The cost of living has skyrocketed in recent years. If you’re not getting a salary increase, chances are your expenses have risen faster than your income. In order to keep up with the rising cost of living and avoid financial hardships, you need to take advantage of any available social security benefits. Social security is one of the most important sources of income for people over 50 and working people who are younger than age 65. However, these programs can actually be a costly burden if you aren’t aware of their benefits and limitations. If you’re nearing retirement or preparing for your later years, it’s crucial that you understand the details behind these programs before it’s too late. Here’s everything you need to know about social security:
What is Social Security?
Social Security is a government program that primarily helps people age 60 and above pay for retirement and medical expenses. If you’re employed and making enough money throughout your career, you can opt into these programs as you age. If you’re not eligible for Social Security, you can still claim the benefits of your spouse or dependents who are enrolled. In fact, the majority of the U.S. population participates in Social Security, and those who don’t can suffer financially because of it.
How is Social Security paid into?
There are two major ways to receive Social Security benefits. The first is by claiming retirement benefits based on your earnings history and age. You can also receive a monthly benefit by taking a disability insurance deduction. Social Security benefits are paid primarily by a 12.4% payroll tax that is deducted from each employee’s check. The money is then sent to the government’s Old-Age and Survivors Insurance (OASI) fund and the Disability Insurance (DI) fund.
How is Social Security distributed?
Once your OASDI funds are deposited, they are then divided according to a number of different factors. The primary factor is your years of Medicare-covered work, which is used to determine your average monthly benefit. For example, if you have 40 years of work with the government’s insurance programs (20 years each with OASI and DI), you will receive a full retirement benefit based on a 66% average monthly payout. If you have fewer years of work, your benefit will be lower. If you have more years of work, your benefit will be higher. Your age, marital status, and many other factors also factor into your payout.
The basics of the Old-Age and Survivors Insurance (OASI) program
The OASI program is the primary source of income for people who are age 65 or older. You can also choose to collect benefits at age 62 if you have 10 years of coverage or less under the DI program. If you’re eligible for the OASI program and make at least $1,040 per year, you will receive a monthly benefit of $1,265. To apply for this program, you will need to file a Social Security claim. You will also need to sign up for Medicare as soon as you are eligible. If you do not sign up for Medicare at age 65, you will face a 1.5% penalty tax on all the money you would have received from Social Security. Additionally, if you don’t take advantage of Medicare’s coverage, you will end up paying more in out-of-pocket expenses in the future.
The basics of the Disability Insurance (DI) program
The DI program is meant to protect you from outliving your assets if you are unable to work due to disability. If your earnings are too low for too long, you may be eligible for this program. You will need to file a disability claim in order to receive this benefit. The amount you receive will depend on your earnings history. If you have at least 10 years of earnings that add up to $15,000 or more, you will receive a monthly benefit of $1,539. To apply for this program, you will need to file a disability claim with the Social Security Administration. After your claim is approved, you will need to complete various medical documentation. You will also need to notify your employer of your new medical restrictions.
The basics of the Medicare program
Like many Americans, you may be surprised to learn that more than half of all seniors do not participate in Medicare. If you are among those who do not receive this government program, it’s important to take action. Medicare is funded by a payroll tax that is deducted from your paycheck. If you do not sign up for Medicare at age 65, you will face a 1.5% penalty tax on all the money you would have received from Social Security. To apply for this program, you will need to apply to the Social Security office. You will also need to enroll in Medicare as soon as you are eligible. If you do not enroll in Medicare at age 65, you will end up paying more in out-of-pocket expenses in the future.
Wrapping up
Social Security may be a vital source of income for those over age 65, but it can be a costly burden for people who are younger than age 65. Social Security is a federal program that primarily helps people age 60 and above pay for retirement and medical expenses. Social Security benefits are paid to eligible recipients based on a number of factors, including your years of work, your earnings history, and your age. If you’re eligible for Social Security, it’s important to understand all the details behind these programs in order to avoid becoming financially strapped in your retirement years.
