Thursday, June 16, 2022

What Is Social Security Benefits

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Are Social Security Benefits Taxable

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If you have a lot of income from other sources, up to 85% of your Social Security benefits will be considered taxable income. If the combination of your Social Security benefits and other income is below $25,000, your benefits wonât be taxed at all. The amount of your benefits that is subject to taxes is calculated on a sliding scale based on your income. Money that Social Security recipients pay in income taxes on their benefits goes back into funding Social Security and Medicare.

If your retirement income is high enough that your benefits are taxable, how do you pay those benefits? You can ask Social Security for an IRS Voluntary Withholding Request Form if youâd like the government to withhold taxes from your Social Security benefits. Otherwise, youâre expected to file quarterly tax returns to pay these taxes over the course of the year.

That covers federal income taxes. What about state income taxes? That depends. In 13 states, your Social Security benefits will be taxed as income, either in whole or in part the remaining states do not tax Social Security income.

Beware The Social Security Earnings Test

Bringing in too much money in earned income can cost you if you continue to work after claiming Social Security benefits early. With what is commonly known as the Social Security earnings test for annual income, you will forfeit $1 in benefits for every $2 you make over the earnings limit, which in 2021 is $18,960. Once you are past full retirement age, the earnings test no longer applies, and you can make as much money as you want with no impact on benefits.

Any Social Security benefits forfeited to the earnings test are not lost forever. At your full retirement age, the Social Security Administration will recalculate your benefits to take into account benefits lost to the test. For example, if you claim benefits at 62 and over the next four years lose one full years worth of benefits to the earnings test, at a full retirement age of 66 your benefits will be recomputed — and increased — as if you had taken benefits three years early, instead of four. That basically means the lifetime reduction in benefits would be 20% rather than 25%.

What About Taxes On Social Security

Keep in mind that Social Security benefits may be taxable, depending on your “combined income.” Your combined income is equal to your adjusted gross income , plus non-taxable interest payments , plus half of your Social Security benefit.

As your combined income increases above a certain threshold , more of your benefit is subject to income tax, up to a maximum of 85%. For help, talk with a CPA or tax professional.

In any case, if you’re still working, you may want to postpone Social Security either until you reach your full retirement age or until your earned income is less than the annual limit. In no situation should you postpone benefits past age 70.

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A Guide On Taking Social Security

The decision of when to take Social Security is highly dependent on your circumstances. You can start taking it as early as age 62 , wait until you’ve reached full retirement age or even until age 70. While there’s no “correct” claiming age for everybody, the rule of thumb is that if you can afford to wait, delaying Social Security can pay off over a long retirement. Here are some of the rules and guidelines.

What If I Change My Mind

Your 2016 guide to Social Security benefits

If you receive Social Security benefits at a reduced rate, but then change your mind, you have the option of withdrawing your application and paying back to the government what you’ve already received . Then, you could restart benefits at a later date to take advantage of a higher payout. But you are limited to one withdrawal per lifetime.

For example, let’s say you elected to receive early benefits at age 62, but then decided to go back to work at age 63. You could withdraw your Social Security application within the first 12 months of receiving benefits, pay back the years’ worth of benefits you received, go back to work, and then wait until a later age to restart your benefit checks at a higher level.

For important details about repaying benefits please read the SSA publication If You Change Your Mind.

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Social Security Number Theft

Because Social Security Numbers have become useful in identity theft and other forms of crime, various schemes have been perpetrated to acquire valid Social Security Numbers and related identity information.

In February 2006, the Social Security Administration received several reports of an email message being circulated addressed to “Dear Social Security Number And Card owner” and purporting to be from the Social Security Administration. The message informs the reader “that someone illegally is using your Social Security number and assuming your identity” and directs the reader to a website designed to look like Social Security’s Internet website.

“I am outraged that someone would target an unsuspecting public in this manner,” said Commissioner Jo Anne B. Barnhart. “I have asked the Inspector General to use all the resources at his command to find and prosecute whoever is perpetrating this fraud.”

Once directed to the phony website, the individual is reportedly asked to confirm his or her identity with “Social Security and bank information”. Specific information about the individual’s credit card number, expiration date and is then requested. “Whether on our online website or by phone, Social Security will never ask you for your credit card information or your PIN,” Commissioner Jo Anne B. Barnhart reported.

Fact #: Social Security Provides A Foundation Of Retirement Protection For Nearly Every American And Its Benefits Are Not Means

97% of the elderly either receive Social Security or will receive it.

