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Understanding The BenefitsSSA Publication No. 05-10024, May 2008, ICN 454930 [View .pdf] (En Español)
Our website is a valuable resource for information about all of Social Security’s programs. There are a number of things you can do online.
In addition to using our website, you can call us toll-free at 1-800-772-1213. We can answer specific questions from 7 a.m. to 7 p.m., Monday through Friday. We can provide information by automated phone service 24 hours a day. (You can use our automated response system to tell us a new address or request a replacement Medicare card.) If you are deaf or hard of hearing, you may call our TTY number, 1-800-325-0778.
We treat all calls confidentially. We also want to make sure you receive accurate and courteous service. That is why we have a second Social Security representative monitor some telephone calls.
Social Security reaches almost every family, and at some point will touch the lives of nearly all Americans.
Social Security helps not only older Americans, but also workers who become disabled and families in which a spouse or parent dies. Today, about164 million people work and pay Social Security taxes and about 50 million people receive monthly Social Security benefits.
Most of our beneficiaries are retirees and their families—about 34 million people.
But Social Security was never meant to be the only source of income for people when they retire. Social Security replaces about 40 percent of an average wage earner’s income after retiring, and most financial advisors say retirees will need about 70 percent or more of pre-retirement earnings to live comfortably. To have a comfortable retirement, Americans need much more than just Social Security. They also need private pensions, savings and investments.
The Social Security Administration wants you to understand what Social Security can mean to you and your family’s financial future. This publication, Understanding The Benefits, explains the basics of the Social Security retirement, disability and survivors insurance programs.
The current Social Security system works like this: when you work, you pay taxes into Social Security. The tax money is used to pay benefits to:
The money you pay in taxes is not held in a personal account for you to use when you get benefits. Your taxes are being used right now to pay people who now are getting benefits. Any unused money goes to the Social Security trust funds, not a personal account with your name on it.
Social Security is more than retirement
Many people think of Social Security as just a retirement program. Although it is true that most of the people receiving Social Security receive retirement benefits, many others get Social Security because they are:
Depending on your circumstances, you may be eligible for Social Security at any age. In fact, Social Security pays more benefits to children than any other government program.
Your Social Security taxes
The Social Security taxes you and other workers pay into the system are used to pay for Social Security benefits.
You pay Social Security taxes on your earnings up to a certain amount. That amount increases each year to keep pace with wages. In 2008, that amount is $102,000.
You pay Medicare taxes on all of your wages or net earnings from self-employment. These taxes are used for Medicare coverage.
Where your Social Security tax dollars go
When you work, 85 cents of every Social Security tax dollar you pay goes to a trust fund that pays monthly benefits to current retirees and their families and to surviving spouses and children of workers who have died. The other 15 cents goes to a trust fund that pays benefits to people with disabilities and their families.
From these trust funds, Social Security also pays the costs of managing the Social Security programs. The Social Security Administration is one of the most efficient agencies in the federal government, and we are working to make it better every day. Of each Social Security tax dollar you pay, we spend less than one penny to manage the program.
The entire amount of taxes you pay for Medicare goes to a trust fund that pays for some of the costs of hospital and related care of all Medicare beneficiaries. Medicare is managed by the Centers for Medicare & Medicaid Services, not Social Security.
Social Security benefits replace a percentage of your earnings when you retire, become disabled or die. Each year, we will send you a Social Security Statement showing your earnings history and an estimate of the retirement, disability and survivors benefits you and your family may receive based on those earnings.
When you receive your Statement, check your earnings history carefully. Make sure all of your earnings are accurate. Be sure to report any errors to us. That is important because your benefits will be based on your lifetime earnings. Your Statement also is useful in helping you plan your financial future.
Choosing when to retire is one of the most important decisions you will make in your lifetime. If you choose to retire when you reach full retirement age, you will receive your full retirement benefits. But if you retire before reaching full retirement age, you will receive reduced benefits for the rest of your life.
Full retirement age
If you were born before 1938, you were eligible for your full Social Security benefit on your 65th birthday. In 2003, the age at which full benefits are payable began to increase gradually. The following chart will guide you in determining your full retirement age:
NOTE: Although the full retirement age is rising, you should still apply for Medicare benefits within three months of your 65th birthday. If you wait longer, your Medicare medical insurance (Part B) and prescription drug coverage (Part D) may cost you more money.
If you choose to delay receiving benefits beyond your full retirement age, your benefit will be increased by a certain percentage, depending on the year you were born. The increase will be added in automatically from the time you reach full retirement age until you start taking benefits or reach age 70, whichever comes first. If, for example, you were born in 1940, your benefit would increase 7 percent for each year, between your full retirement age and age 70, that you do not get retirement benefits.
