How Much Backpay Will I Receive
You will receive back pay based on what is called your entitlement date.
For SSD, your entitlement date is generally five full months after your date of disability onset or twelve months before the date you submitted your application, whichever is later.
Social Security will determine the date of onset of your disability based on the medical evidence the agency has collected about you from your doctors and from hospitals that have treated you. Having to wait five months before getting any benefits basically means your first five months of benefits are withheld.
For SSI benefits, even if your disability began before you applied for benefits, your official date of onset will be sometime after the date you applied. This is because no benefits are paid to SSI recipients for periods before an application for benefits was submitted. Your back payment will be paid from the month after your application date through the date benefits are awarded to you.
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Benefits For Disabled Widows Or Widowers
If something happens to a worker, benefits may be payable to their widow, widower, or surviving divorced spouse with a disability if the following conditions are met:
- The widow, widower, or surviving divorced spouse is between ages 50 and 60.
- The widow, widower, or surviving divorced spouse has a medical condition that meets the definition of disability for adults and the disability started before or within seven years of the workers death.
Widows, widowers, and surviving divorced spouses cannot apply online for survivors benefits. However, if they want to apply for these benefits, they should contact Social Security immediately at 1-800-772-1213 to request an appointment
To speed up the application process, complete an Adult Disability Report and have it available at the time of your appointment.
We use the same definition of disability for widows and widowers as we do for workers.
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When You Plan To File For Benefits
Another important factor is when you plan to file for benefits. While you can file for social security benefits as early as age 62, waiting longer can earn you more money. If you wait until the age of 70, you are more likely to receive more benefits. You could potentially collect hundreds of dollars more per month if you wait until at least 70.
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When Do You Plan To Claim Benefits
Finally, you’ll need to wait until the age of 70 to start getting your Social Security benefits if you hope earn the highest possible check. That’s because the $3,895 max benefit is available only to people who earn the maximum number of delayed retirement credits.
Delayed retirement credits become available after you reach full retirement age. You earn them for each month after FRA until age 70 and they raise your benefit by two-thirds of 1% per month. If you claim checks before 70, you won’t earn the full benefits boost available and will end up falling short of the $3,895 maximum.
Delaying a benefits claim until 70 is challenging for many retirees, as is earning at least the wage base limit for 35 years. Don’t worry if you end up falling short of earning the maximum Social Security check. Instead, focus on saving money so you have plenty of income to supplement the retirement benefits you do end up with.
File For Benefits At Age 70
You’re eligible to receive your full monthly Social Security benefit based on your wage history once full retirement age arrives. That year is either 66, 67, or somewhere in between, depending on the year you were born.
You’re allowed to file for benefits outside of FRA, though. In fact, you can sign up as early as age 62. But filing before FRA will slash your Social Security income for life.
On the flipside, delaying your claim beyond FRA will result in an 8% boost to your benefits for each year you hold off. Once you turn 70, that incentive runs out. But if you delay your filing until age 70, you’ll put yourself in a strong position to score the maximum Social Security benefit, provided you meet the other two criteria above.
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Social Security Disability Through The Ssdi Program
To qualify for SSDI benefits, you must be disabled. Social Security follows the Code of Federal Regulations, which defines a disability as being unable to engage in any substantial gainful activity because of a medically determinable physical or mental impairment expected to cause death or last for at least 12 consecutive months. You also must have a record of working at jobs or through self-employment and paying Social Security taxes on the income earned.
The cause of your disability and its severity are factors used by Social Security to determine eligibility for benefits through the SSDI program, but they do not affect how much you receive in monthly payments after approval of your claim for benefits. How much you receive through SSDI depends, in part, on the lifetime average earnings you had before the onset of the disability.
Keep in mind that lifetime average earnings for purposes of SSDI only includes money earned while working for someone or through self-employment on which Social Security taxes were paid. Social Security uses a complicated formula that includes indexing earnings over a period of time to account for changes in wage levels during the years that you worked to arrive at your primary insurance amount.
Work For At Least 35 Years
The Social Security Administration calculates your final benefit amount based on your earnings for the 35 years when you made the most. It then indexes your annual earnings, which is to say it adjusts for inflation, and then takes the average of the 35 indexed amounts. If you have income for less than 35 years, the SSA will give you a zero for those years short of 35.
