Nearly every American worker is covered by the social insurance program known as Social Security. But many do not fully understand the Social Security system or the benefits to which they are entitled. The goal of this article is to summarize Social Security retirement and survivor benefits.
Paying into the system- A worker is fully insured if he/she has 40 quarters of coverage or “credits.” There can be no more than 4 credits per calendar year. Workers who have acquired 40 credits are fully insured for life. Fully insured workers are eligible for both survivor and retirement benefits.
Workers Benefits- A retired fully insured worker age 62 or over is entitled to retirement benefits. The spouse of a retired worker qualifies for Social Security payments if he/she is age 62+, or any age if he/she is caring for a child under age 16, or a child age 16+ who became disabled before age 22.
Benefits Calculation- The Primary Insurance Amount (PIA) is used to determine the monthly benefit payable under Social Security. This is the benefit a person would receive if he/she elects to begin receiving retirement benefits at his/her Full Retirement Age (varies from age 65 to 67 by birth year). At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.
Taking Social Security Before Full Retirement Age- Fully insured workers can start receiving retirement benefits as early as the month after reaching age 62 or any month thereafter. However, if a worker elects to start benefits before Full Retirement Age, the benefit is reduced. In making the reduction, the worker’s PIA must be determined and then reduced by 5/9 of 1% for each of the first 36 months that the worker is under Full Retirement Age.
Working After Retirement- When you begin taking benefits, you are considered “retired” in the eyes of the Social Security Administration. You can obtain benefits and work at the same time; however, there is a limit to how much you can earn and still receive full benefits. For workers younger than Full Retirement Age during all of 2024, the government will deduct $1 from Social Security benefits for every $2 earned above $22,320. Workers who reach Full Retirement Age during 2024, will have $1 deducted from benefits for every $3 of earned income above $59,520. Workers who attain their Full Retirement Age (FRA) may keep all benefits, no matter how much is earned.
Taxation of Benefits- If you take benefits, then you may pay income tax on those benefits if your provisional income exceeds a certain threshold. Provisional income is Adjusted Gross Income (AGI) plus tax exempt interest plus ½ social security income. If a person’s provisional income is more than $25,000 Single or $32,000 Married Filing Jointly, up to 50% of the benefit will be included in taxable income. If a person’s provisional income is more than $34,000 Single or $44,000 Married Filing Jointly, up to 85% of his/her benefit will be included in taxable income.
Survivor Benefits- The surviving spouse of a deceased insured qualifies for Social Security payments if the widow(er) is age 60+, or any age if he/she is caring for a child of the deceased who is under age 16 or a child 16+ who became disabled before age 22.
A surviving, divorced spouse also qualifies if he/she is at least age 62, was married to the deceased worker for at least 10 years, has been divorced from the worker for at least 2 years, and generally not remarried.
Dependent Benefits- The dependent, unmarried child of a deceased or retired insured worker, qualifies for Social Security payments if the dependent is under age 19 and a full-time elementary or secondary school student; or any age if the dependent became disabled before age 22.
Lump-Sum Death Benefit- A spouse who was living in the same household as the deceased worker at the time of death or a dependent child is eligible for a one-time lump-sum benefit of $255.
For more information regarding Social Security benefits, visit www.ssa.gov.