You may start receiving benefits as early as age 62. However, if you start your benefits early, your benefits are reduced permanently. Your benefit is reduced about one-half of one percent for each month you start your Social Security before your full retirement age. For example, if your full retirement age is 66 and you sign up for Social Security when you are 62, you would only get 75 percent of your full benefit.
NOTE: The reduction will be greater in future years as the full retirement age increases.
If you work and get benefits
You can continue to work and still receive retirement benefits. Your earnings in (or after) the month you reach full retirement age will not reduce your Social Security benefits. In fact, working beyond full retirement age can increase your benefits. However, your benefits will be reduced if your earnings exceed certain limits for the months before you reach your full retirement age.
If you work but start receiving benefits before full retirement age, $1 in benefits will be deducted for each $2 in earnings you have above the annual limit. In 2008, the limit is $13,560.
In the year you reach your full retirement age, your benefits will be reduced $1 for every $3 you earn over a different annual limit ($36,120 in 2008) until the month you reach full retirement age.
Once you reach full retirement age, you can keep working, and your Social Security benefit will not be reduced no matter how much you earn.
For more information about how work affects your benefits, ask for How Work Affects Your Benefits (Publication No. 05-10069).
NOTE: People who work and receive disability or Supplemental Security Income payments have different earnings rules. They immediately must report all of their earnings to Social Security no matter how much they earn.
Retirement benefits for widows and widowers
If you are receiving widow’s or widower’s benefits, you can switch to your own retirement benefits as early as age 62, assuming your retirement benefit is more than the amount you receive on your deceased spouse’s earnings. In many cases, you can begin receiving one benefit at a reduced rate and then switch to the other benefit at the full rate when you reach full retirement age. The rules are complicated and vary depending on your situation, so talk to a Social Security representative about the options available to you.
For more information about retirement benefits, ask for Retirement Benefits (Publication No. 05-10035).
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.
Our disability rules are different from those of private plans or other government agencies. The fact that you qualify for disability from another agency or program does not mean you will be eligible for disability benefits from us. And having a statement from your doctor indicating you are disabled does not mean you will automatically be eligible for Social Security disability benefits. For more information about Social Security disability benefits, ask for Disability Benefits (Publication No. 05-10029). You can apply for Social Security disability benefits on our website at www.socialsecurity.gov/applyfordisability.
People with disabilities, including children, who have little income and few resources, also may be eligible for disability payments through the Supplemental Security Income (SSI) program. For more information about SSI, ask for Supplemental Security Income (SSI) (Publication No. 05-11000).
If you become disabled, you should file for disability benefits as soon as possible, because it usually takes several months to process a disability claim. We may be able to process your claim more quickly if you have the following when you apply:
Your benefits may be taxable
Some people who get Social Security will have to pay taxes on their benefits. Less than one-third of our current beneficiaries pay taxes on their benefits.
You will have to pay taxes on your benefits if you file a federal tax return as an “individual” and your total income is more than $25,000. If you file a joint return, you will have to pay taxes if you and your spouse have a total income that is more than $32,000. For more information call the Internal Revenue Service’s toll-free number, 1-800-829-3676.
When you start receiving Social Security retirement or disability benefits, other family members also may be eligible for payments. For example, benefits can be paid to your husband or wife:
Benefits also can be paid to your unmarried children if they are:
If you become the parent of a child (including an adopted child) after you begin receiving benefits, let us know about the child, so we can decide if the child is eligible for benefits.
How much can family members get?
Each family member may be eligible for a monthly benefit that is up to half of your retirement or disability benefit amount. However, there is a limit to the total amount of money that can be paid to you and your family. The limit varies, but is generally equal to about 150 to 180 percent of your retirement or disability benefit.
If you are divorced
If you are divorced, your ex-spouse may qualify for benefits on your earnings. In some situations, he or she may get benefits even if you are not receiving them. To qualify, a divorced spouse must:
When you die, your family may be eligible for benefits based on your work.
Family members who can collect benefits include a widow or widower who is:
Your children can receive benefits, too, if they are unmarried and:
Additionally, your parents can receive benefits on your earnings if they were dependent on you for at least half of their support.
Payment after death
If you have enough credits, a one-time payment of $255 also will be made after your death. This benefit may be paid to your spouse or minor children if they meet certain requirements.
If you are divorced
If you are divorced, your ex-spouse may be eligible for survivors benefits based on your earnings when you die. He or she must:
NOTE: If you are deceased and your ex-spouse remarries after age 60, he or she may be eligible for Social Security benefits based both on your work and the new spouse’s work, whichever is higher.
How much will your survivors get?
Your survivors receive a percentage of your basic Social Security benefit—usually in a range from 75 to 100 percent each. However, there is a limit to the amount of money that can be paid each month to a family. The limit varies, but is generally equal to about 150 to 180 percent of your benefit rate.