Thats why its important to have income for at least 35 years. Those zeroes can bring down your average significantly. The government used to send out peoples annual earnings histories, but stopped in 2011 to save money. Its a good idea, though, to check periodically what the government has recorded for you so you can make any needed corrections. You can do this easily by creating an online Social Security account.
Qualifying For The Maximum Benefit
So who receives the maximum benefit, and how do they qualify for it? Well, you’d have had to earn the maximum earnings allowable during your working life, and you’d have to have delayed starting to collect your benefits until age 70.
Maximum earnings don’t mean Bill Gates- or Warren Buffett-like incomes. For every year there’s an earnings cap beyond which we’re not taxed on our earnings for Social Security. For 2021, that limit is $142,800. So you’d need to have maxed out earnings in all your earning years that are included in the calculation.
Here’s why age 70 matters: Each of us has a “full retirement age” at which we can start collecting the full benefits to which we’re entitled, based on our earnings — and for most of us, it’s 66 or 67. But you can start collecting as early as age 62 and as late as age 70, with your benefit checks shrinking if you start early and getting bigger if you delay.
For that maximum benefit, you’ll have to delay starting to collect until age 70 — something that’s hard for many retirees who need the income sooner. Here’s a look at the benefits a maximum earner would receive, according to the SSA:
The maximum benefit depends on the age you retire. For example, if you retire at full retirement age in 2021, your maximum benefit would be $3,148. However, if you retire at age 62 in 2021, your maximum benefit would be $2,324. If you retire at age 70 in 2021, your maximum benefit would be $3,895.
How The Minimum Social Security Benefit Is Calculated
The calculation to determine the minimum Social Security benefit does not rely on a calculation based on an individuals specific earnings history. Instead, it uses a persons years of coverage to establish a minimum Social Security payment.
To determine the years of coverage an individual has, a certain threshold is used. As long as there were at least 11 years of earnings which were in excess of that threshold, a minimum benefit can be paid to that individual and their eligible family members.
The amount of the benefit which can be paid is contingent on the number of earnings years which were over the threshold. In December of 2020, an individual with 11 years of coverage would have a benefit of $43 while an individual with 30 years of coverage would have a benefit of $897.80.
You can see the following chart to see the PIA based on specific years of coverage:
Analysis Of Family Maximum Rules
Because of the more restrictive DI family maximum rules, benefits payable to disability beneficiary families are significantly lower than those for retirement and survivor beneficiary families, particularly at the lower end of the earnings scale. In 2015, newly eligible disabled beneficiaries with AIMEs of $903 or less can have no auxiliary beneficiaries because the DI family maximum for such workers is 100 percent of their PIA. Newly eligible disabled beneficiaries with AIMEs between $904 and $1,942 have their family benefits reduced, even if they have only one auxiliary, because the family maximum caps their benefits at 85 percent of their AIME .
Chart 1 shows OASI and DI family maximum amounts as well as the PIA formula as percentages of AIME and at each level of AIMEa measure of lifetime earnings. At all earnings levels, the OASI family maximum is more generous than the DI family maximum, replacing a greater proportion of earnings. At the low end of the earnings scale , the DI family maximum is equal to the worker’s PIA, which means that no benefits will be paid to disabled-worker family members. The DI family maximum is notably less progressive than the OASI family maximum , as shown by the slope of each line in Chart 1. The DI family maximum line slopes downward in a relatively straight line, while the OASI family maximum is kinked at the low end because it allows significantly more generous benefits for the families of lower earners.
How The Length Of Your Career Affects Your Benefits
One of the most important factors when it comes to your benefit amount is the number of years you’ve worked. Most people become eligible for Social Security retirement benefits once they’ve earned income for 10 years, but you’ll need to work for at least 35 years to receive the maximum benefit amount.
When calculating the amount you’ll receive, the Social Security Administration takes an average of your wages throughout the 35 highest-earning years of your career. That number is then adjusted for inflation, and the result is the amount you’ll collect if you claim at your full retirement age .
If you work more than 35 years, only the years with the highest earnings will be counted — which could increase your average and result in a higher benefit amount. If you work fewer than 35 years, however, you’ll have zeros added to the equation, which will bring down your average.
