other benefit calculators that can help you estimate disability and survivor’s benefits.
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How Does Age Affect Disability Benefits
When it comes to SSDI benefits, other factors involved in addition to the number of credits. In these cases, the age of the claimant seeking SSI disability is also a determining factor. For those who are under 24 years of age, benefits may be awarded with as little as 6 credits. A claimant over 31 however, will need 20 Social Security credits. The first step, however, is to complete a Social Security disability application. Fill out the appropriate SSDI forms and go from there. If you need further assistance you can also consult with a Social Security disability attorney.
What Are Social Security Benefits And How To Determine If You Are Eligible
Before you receive any Social Security benefits, the Social Security Administration will need to determine your eligibility. Remember that Social Security is an insurance system designed to pay you benefits during times of economic hardship. Just as a medical insurance plan representative must review your policy coverage before paying your surgical bill, a Social Security administrator must examine your Social Security record to ensure that you are eligible for the type of benefit for which you have applied. Determining your eligibility will mean finding answers to the following questions:
- Have your earnings been subject to Social Security taxes?
- What is your insured status?
- Have you met the eligibility requirements specific to your benefit claim?
- Have you filed your benefit claim?
To Collect Ssdi Benefits You Must Be Insured
There are both medical and financial eligibility criteria you have to fulfill before getting disability benefits through the Social Security Disability Insurance program. One of the non-medical eligibility requirements for SSDI is having enough “work credits.” Each work credit is based on having earned and paid Social Security taxes on a certain amount of money.
If you do not have enough work credits, you are not considered “insured” for SSDI. If you do have enough work credits, you are then considered “insured.”
How To Calculate Spousal Social Security Benefits If You Are Divorced
If you are divorced, your spousal benefits are based on your former spouses earnings and when you claim.
The Social Security Administration first pays out benefits on your own earnings record .;
It then calculates half of your exs full retirement amount and adjusts it based on when you claim benefits. So, again, there is no reason to wait to claim these benefits after your full retirement age. Moreover, the spousal benefits you receive dont reduce the amount your former spouse will receive.
If you continue to;work while receiving benefits, the retirement benefit earnings limit still applies until your full retirement age. If you also receive a pension based on work not covered by Social Security, such as government work, your Social Security benefit on your ex-spouses record may be affected.
The major difference with spousal benefits if you are divorced is that your ex-spouse doesnt have to file for retirement benefits for you to be able to collect spousal benefits. That means you can claim spousal benefits as long as both you and your ex are at least 62 years old.
Your Insured Status Affects Your Eligibility For Benefits
Your insured status is the foundation of any benefit claim. You are considered insured when you have acquired a certain number of Social Security credits. These credits are also known as quarters of coverage. Since 1978, covered workers receive credits based on their annual earnings. Every year, the earnings necessary to earn one credit increase according to how much the national average wage has increased. In 2015, you earn one credit for every $1,220 in earned income, up to a maximum of four credits per year. Prior to 1978, an employee earned one credit for each calendar quarter in which covered wages paid were $50 or more . However, even if the employee received no wages in some of the quarters, he or she could still earn the maximum four credits if his or her total annual wages equaled or exceeded the maximum Social Security earnings base for that year.
Check The Social Security Administration’s Math
Your statement includes a record of the earnings on which you’ve paid taxes and an estimate of the benefits you will receive at various retirement ages: 62, 67, and 70. It is always wise for you to check the SSA’s numbers. Don’t be surprised if you uncover an error. Some government-watchers estimate that the SSA makes mistakes on at least 3% of the total official earnings records it keeps.
When you check your record, make sure that the Social Security number noted on your earnings statement is your own, and make sure the earned income amounts listed on the agency’s records mesh with your own records of earnings as listed on your income tax forms or pay stubs.
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How To Qualify For Ssi Benefits
You can get Social Security Disability benefits even if you do not have enough work credits to qualify for SSDI. The SSA offers the SSI program to disabled adults and children who have limited financial resources. It is a safety net so that people who cannot work for a living but do not qualify to collect SSDI can pay for essential items, like food, clothing, and shelter.
To qualify, you have to meet the same medical disability standards as a person does for SSDI. In addition, your income must be low, and your countable assets cannot exceed certain limits. Specifically, you could qualify for SSI benefits if:
- You have a severe illness or injury that meets the benchmarks of the SSAs Listing of Impairments, also called the Blue Book.
- Your disability prevents you from supporting yourself through gainful employment.
- You have very little income. This income limit can change every year. In addition, the income limit tends to vary by location because SSI is a joint program of the federal and state governments.
- Your countable assets do not exceed the SSI limit. This number can also change every year. Your home and the land it is on do not count as assets. Most cars also do not count toward your resources.
You must satisfy all of these elements to be eligible for SSI benefits. If you are struggling to understand the qualifications for SSDI or SSI, our firm can help you navigate these matters and apply for the benefits you may be entitled to because of your medical condition.
How Many Work Credits Do I Need To Qualify For Ssdi
The general rule is that you must have earned at least 20 credits in the 10 years before you became disabled. So, if you worked for 5 years and earned 4 credits per year, then you will have earned 20 credits.
However, like everything with Social Security, it isnt always that simple.
If you become disabled before age 24:
You need to have six work credits in the three years before your disability.
However, it may not take a full year and a half of work to qualify. Remember, you will earn all four of your yearly credits when you have earned $5,040 in one year. It does not matter if it takes you two months or twelve months to earn that amount.
For example:;What if you earned approximately $5,040 during the last few months of 2015? Then you earned all FOUR work credits for 2015.
THEN, what if you earned another $2,520 during the first couple months of 2016? You will have earned TWO work credits for 2016.
This fulfills your requirement for six work credits earned during the past three years
Please note: the six credits mentioned here are only appropriate for this example. Your age and work credit requirements may vary.
If you become disabled from age 24 through 30:
It isnt quite as complicated as it sounds. Here is;how you do it:
For example: If you become disabled at 29. The difference between age 21 and 29 is eight years. Social Security says you need work credits for halfof that time. So, you need credits for four years out of the last eight years .
a) 29 21 = 8
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Can You Still Receive Benefits If Youve Opted Out
Even if you have opted out of Social Security you can still receive benefits. If you have enough non-ministerial wages to have earned 40 credits, you will be entitled to benefits based on those earnings. Also, if your spouse has earned at least 40 credits you will be eligible for spousal benefits, which for retirement are up to half of the working spouses earned benefit.
How Many Work Credits Do You Have
Work credits are currently awarded on a yearly basis and are based on the amount of money you earned and paid FICA taxes on. If you earn even a modest amount of money in a calendar year, you’ll likely receive the maximum four credits for that year.
Here are the specifics. For the year 2021, every $1,470 you make earns you another work credit for Social Security purposes, up to the maximum of four per year. For example, if you made $5,880 or more in 2021, you’ll receive the maximum four work credits available for the year.
The amount of money you must make to earn one credit changes every year. To see exactly how much you had to make in each year to earn work credits for that year, see the Social Security Administration website at .
Not all income counts towards work credits. Only wages and self-employment income are counted. Income from pension payments or investments does not count toward work credits.
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Theres A Social Security Spousal Benefit
Marriage brings couples an advantage when it comes to Social Security. Namely, one spouse can take what’s called a spousal benefit, worth up to 50% of the other spouse’s Social Security benefit. Put simply, if your monthly Social Security benefit is worth $2,000 but your spouse’s own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 — bringing in $500 more in income per month. Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earners benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.