You should apply for benefits about three months before the date you want your benefits to start. If you are not quite ready to retire, but are thinking about doing so in the near future, you may want to visit Social Security’s website to use our convenient and informative retirement planner at www.socialsecurity.gov/retire2. To file for disability or survivors benefits, you should apply as soon as you are eligible.
When you apply for benefits, we will ask you to provide certain documents. The documents we will ask for depend on the type of benefits you are filing for. Providing these documents to us quickly will help us pay your benefits faster. You must submit original documents or copies certified by the issuing office—we cannot accept photocopies.
Do not delay filing an application just because you do not have all of the documents you need. We will help you get them.
Here is a list of some documents you may need when you sign up for Social Security:
We will let you know if other documents are needed when you apply.
How benefits are paid
Social Security benefits generally are paid by direct deposit. Direct deposit is a simple, safe and secure way to receive your benefits. Be sure to have your checkbook or account statement with you when you apply. We will need that information to make sure your monthly benefit is correctly deposited into your account.
If you do not want direct deposit, we will make other arrangements to pay your monthly benefits.
If you get Social Security benefits, but have limited income and resources (things you own), SSI may be able to help. SSI is financed from general revenues, not Social Security taxes.
SSI makes monthly payments to people who are age 65 or older or who are blind or disabled. We do not count some of your income and some of your resources when we decide whether you are eligible for SSI. Your house and your car, for example, usually are not counted as resources.
Call us for more information or to apply for SSI.
If you disagree with a decision made on your claim, you can appeal it. For an explanation of the steps you can take, ask for The Appeals Process (Publication No. 05-10041).
You have the right to be represented by an attorney or other qualified person of your choice. For more information, ask for Your Right To Representation (Publication No. 05-10075).
Medicare is our country’s basic health insurance program for people age 65 or older and many people with disabilities.
You should not confuse Medicare and Medicaid. Medicaid is a health care program for people with low income and limited resources. It is usually run by state welfare or social services agencies. Some people qualify for one or the other, while some people qualify for both Medicare and Medicaid.
Medicare has four parts
Who is eligible for hospital insurance (Part A)?
Most people get hospital insurance when they turn 65. You qualify for it automatically if you are eligible for Social Security or Railroad Retirement benefits. Or you may qualify based on a spouse’s (including a divorced spouse’s) work. Others qualify because they are government employees not covered by Social Security who paid the Medicare tax.
If you get Social Security disability benefits for 24 months, you will qualify for hospital insurance.
If you get Social Security disability benefits because you have amyotrophic lateral sclerosis (Lou Gehrig’s disease), you do not have to wait 24 months to qualify.
Also, people who have permanent kidney failure that requires maintenance dialysis or a kidney replacement qualify for hospital insurance if they have worked long enough or if they are the spouse or child of a worker who qualifies.
Who can get medical insurance (Part B)?
Almost anyone who is eligible for hospital insurance can sign up for medical insurance. Part B is an optional program. It is not free. In 2008, the standard monthly premium is $96.40. Some people with higher incomes pay higher premiums.
Who can get Medicare Advantage plans (Part C)?
Anyone who has Medicare hospital insurance (Part A) and medical insurance (Part B) can join a Medicare Advantage plan. Medicare Advantage plans include:
You might have to pay a monthly premium because of the extra benefits the Medicare Advantage plan offers.
Who can get Medicare prescription drug coverage (Part D)?
Anyone who has Medicare hospital insurance (Part A) or medical insurance (Part B) or a Medicare Advantage plan (Part C) is eligible for prescription drug coverage (Part D). Prescription insurance is optional, and you pay an additional monthly premium for the coverage.
For more information, ask for Medicare (Publication No. 05-10043).
Help with Medicare expenses for people with low income
If you have a low income and few resources, your state may pay your Medicare premiums and, in some cases, other “out-of-pocket” medical expenses, such as deductibles and coinsurance.
Only your state can decide whether you qualify for help under this program. If you think you qualify, contact your state or local medical assistance (Medicaid) agency, social services or welfare office.
You can go online to get more information about this program from the Centers for Medicare & Medicaid Services (CMS) website. Visit www.medicare.gov and request If you need help paying Medicare costs, there are programs that can help you save money (Publication No. CMS-10126).
“Extra help” with Medicare prescription costs
If you have limited income and resources, you may qualify for extra help to pay for your prescription drugs under Medicare Part D. Social Security’s role is to help you understand how you may qualify and to process your application for extra help. To see if you qualify or to apply, call Social Security’s toll-free number or visit our website.
2008 Social Security taxes
2008 Medicare taxes
Work credits in 2008
Average 2008 monthly Social Security benefits
2008 monthly SSI payment rates (does not include state supplement, if any)