How Social Security Works
More than 47 million Americans received over $500 billion in Social Security benefits in 2004. Funds for these payments were generated from monies withheld from workers’ paychecks (6.2%) and matching monies provided by employers (6.2%). If you are self-employed, you pay both shares (12.4%).
For each dollar withheld, 85 cents goes toa trust fund that pays monthly benefits to current retirees and their families and to surviving spouses and children of workers who have died. The remaining 15 cents goes to a trust fund that pays benefits to people with disabilities and their families. A small amount (less than one penny per dollar) goest to manage the program.
When you retire, Social Security benefits replace a percentage of your earnings. The same is true should you become disabled or die.
If you were born before 1938, you were eligible for full Social Security benefits at age 65. Beginning in 2003, the age at which full benefits are payable began to increase gradually to age 67.
If you decide to work beyond your full retirement age, you can work and get your full benefits or you can decide to wait until age 70 to collect and your benefits will be higher.
Should you decide to retire as early as age 62, you can collect benefits but they at a permanently reduced amount (one half of one percent for each month you start receiving Social Security before your full retirement age).
Disability Benefits
If you cannot work because of a physical or mental condition that is expected to last at least one year or result in death, you may be eligible for Social Security disability benefits.
Additional disability payments through the Supplemental Security Income (SSI) program may also be available if a person with a disability, including a child, has little income and few resources.
Family Benefits
Other family members may be eligible for benefits when you start receiving Social Security retirement or disability benefits. Each family member may be eligible for a monthly benefit that is up to half of your retirement or disability benefit amount. There is a limit however. Here are examples of when benefits can be paid to your spouse:
* If he or she is age 62 or older.
* At any age if he or she is caring for your child (under age 16 or disabled).
Unmarried children can also receive benefits if they are:
* Younger than 18.
* Between 18 and 19 years old, but in elementary or secondary school as a full-time student.
* Age 18 or older and severely disabled.
Even if you are divorced, your ex-spouse may qualify for benefits on your earnings. Additionally, your family may be eligible for benefits based on your work should you die. Your spouse or minor children may also be eligible for a one-time death payment ($255) if you had enough credits at the time of your death.
The information used for this article was taken directly from “Understanding The Benefits” published by the Social Security Administration.