Social Security
Social Security is a federal program that provides financial assistance to qualified individuals, including retirees, people with disabilities, and the survivors of deceased workers. The official name of this program is Old-Age, Survivors, and Disability Insurance (OASDI), and it is administered and operated by the Social Security Administration (SSA).
Social Security is funded through payroll taxes from both employees and employers, and the size of future benefits is determined based on an individual’s earnings history. This program is designed to provide financial stability and support to individuals who can no longer engage in economic activity due to old age or disability. Types of benefits include Retirement Benefits, Social Security Disability Insurance (SSDI), and Survivor Benefits.
KEY ASPECTS
- Retirement Benefits: Provides a set monthly income to retired workers and their families.
- Disability Benefits: Provides financial support to workers who become unable to work due to a disability.
- Survivor Benefits: Supports the families of deceased workers by providing income for their livelihood.
- Funded by Taxes: Social Security funds are raised through payroll taxes from employees and employers.
- Administered by SSA: The SSA manages the entire program and oversees the full process of benefit payments.
Eligibility
- Requirements: You earn credits by working and paying Social Security taxes. To receive retirement benefits, you generally need 40 credits (approximately 10 years of work).
- Employment Gaps: Your credits never expire even if you stop working. However, because benefits are calculated using your 35 highest-earning years, significant gaps in your work history may affect your benefit amount.
Benefit Amounts
- Average Indexed Monthly Earnings (AIME): Calculated based on the 35 years of your highest earnings during your working life.
- Primary Insurance Amount (PIA): Calculated based on AIME using the following formula (for those reaching age 62 in 2026):
- 90% of the first $1,286 of AIME
- 32% of AIME between $1,286 and $7,749
Timing and Benefit Amounts
- Full Retirement Age (FRA): The age at which you can receive full benefits. This varies by birth year; for those born in 1960 or later, it is 67.
- Early Retirement (Age 62): You can begin collecting benefits as early as age 62, but your monthly benefits will be permanently reduced. For instance, claiming early retirement at 62 instead of the FRA of 67 may result in a permanent reduction of your monthly benefits by up to 30%.
- Delayed Retirement (Age 70): If you wait past your FRA up to age 70, your benefit increases by approximately 8% for each year you delay. These increases stop once you reach age 70.
Social Security and Medicare
If you have been receiving Social Security benefits for at least four months before your 65th birthday, you will be automatically enrolled in Medicare Parts A and B (no separate application is required).
Retirement Planning Checklist
What to Know Before You Apply
- Definition of “Retirement”: The SSA defines retirement as the point when you begin collecting your Social Security retirement benefits, not when you stop working entirely.
- Work and Benefit Impact: If you have income above a certain limit before reaching FRA, your benefits may be temporarily reduced. Once you reach FRA, you receive full benefits regardless of your income.
- If you are under FRA all year, $1 is withheld for every $2 earned above $24,480. In the year you reach FRA, $1 is withheld for every $3 earned above $65,160 (until the month you reach FRA).
- Taxation: If you have other income, a portion of your Social Security benefits may be subject to federal income tax.
Special Benefit Situations
- Spousal and Survivor Benefits: You may receive benefits based on a spouse’s work record. A spouse can receive up to 50% of the worker’s PIA (at their own FRA), provided the worker has already applied for benefits. You will receive the higher amount between your own benefit and the spousal benefit.
- Divorced Spouses: You can receive benefits based on a former spouse’s record if:
- The marriage lasted at least 10 years;
- You are currently unmarried;
- You are age 62 or older; and
- The former spouse is eligible for Social Security (if divorced for at least 2 years, they do not need to have applied yet for you to claim).
Additional Considerations
- Application Timing: You can apply up to 4 months before the month you wish to begin receiving benefits.
Check My Benefits
How to Apply
Contact
- AWCA provides consultations free of charge (201-862-1665 / info@awcanj.org).
Resources
