The U.S. Social Security Administration (SSA) is an independent U.S. government agency that encompasses several social welfare and social insurance programs, intended to provide income for people who are retired, disabled, or unemployed. Medicare (which provides health insurance for retired persons) and Medicaid (which provides health insurance to needy people) are additional social welfare programs, administered through the Department of Health and Human Services rather than the SSA.
All of these programs are funded through payroll taxes, with the tax burden shared by employer and employee.
In order to qualify for Social Security retirement benefits, you first need to accumulate forty Social Security “credits,” at a maximum of four credits per year. In order to receive one credit, you must earn $1,120 (as of 2011). It does not matter when during the year you earn this money; if you earn $4,480 in a single month, enough money to make up four Social Security credits, you don’t need to work the rest of the year to earn the maximum credits for the year. Generally, then, ten years of working qualifies an applicant to receive retirement benefits.
When You Can or Should Collect Benefits
To earn the full benefit to which you are entitled, you should begin drawing checks at your “full retirement age,” which is anywhere from age 65 to 67, depending on the year you were born. (If you were born before 1938, your full retirement age is 65; if you were born in 1960 or later, your full retirement age is 67.)
However, you have other choices. The earliest age at which you can begin to draw checks is age 62; however, in this case, your benefit will be reduced, according to a formula. For instance, if your full retirement age is 65 but you begin drawing checks at 62, your checks will only be 80 percent of the full amount to which you are otherwise entitled. If your full retirement age is 67, you will only get 70 percent of the full benefit. You will need to use a calculator to determine whether the additional three or five years of payments will make up for the reduced benefit, which will last for the rest of your life.
On the other hand, if you delay receiving your social security checks until you turn 70, your checks will be bigger. For each year after your full retirement age that you delay applying for benefits, you can expect about an 8 percent increase in those monthly benefits. There is no reason to delay applying for social security benefits beyond age 70.
You will need to make some calculations before determining the best time to begin receiving your checks, depending on other sources of income you may have at retirement, your income needs, and other variables.
The size of your monthly social security check depends on your lifetime earnings, during your 35 years of highest earnings. Basically, the more you earned, the bigger your check will be. However, there is a maximum amount that any applicant received — in 2011, for an applicant retiring at age 66, that maximum amount is $2,366. There are online calculators at the Social Security Administration’s website that help you determine this amount.
In addition to this retirement benefits program, the Social Security Administration provides disability insurance for people who cannot work because of a long-term illness or disability. Applying for these benefits is a long and complex process; if your initial application is rejected, you have the right to an appeals process, which can last a year or longer. A great many appeals are successful, so it’s well worth the effort — though you may need to hire a disability lawyer to help you through.
If you are eventually successful, your disability check will be based on your prior income, but your benefit is not intended to replace income, only to help you through until you are able to work again. The check amount is adjusted upward if the applicant has a family, and if his or her paychecks were the family’s sole source of income. It is worth following up with a case worker at your local Social Security field office to ensure that you are getting the maximum amount your are entitled to; if you have doubts, you can work with a disability lawyer to help press your case.