How do Social Security Benefits Work?

The Social Security is a program designed by the US federal government to augment the future financial needs of its citizens through claiming their Social Security benefits at the right time and when needed. The benefits are provided to Americans who diligently pay their Social Security taxes and can be enjoyed upon their retirement. It is targeted to help the monetary demands of the paying members in case they become physically or mentally disabled.

Social Security Eligibility

Individuals who remit their Social Security taxes through the income they earned from a regular or self-employment are qualified to receive the benefits. In addition, a member has to obtain the required number of credits for him to become eligible. Credits are calculated based on the total amount of your annual income. Basically, you need to accumulate 40 credits to claim the benefits.

Amount of Social Security Taxes

The percentage of taxes you pay depends on your source of income.

If you receive wages from an employer, you pay:

  • 6.2%  for Social Security tax
  • 1.45% for Medicare tax.

Meanwhile, if you are self-employed:

  • 12.4% for Social Security tax
  • 2.9% for Medicare coverage are taken from your total net earnings

Retirement Benefits

US citizens are eligible for full benefits at retirement age. The full retirement age varies and depends on what year you were born. If you decide to retire at an early age, your benefit payment can be trimmed down up to 30% of the original amount, depending on the difference between the age you retire and your full retirement age.

Disability and Other Related Benefits

The Social Security program is not solely created for retirement benefits. In an unfortunate circumstance which causes you to become disabled, you may also have access to:

  • Social Security Disability Insurance - The recipient continues to receive the financial support up to the time he will fully recover from his medical condition and resume working. Qualified dependents may also be granted the benefit payments.
  • Supplemental Security Income - Is a monthly benefit offered to physically disabled adults and children, as well as people 65 years of age or older who does not have sufficient income to support them.

Furthermore, in case of your death, your widow or widower, children, parents and other eligible dependents may be able to claim and receive the Social Security benefits.

Amount and Payment of Benefits

The amount of the monthly payout you will receive when you retire, become physically or mentally incapacitated, or die depends on the total earnings you generate. Payments are secured through a direct deposit in your account or your eligible dependent's bank account. To calculate how much you may withdraw when the time comes, you can refer to your Social Security Statement records.

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