Almost all workers participate in Social Security by making payroll tax contributions, and almost all elderly Americans receive Social Security benefits. In fact, 97 percent of the elderly either receive Social Security or will receive it, according to Social Security Administration estimates. The near-universality of Social Security brings many important advantages.

Social Security provides a foundation of retirement protection for people at all earnings levels. It encourages private pensions and personal saving because it isnt means-tested in other words, it doesnt reduce or deny benefits to people whose income or assets exceed a certain level. Social Security provides a higher annual payout than private retirement annuities per dollar contributed because its risk pool is not limited to those who expect to live a long time, no funds leak out in lump-sum payments or bequests, and its administrative costs are much lower.

Indeed, universal participation and the absence of means-testing make Social Security very efficient to administer. Administrative costs amount to only 0.6 percent of annual benefits, far below the percentages for private retirement annuities. Means-testing Social Security would impose significant reporting and processing burdens on both recipients and administrators, undercutting many of those advantages while yielding little savings.

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Fraud In The Acquisition And Use Of Benefits

Given the vast size of the program, fraud sometimes occurs. The Social Security Administration has its own investigatory unit to combat and prevent fraud, the Cooperative Disability Investigations Unit . The Cooperative Disability Investigations Program continues to be one of the most successful initiatives, contributing to the integrity of SSA’s disability programs. In addition when investigating fraud in other SSA programs, the Social Security Administration may request investigatory assistance from other federal law enforcement agencies including the Office of the Inspector General and the FBI.

What Are Social Security Credits How Are They Earned

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Social Security credits determine eligibility and benefit amounts in retirement. In 2021, earning $1,470 in income qualifies as earning one Social Security work credit.2 You are eligible to earn up to four credits per year. Most people need 40 credits to qualify for Social Security benefits though younger individuals require fewer credits for disability benefits or for their family members to receive survivors benefits.

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Claim That It Is A Ponzi Scheme

Critics have drawn parallels between Social Security and Ponzi schemes, arguing that the sustenance of Social Security is due to continuous contributions over time. One criticism of the analogy is that while Ponzi schemes and Social Security have similar structures , they have different transparencies. In the case of a Ponzi scheme, the fact that there is no return-generating mechanism other than contributions from new entrants is obscured whereas Social Security payouts have always been openly underwritten by incoming tax revenue and the interest on the Treasury bonds held by or for the Social Security system. The sudden loss of confidence resulting in a collapse of a conventional Ponzi scheme when the scheme’s true nature is revealed is unlikely to occur in the case of the Social Security system. Private sector Ponzi schemes are also vulnerable to collapse because they cannot compel new entrants, whereas participation in the Social Security program is a condition for joining the U.S. labor force. In connection with these and other issues, Robert E. Wright calls Social Security a “quasi” pyramid scheme in his book, Fubarnomics.

How Do You Apply

You can apply online by using our Social Security Retirement/Medicare Benefit Application to apply for retirement, spouse’s, divorced spouse’s or Medicare benefits.

If you and your spouse apply online for retirement benefits at the same time, or if your spouse applies online after you start receiving benefits, we will check their eligibility for benefits as a spouse. If they are qualified, the online application will automatically include a request for spousal benefits on your record.

If your spouse applies for benefits, they need to be ready to supply the information we need to approve their application for these benefits:

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How And When Will I Get My Social Security Payment

Once you activate your benefits, the Social Security Administration will send your monthly payments by direct deposit or check. Benefits are paid in arrears, which means your February payment is for your January benefits.

When you receive your payment each month is based on your birthday.

  • If your birthday is on the 1-10 of the month: Payments deposited on the second Wednesday of the month.
  • If your birthday is on the 11-20 of the month: Payments deposited on the third Wednesday of the month.
  • If your birthday is on the 21-31 of the month: Payments deposited on the fourth Wednesday of the month.

What Is The Difference Between Ssi And Social Security Benefits

What is the Maximum Possible Social Security Benefit in 2017?

The United States Social Security Administration has a lot of different programs available to assist Americans in need and elderly Americans. About 178 million people pay into the Social Security system, and about 64 million people receive monthly Social Security benefits. Whether the benefits are for retirement, to help those with disabilities, or to pay survivor benefits, the SSAs goal is to improve the quality of life for many of us.

In fact, SSA plays a role in our lives directly or indirectly from the time we are born until we pass away. Most parents apply for a childs Social Security number at birth. When you get your first and subsequent jobs, the SSA verifies you with your employer based on your Social Security number, which reduces fraud and ensures the accuracy of your earnings. When you get married, you should let the SSA know so that you may receive certain retirement, survivor, and disability benefits with your spouse. And also, the SSA has assistance for those who become disabled, who need financial support in difficult times, and in retirement.

