Understanding Social Security Benefits

Written by Lee Wyatt (last updated August 23, 2013)

For most people understanding Social Security benefits is something that just isn't done. After all, it is a government program that has grown to be one of the largest around. In fact, it could be argued that it has taken on such a huge standing that it rivals the importance of the Department of Defense (in the eyes of some people). When something get's to be that large, it only make sense that it can be a tad difficult to understand what you get from it. That is, unless you take a look at these helpful guidelines.

  • What it is meant to do. The first step in understanding your Social Security benefits is to know what it is meant to do. All that these benefits are supposed to do is replace a percentage of your total earnings when you retire, become disabled, or you or a loved one dies. That is it. Over time these benefits are accrued due to your work habits, so if you have periods of time where you worked less than you normally did, there will be fewer benefits for you to receive at a later date.
  • Retirement benefits. Retirement benefits that are paid through Social Security can be paid upon retiring from active work. Typically you will not receive the full amount of your Social Security benefits unless you have waited until your full retirement age. This doesn't mean that you can't still receive your benefits; it will just be a reduced monthly amount.
  • Full retirement age. While most people believe that the retirement age is at 65 years old, this isn't exactly true if you were born after a certain year. In the past few years the federal government raised the retirement age to receive full Social Security benefits, so make sure that you know where you fall before you begin filing. For example, if you were born between the years of 1943 and 1954 then your full retirement age isn't until you reach 66 years old. If you were born between the years of 1955 and 1956 it is increased by two months every year (i.e., 1955 is 66 years and 2 months, while 1959 is 66 years and 10 months). If you were born after 1960 then you will need to wait until you are 67 years old before you can apply for your full Social Security benefits.
  • When to apply. Typically, you should only apply for full retirement benefits when you reach your full retirement age. However, if you are planning on applying for Medicare then you really need to apply about three months before you turn 65 so that you can start receiving a percentage of your Medicare benefits. If you wait longer, then you will have to pay more money for medical insurance (also known as Part B) and your prescriptions (known as Part D).
  • Delaying your retirement. Just because you have to wait till around the age of 66 or 67 to receive your full retirement package doesn't mean that you have to retire at that time. In fact, if you do wait beyond your full retirement age then your monthly income will be raised by a certain percentage each month that you delay your retirement.
  • Early retirement. Conversely, you can also start your retirement as early as age 62. However just as delaying will increase, applying early will decrease your monthly payments. The average amount that your benefits are decreased are at the rate of one-half of one percent (or 0.5%) for each month that you apply before your full retirement.
  • Disability benefits. If you plan on applying for disability benefits due to a mental or physical disability, be expected to jump through a few hoops. For example, the minimum requirement is that the condition will last for a minimum of one year, and will prevent you from working full time. Also, keep in mind that just because you may be considered disabled by another government agency doesn't mean that you will be considered disabled by the Social Security Administration. You will need to file for disability benefits as soon as possible, since it usually requires a lot of time for these benefits to be processes, and approved or denied. In addition to your application, you will also need to provide any and all medical records that support your claim, treatments received, dates and times that you received those treatments, who provided those treatments, lab or other test results, contact information for all doctors, clinics, and hospitals you have visited, copies of all medications that you are taking, and a complete 15 year job history. Even with all of this information it is not a guarantee that you will receive payment; however, when you do finally receive payment it will be backdated to when you first applied.
  • Medicare. Medicare is the basic health care system that is offered by the United States, and is open to all people who are either disabled (meaning they receive disability from Social Security) or are over 65 years old. In many ways Medicare is just as complicated as the rest of the Social Security system, but there are some basics that you should be aware of. These basics are that there are four parts to Medicare which are Part A (hospital insurance), Part B (medical insurance), Part C (also known as Medicare Advantage plans where you can receive treatment through a provider program), and Part D (prescription drug coverage). There is almost always a co-pay or out of pocket payment that will be accompany each of these parts.
  • Benefits can be taxable. Anyone that receives any kind of Social Security benefits needs to be aware that they may be required to pay taxes on those benefits. If you have received, or will be receiving, more than $25,000 annually from Social Security, then you will be required to pay taxes on them. If you plan on filing jointly with your spouse, then you will be paying taxes in the event that you receive more than $32,000 annually.

Author Bio

Lee Wyatt

Contributor of numerous Tips.Net articles, Lee Wyatt is quickly becoming a regular "Jack of all trades." He is currently an independent contractor specializing in writing and editing. Contact him today for all of your writing and editing needs! Click here to contact. ...


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