How much — or little — you know about Social Security can have a huge impact on your post-retirement finances.
Social Security was originally implemented because Americans were retiring without enough savings to support themselves in their golden years. During the peak of the Great Depression, a significant number of older people found themselves without much money, lacking the resources to retire comfortably.
In response, the 1935 Social Security Act was enacted, guaranteeing a certain level of income for retirees, even in the absence of personal savings or pension funds. This crucial social safety net aimed to provide financial support and ensure a basic standard of living for American’s entire lives.
We discovered Americans were missing these six key points when it came to understanding Social Security.
When You Can Start Claiming Benefits
At age 62, you become eligible for Social Security retirement benefits. However, if you opt to receive benefits before your full retirement age, they’ll be reduced.
For instance, if you turn 62 in 2023, your benefit would be approximately 30-percent lower than what you would receive at your full retirement age of 67.
The Amount You Can Receive
As reported by US News and World Report, the average Social Security benefit saw a significant increase to $1,827 per month in 2023, a substantial rise from $1,681 in 2022, thanks to an 8.7% surge in the Social Security cost-of-living adjustment.
As of July 2023, the Social Security Administration states that the maximum Social Security retirement check amounts to $4,555 per month. However, you can only receive that if you choose to wait until the age of 70 before claiming your retirement benefits.
It’s important to note that to receive this maximum payment, a worker would need to have earned the maximum taxable amount, which is currently set at $160,200 for the year 2023, over the course of a 35-year career.
You can calculate your specific benefits at the Social Security website.
How Social Security Disability Works
As per the Social Security website, in order to qualify for Social Security Disability Insurance (SSDI) benefits, you need to meet the following criteria:
- You must have worked in jobs covered by Social Security.
- You must have a medical condition that meets Social Security’s strict definition of disability.
Typically, SSDI provides monthly benefits to individuals who are unable to work for a year or more due to a disability. There is usually a 5-month waiting period, and your first benefit will be paid on the sixth full month after the date when your disability is determined to have begun.
Additionally, if it’s found that you were disabled during a specific period before applying and you meet all other requirements, they may pay Social Security disability benefits for up to 12 months prior to your application date.
How Social Security Spousal Benefits Work
When a worker applies for retirement benefits, their spouse may also be eligible for a benefit based on the worker’s earnings.
To qualify, the spouse must be at least 62 years old or have a qualifying child in their care. A qualifying child refers to a child under the age of 16 or a child receiving Social Security disability benefits.
The spousal benefit can be up to half of the worker’s “primary insurance amount,” depending on the spouse’s age at retirement. If the spouse starts receiving benefits before their “normal (or full) retirement age,” the benefit amount will be reduced. However, if the spouse is caring for a qualifying child, the spousal benefit remains unaffected.
Do Men and Women Receive Different Benefit Amounts?
A 2023 study on the gender pay gap by PayScale revealed that women are earning 83 cents for every dollar made by white men — and, even more disturbingly, women of color see wider pay gaps as they advance in their careers.
Consequently, in 2023, the average monthly Social Security check for a man was $2,033, whereas for a woman it was only $1,650.
Will Social Security Will Run Out?
The Social Security program is projected to face a cash shortage by 2034. Although this doesn’t signify the total end of Social Security, if taxes stay where they’re at, beneficiaries will only receive about 80% of their scheduled benefits.
What’s more, according to the Social Security website, by the year 2035, the program’s costs are expected to increase, resulting in sufficient taxes to cover only 75% of the scheduled benefits. This rise in costs is primarily due to population aging, caused by a decline in birth rates from an average of three to two children per woman, not because of increased life expectancy.
However, it’s essential to note that this projected shortfall stabilizes after 2035.
To ensure the Social Security program’s future, the government can make adjustments to taxes or benefits to offset the impact of the lower birth rate. This will allow the program to maintain its financial stability on a sustainable basis.
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Levi Leidy contributed to the reporting for this article.