One of those main SSA programs available in the Supplemental Security Income program. Not to be confused with Social Security Disability Insurance , SSI pays monthly benefits to people with limited income and resources who are disabled, blind, or age 65 or older.

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Theres A Social Security Spousal Benefit

Marriage brings couples an advantage when it comes to Social Security. One spouse can take what’s called a spousal benefit, worth up to 50% of the other spouse’s Social Security benefit. For example, 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.

What’s Full Retirement Age

Full retirement age is when you’re eligible to receive full Social Security benefits. Your full retirement age depends on your birth year: Under current law, if you were born in 1955 or later, your full retirement age can be anywhere between age 66 and 2 monthsall the way up to age 67 for those born after 1959. If you were born before 1955, you’ve already reached age 66 and full retirement age.

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Earn Ssa Work Credits In Some Countries

You may not have enough credits from your work in the United States to qualify for retirement benefits. But, you may be able to count your work credits from another country. The SSA has agreements with 24 countries. If you earned credits in one of those countries, they can help you qualify for U.S. benefits.

Effect Of Late Retirement On Benefits

What Are Social Security Benefits? | Social Security FAQ

1.Represents Full Retirement Age based on DOB Jan. 2, 1955

2.PIA = The primary insurance amount is the basis for benefits that are paid to an individual

To review your situation, your annual Social Security statement will list your projected benefits at age 62, full retirement age, and age 70, assuming you continue to work and earn about the same amount until age 62, full retirement age, or age 70 before retiring. If you need a copy of your annual statement, you can request one from the Social Security Administration .

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How To Receive Federal Benefits

To begin receiving your federal benefits, like Social Security or veterans benefits, you must sign up for electronic payments with direct deposit.

If You Have a Bank or Credit Union Account:

  • Call the Go Direct Helpline at .

If You Don’t have a Bank or Credit Union Account:

Make Changes to an Existing Direct Deposit Account:

Learn how to make changes to an existing direct deposit account. You also may contact the federal agency that pays your benefit for help with your enrollment.

Benefits For Your Family

If youre getting Social Security retirement benefits, some members of your family may also qualify to receive benefits on your record. If they qualify, your ex-spouse, spouse, or child may receive a monthly payment of up to one-half of your retirement benefit amount. These Social Security payments to family members will not decrease the amount of your retirement benefit.

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Getting A Social Security Number For A New Baby

The easiest way to get a Social Security number for your child is at the hospital after they are born when you apply for your childs birth certificate. If you wait to apply for a number at a Social Security office, there may be delays while SSA verifies your childs birth certificate.

Your child will need their own Social Security number so you can:

  • Claim your child as a dependent on your income tax return
  • Open a bank account in their name
  • Get medical coverage for them
  • Apply for government services for them

Keep your Social Security card in a safe place to protect yourself from identity theft.

How To Get A Social Security Card

What is the minimum Social Security benefit?
  • Gather your documents. Learn what documents you’ll need to get a card. Select your situation:
  • Adult or child
  • Original, replacement, or corrected card
  • U.S. born citizen, foreign born U.S. citizen, or noncitizen
  • Apply online for a replacement card. Apply online if youre not changing anything on your card and you are eligible. This option is available in most states. You will need to make a my Social Security account first. Or complete an application. If you can not apply online, fill out an application and return it to the SSA. Find out where to take it in person or mail it.
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    How Is Social Security Financed

    In order to understand why Social Security is facing a long-term financing issue, it’s important to know how Social Security works. First off, Social Security is funded through payroll tax deductions. These payroll taxes are taken directly out of an employee’s paycheck and are paid by both employees and employers. In 2022, payroll taxes apply to up to $147,000 of an individual’s annual income.

    The payroll tax rate for Social Security is 6.2%. This means that employees pay 6.2% and employers pay 6.2%. Self-employed people will pay the entire payroll tax rate of 12.4%.

    When a worker pays their Social Security payroll tax, that money doesn’t go to a specific Social Security fund allocated just for them. Current workers are paying into a system that pays for the benefits of all current retirees.

    In 2022, for every dollar you pay in Social Security payroll tax, 85 cents goes towards the Social Security trust fund that pays monthly benefits to current retirees and their families , according to the Social Security Administration. The other 15 cents goes to a trust fund that pays benefits to people with disabilities and their families

    In recent years, there has been an excess of reserves in the Social Security Trust Fund: the amount of money that the Social Security administration collects through payroll taxes exceeds the amount of money the administration pays out in benefits.

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