Top Questions About Social SecurityJanuary 17, 2019 12:43 pm
Includes Bonus: 2019 Social Security Cheat Sheet
Social Security is something almost every American will have to learn about in their lifetime. That’s why, we have compiled this helpful sheet including the top questions you may have about social security benefits, covered in the section “Top Questions About Social Security”.
Because Social Security has been around for over 80 years, it’s always changing. To keep you updated, we’ve included the latest changes to social security in a “2019 Social Security Cheat Sheet.”
TOP QUESTIONS ABOUT SOCIAL SECURITY
1) What is Social Security?
If you’re an American citizen, you have a social security card and number. But what exactly is the “Social Security Program”?
Started in 1935 by President Roosevelt, the program provides a supplemental income to elderly and disabled people and those whose spouse or parent dies. Employers and employees must pay a Social Security tax which pays into this fund. (Currently, the tax is 12.4% -- you pay 6.2% and your employer pays 6.2%.)
The money collected from taxes is then used to pay a percentage of your pre-retirement income in order to supplement your regular income.
2) Does Social Security start automatically?
Unfortunately, your payments do not start when you turn retirement age, but rather you need to apply online or call.
- ONLINE: Visit the social security website to sign up here: Social Security Sign Up Online
- OVER THE PHONE: Call the Social Security Administration at 1-800-772-1213 (TTY 1-800-325-0778) between 7 a.m. and 7 p.m., Monday through Friday to make an appointment
- IN PERSON: Contact your local Social Security Office. You can look up the nearest office here: Social Security Office Locator
3) When can I begin taking my Social Security benefits?
Once you’ve turned 60, you should begin thinking about social security and when you want to take it.
- If you are 62, you can start receiving 25% less than your full retirement age benefit.
- If you are 66 (and born between 1943-1954), you are eligible to receive full benefits.
- If you retire at age 70, your monthly check will be 32% more than your full retirement.
Even though you are able to take Social Security starting at the age of 62, you should hold out as long as you can. The longer you wait, the more benefits you will receive.
Typically, your benefits will increase by 8% every year that you wait to take your Social Security benefit, and increase monthly. The longer you wait, the more you are eligible to receive So if you don’t need the money now, hold off!
4) What determines how much Social Security I get?
The higher your income, typically the higher your social security payout. Why? Because you will have paid higher Social Security taxes if your income was/is higher. However, Social Security provides for those in need by distributing a higher payout to them.
According to the Social Security Administration, benefits paid are designed to replace about 40% of a worker's income during retirement. However, this figure is currently closer to 55% for low-income earners, and 27% for maximum earners.
5) Does everyone get Social Security?
From USA today “Social Security covers 94% of American workers, but in order to qualify, a worker will need to collect 40 "work credits" over their lifetime. A maximum of four work credits can be earned each year” (Source).
In 2018, one work credit was equivalent to approximately $1,320. That means, the total amount you need to make to earn 4 work credits per year is $5,280. In 2019, this number will increase to $1,360, meaning you’ll have to make $5,440 in order to earn 4 work credits this year.
To answer the question, yes, almost everyone gets Social Security benefits.
6) What is the minimum and maximum benefit I can receive?
Minimum: There is currently no minimum amount for Social Security benefits. Because Social Security benefits are calculated using your income, if you work or earn only a little, then your monthly payment in return could be lower than $100.
Maximum: “In 2018, the maximum monthly Social Security benefit for a worker retiring at full retirement age was $2,788. In 2019, the maximum benefit will increase $73 per month to $2,861” (Investopedia).
7) What is the average benefit received by most Americans?
According to the IRS Social Security Fact Sheet, in 2018:
- Retired Workers received $1,413 average monthly benefits, or $16,956 yearly
- Disabled Workers received $1,198 average monthly benefits, or $14,376 yearly
8) Are my Social Security benefits taxable?
Up to 85% of social security benefits could be taxable (reference: motley fool). 13 states do tax social security benefits, while the other 37 states do not. If you live in a state with taxable benefits, there’s an easy way to check if your benefits are taxable. Take half of your Social Security benefits and add that amount to your total income and nontaxable interest. This will equal your combined income.
½ Social Security Benefits + Total Income + Tax-exempt Interest = Combined Income
Your benefits are then taxable if you are:
- A single filer and your combined income is above $25,000
- A joint filer and your combined income is above $32,000
9) What is the Cost of Living Adjustment (COLA)?
Social Security benefits are adjusted to keep up with inflation. This adjustment is called a cost-of-living-adjustment, or COLA. COLA is determined using the Consumer Price Index for Urban Wage Earners and Clerical Workers, also known as CPI-W. The CPI-W was 0.3% for 2017, meaning Social Security paid 0.3% higher benefits in 2018.
10) Can I undo my Social Security Claim?
Yes, but only up to 12 months after first filing.
As mentioned earlier, you probably want to wait as long as possible to start collecting your Social Security benefits. If you begin taking the benefits, and decide you’ve taken them too early, you can repeal your request to start benefits up to 12 months after filing. To do this, use the “Request for Withdrawal of Application” form (Form SSA-521). If you submit SSA-521 you will have to pay back the benefits you earned from filing. However, you can restart benefits at a later date, to reap the full benefit of your Social Security.
2019 SOCIAL SECURITY CHEAT SHEET
1) 2.8% Huge COLA Adjustment
The 2019 COLA adjustment is expected to be one of the biggest Social Security adjustments in 7 years. That means you will get 2.8% more benefits in 2019!
2) Higher Income = Higher Social Security Taxes
Last year the highest taxable income was $128,400. In 2019, the maximum taxable income will increase to $132,900.
3) Full retirement age increases
In 2019, the full retirement age will increase to 66 and six months. Originally the age you could start collecting retirement benefits was 62. However, the retirement age will start increasing by 2 months every year, starting in 2019, until the full retirement age reaches 67. To sum it all up, if you were born in 1960 or later, your full retirement age is 67 years old.
4) More money for disabled individuals
A slight increase to disability benefits will occur in 2019. For the legally blind, the benefit will increase $70 per month to $2,040. For everyone else, the maximum disability benefits will increase $40 a month to $1,220.
5) Qualifying for Social Security will be more difficult
In 2019, one work credit will require you to earn $1,360, or $5,440 per year to earn your total of 4 work credits per year.
SOCIAL SECURITY CAN BE CONFUSING
There’s a lot to learn about Social Security, but a few of the most important things to remember are 1) Wait as long as you can to file, so that you get the full benefit of your Social Security; 2) Don’t forget that you must activate your Social Security online, in-person, or over the phone; 3) Talk to an advisor about the best time to start taking your Social Security benefits.
Overall, Social Security is not enough to live on, but it could be necessary supplemental income for many. Talk to a financial advisor at Tranel Financial to find out when the best time is for YOU to start taking Social Security benefits. We’ll work with you to figure out a plan that works best for your financial situation, your family, and your life.