Things to Consider When Thinking About Social Security

There is a lot of misconception and misunderstanding amongst people regarding the social security benefits. Most of us who want to get social security benefits hardly know how one can maximize the benefits. Let’s check out seven things that one should know about social security:

Calculation of your social security benefit: The benefit that you receive from social security will be based on your highest 35 years of earnings. The number of years you work will matter. The years you did not work will be counted as 0. Thus, the more years you work and the more you earn, the greater will be your benefit.

Primary insurance amount: This is the amount that you would receive when you reach the full retirement age. You should know your primary insurance amount as your calculations for benefits would come from this figure. You can find this figure from your annual Social Security mailing or by visiting www.ssa.gov.

Benefit in case of married couple: If one of the spouse begins taking social security benefits and you’re 62 or more of age, you will be able to apply for your own benefit. You should remember that if your spouse receives more than double of your primary insurance amount, then you may be able to apply for a portion of your own benefit as well as a portion of your spouse’s benefit.

Benefits in case of divorced couple: If you’re 62 years of age, were married to someone for 10 years and your ex-spouse starts taking social security benefits, then you would be able to apply for your own benefit. If your primary insurance amount is less than half of your ex-spouse’s, you can apply for your own benefit as well as a portion of your ex-spouse’s benefit. Multiple divorced spouses will be able to receive the same benefit without decreasing each others benefits.

Suspension of benefits: If you’re receiving social security benefit after your retirement at 62 and then decide to go back to work, you will be able to suspend your benefits. The additional years that you work will increase your benefit that you’ll receive once you start getting the benefit at a later period.

Survivor benefits: If a worker covered by Social Security dies, a surviving spouse can receive survivors’ benefits. In some instances, survivors’ benefits are available even to a divorced spouse. A father or mother with minor or disabled children in his or her care can receive benefits which are not actuarially reduced. The earliest age for a nondisabled widow(er)’s benefit is age 60.

The benefit is equal to the worker’s full retirement benefit for spouses who are at, or older than, normal retirement age. If the surviving spouse starts benefits before normal retirement age, there is an actuarial reduction. If the worker earned delayed retirement credits by waiting to start benefits after their normal retirement age, the surviving spouse will have those credits applied to their benefit.

According to the mortgage fit community, So basically, If you’re 60 years old (50 years in case of permanently disabled) and your spouse is deceased, you would be able to qualify for survivor benefits. This benefit would be equal to an “age-reduced portion” of your spouse’s benefit. It is same in case of your deceased ex-spouse to whom you were married for at least 10 years.

Losing the benefits: If you’re working and apply for social security benefits at age 62, you would lose $1 for every $2 that you earn over $14,160. If you apply for benefits after your full retirement, you can earn any amount you want without losing any benefit.

The Federal Insurance Contributions Act (FICA) (codified in the Internal Revenue Code) imposes a Social Security withholding tax equal to 6.20% of the gross wage amount, up to but not exceeding the Social Security Wage Base ($97,500 for 2007; $102,000 for 2008; and $106,800 for 2009). The same 6.20% tax is imposed on employers. For each calendar year for which the worker is assessed the FICA contribution, the SSA credits those wages as that year’s covered wages. The income cutoff is adjusted yearly for inflation and other factors.

A separate payroll tax of 1.45% of an employee’s income is paid directly by the employer, and an additional 1.45% deducted from the employee’s paycheck, yielding a total tax rate of 2.90%. There is no maximum limit on this portion of the tax. This portion of the tax is used to fund the Medicare program, which is primarily responsible for providing health benefits to retirees.

The combined tax rate of these two federal programs is 15.30% (7.65% paid by the employee and 7.65% paid by the employer).[1]

 Print This Post