What Is The Minimum Social Security Benefit
The minimum Social Security benefit provision is an alternative benefit that increases benefits paid to low-income individuals.
Where the regular Social Security benefit formula bases the benefit amount on an individuals lifetime earnings, the minimum Social Security benefit formula is based on the number of years a person has worked with earnings at or above a certain threshold.
The benefit amounts are still calculated through both formulas, but with the minimum Social Security benefit provision, the higher of the two benefits is the amount provided to qualified individuals.
In 2019, there were 64 million Social Security recipients about 32,092 of them qualified for the minimum benefit. While its not a provision that impacts most people qualifying for Social Security, its still an important concept to understand if you want to broaden your full understanding of how the system works.
To start, lets break down how benefits are normally calculated. Then, we can jump into the specific formula used for workers who fall under the minimum Social Security benefit provision umbrella.
What Calculators Tell You
The Social Security Administration offers two such calculators. One is a quickie calculator. It uses yearly earnings information you input. It’s good for generating what-if scenarios. Those can vary depending on earnings amounts you plug in and retirement dates that you use.
The SSA’s second calculator uses your actual year-by-year earnings data.
The second overall method tells you only if you qualify for the current maximum monthly Social Security benefits. You’ve got to compare your yearly earnings to the yearly threshold amount, known as the wage base. More on that later in this report.
You’ve got to make that comparison yourself. The calculator does not make that comparison. And it won’t show you a dollar-amount estimate of your benefits.
This second method relies on the fact that the SSA bases your benefit on your earnings in your 35 highest pay years.
To receive the maximum benefits, you must reach a certain earnings threshold in each of those 35 years, says Morgan Christen, chief executive officer of Spinnaker Investment Group.
Social Security Family Maximum Benefits: The Complete Guide
On paper, the Social Security system has a generous payment to beneficiaries of someone who retires, dies, or becomes disabled. But what catches many people by surprise is that theres a limit to these payments.
The Social Security family maximumbenefits rule may stop you from getting the full amount you might expect.
This article takes a very deep dive intothe issue to explain both the common, well-known rules around the SocialSecurity family maximum benefits and the more obscure rules that causebenefits to be capped to a range of 150%-188% of a retired, deceased ordisabled individuals full retirement age benefit.
Well also goover the calculation, and teach you how to determine what kinds of benefits to expectin your own situation.
To kick things off, lets take a quick look at the benefits available to your family members if you retired, died, or experience a disability. These benefits paid to your family are in addition to the benefit which you receive and are available to an eligible spouse and children.
Number Of Working Years
How long have you worked? The Social Security Administration calculates your benefit amount by taking an average of your earned wages over the 35 highest-earning years of your career adjusting for inflation over the years.
Think means youll need to have worked at least 35 years during your life, GOBankingRates reported, and times you werent working will result in a lower average and less money.
Social Security Benefits: Making Yours Grow
The $2,337 gap between average and maximum monthly Social Security benefits will mushroom into more than $908,000 if you invest it and earn a relatively modest 7% yearly rate of return for 16 years, according to calculator.net.
And 7% is fair. That’s much less than the broad market’s actual performance over the past 15 years. In that span, the S& P 500 has averaged annual returns of 10.3%, according to Morningstar Direct.
Why do we talk about investing your extra Social Security benefits for 16 years? That’s about the average American’s life expectancy once he or she reaches age 70. And age 70 is when you become eligible for your maximum starting Social Security benefits.
Of course, being able to invest the additional Social Security benefits depends on your not needing it for living expenses. That would be the case if you’ve invested wisely or have other sources of income, such as a traditional pension.
Avoid Social Security Tax Traps
Either 50% or 85% of your benefits can be subject to federal taxation. In 2020, income tax is imposed on 50% of your Social Security check if your combined income falls between $25,000 to $34,000 for single filers and $32,000 to $44,000 for joint filers.
For single filers with more than $34,000 in combined income and joint filers with more than $44,000, you can look forward to an income tax of 85% on your Social Security benefits. If youre looking to avoid this, try reducing your taxable income to reduce the amount of taxes. This can be achieved by looking at all of your adjusted gross income and evenly distributing your funds over the span of a few years, so there are no sudden increases or decreases.
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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, 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 disappears, 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%.