Social Security

Receiving your benefits

Social Security is a retirement program run by the Social Security Administration with the goal of providing financial aid to the elderly. In the year 2004 alone, approximately 47 million Americans received basic Social Security benefits.

It is important to keep in mind that more than anything, Social Security is a safety net program rather than a means for funding your entire retirement. For most, social security pays an amount that is less than the average retiree needs to have a comfortable retirement that matches their standard of living during their working years.

In order to receive Social Security benefits, you must have paid social security taxes while you were still working. Also referred to as payroll taxes, Social Security taxes are withheld from your income and paid to the IRS by your employer. The average rate of payroll taxes is 7.6%, which includes a portion for Medicare. Social Security taxes are also referred to as FICA taxes.

To qualify for Social Security benefits it is also necessary to have earned at least 40 credits during your working career. It is possible to earn a maximum of four credits a year. In higher income brackets, Social Security benefits are reported as taxable income.

Individuals who are disabled or who have lost a spouse may receive an additional income benefit called Supplemental Security Income, or SSI.

Should your earnings exceed a certain amount in a given year or month your benefits may be reduced.

You may want to request a Social Security Statement at the SSA’s web site. Another possibility is to download a request form and mail it to the address on the actual form.

You may decide that you want to receive Social Security benefits when you turn 62. This is a decision you will want to make carefully, because if you choose to start receiving benefits sooner, the amount of your monthly benefit is reduced permanently. According to the SSA, the value of the reduced, earlier-starting monthly payout will still equal the value of the larger, longer-deferred payout over the long term. However, if you do not need the benefits early, waiting may be the better choice.