Designed to be a safety net for older Americans who need a steady source of money to support their financial needs after they retire, Social Security originally began in 1935 with the Social Security Act. Before that time, supporting the elderly with cash wasn’t much of a concern for the American government, and indeed the problem often fell to families, towns, and states, rather than the US in general.
If you or someone you know is about to receive social security benefits, then you might want to know how payment works with social security, who is covered, and when you can start getting payouts.
Looking at Social Security:
Before we cover how payment works with social security, let’s figure out what social security benefits are actually about. The program is based on contributions that are made into the system by workers. While you’re employed, you pay cash into social security and receive benefits at a later stage. When it is time for you to retire, you get your payments. Contributions will take the form of the federal insurance contribution act taxes withheld from your paychecks.
Importantly, Medicare benefits are often considered to be part of social security benefits, though Medicare is technically a separate program. Medicare contributions are also withheld from your paycheck in the same fashion as your social security contributions.
Who Is Eligible?
If you’re looking into how payment works with social security, you may also need to make sure that you’re eligible. Anyone who has worked for at least ten years will be eligible to receive social security. However, even if you have already earned the credits required to get social security, you cannot start getting your payouts until you’re at least 62 or older. Social security doesn’t just cover retirees either. Survivor benefits and disability are also covered by the program. Assuming you have worked enough hours to qualify for standard benefits then you should find that your children and spouse will be able to receive benefits after too after you have passed away.
The simple way to understand social security payments is that you are able to gather credits depending on your earnings. In 2016, for instance, you are able to earn one credit for every $1,260 that you get in your pay, and that amount is adjusted every year, which a maximum of four credits each year. The credits you earn will remain on your record even if you change jobs or cease work for a certain period of time.
When Can I Get Payments?
One of the biggest concerns that people have when it comes to understanding their social security benefits is when they should be allowed to start taking money from whatever they have earned. Unfortunately, though you may have earned the required credits long before you turn 62, that will be the first time you can begin collecting your benefits. The latest age that you can start taking payouts is at 70.
An important issue to remember is that when you actually retire doesn’t matter. You can either retire after you’ve reached 70 or before you reach 62 and you’ll still get access to your social security benefits. Crucially however, if you retire before you turn 62 you will need to make sure you set aside enough money to support yourself until your payments kick in.