Social Security Benefits 101

In the United States, Social Security is frequently talked about in the news, but poorly understood. As a result, most people think Social Security is a “government handout”, or some form of welfare for the poor. What people fail to understand is that Social Security is primarily an insurance program for workers.

And just like the insurance you would purchase for your home, car, or business, you can make a claim on your Social Security insurance if you (1) are insured, and (2) meet program rules.

There are three main types of Social Security insurance benefits: retirement, disability, and survivors.

How to Become Insured for Social Security Benefits

But before we dive into a discussion of the types of Social Security benefits, let’s first discuss how to become insured for these benefits.To be insured for Social Security benefits, you need to work and pay your taxes.

To be insured for Social Security benefits, you need to work and pay your taxes.

For most people, paying taxes is a no-brainer. That is because your employer does it for you. When you start a new job, your employer will ask you to provide your social security number and a completed Form W-4, which they will use to withhold your income taxes and FICA tax from each paycheck. FICA stands for “Federal Insurance Contributions Act” and is a combination of taxes for Medicare and Social Security. Your employer will then pay the withheld FICA tax to the IRS, and the IRS will report your earnings and FICA tax payment to Social Security. If you are self-employed, you are responsible for paying the FICA tax directly to the IRS. Part of the withheld FICA tax goes into a trust from which Social Security will pay insurance claims.

It’s important to know that becoming insured for Social Security benefits takes some time. Unlike other insurance programs where you become immediately insured with your first premium payment, you do not become insured through your first FICA tax payment. You will be insured for Social Security benefits once you have earned enough credits, or “quarters of coverage”. The amount of money you must earn to receive a credit changes each year. For example, in 2018, you will receive a credit or “quarter of coverage” for every quarter that you earn at least $1,320 (by comparison, in 1978, it was $250). As there are 4 quarters in a year, you can only receive up to 4 credits per year.

To be fully insured for retirement and survivors insurance, you need at least 6 quarters of coverage and at least one quarter of coverage in every year after you turn 21 and the year before you die, or turn 62. To be permanently insured for these benefits, you need 40 quarters of coverage. Thus, you could be permanently insured for retirement and survivors insurance after just 10 years of full-time employment. Disability insurance is a little different, however. To be insured for disability, you need 20 quarters of coverage in the 10 years prior to the date you became disabled. The requirements are different for younger individuals under age 31.

If you are not sure whether you are insured for Social Security benefits, you can always check your Social Security Benefits Statement. Your statement will explain which benefits you are insured for, and the estimated monthly benefit you could receive based on your earnings record. Because the amount of your benefits are directly tied to your reported earnings, it’s a good idea to check your Social Security Benefits Statement on a yearly basis. This is easy to do now that you can obtain a copy of your benefits statement online at ssa.gov.

Retirement Benefits through Social Security

With the passage of the Social Security Act in 1935, the first Social Security insurance benefit was born: “federal old-age benefits”, or Social Security retirement. In addition to being fully insured, you need to be at least 62 years old before you can qualify for this Social Security benefit. The retirement benefit is not just an individual benefit, but a family benefit as well. If you are married and/or have children who are under the age of 18, or who are adults with developmental disabilities, you will receive a benefit for your spouse and children as well.

Although you can claim your retirement benefits at age 62, there are penalties for doing so. For most non-retired workers, full retirement age is somewhere around the age of 66–at this age you will be entitled to receive the full amount of your Social Security retirement benefits. However, if you choose to retire sooner, at age 62-65, your benefits will be permanently reduced by as much as 30%. Additionally, if you continue working while receiving your retirement benefits between ages 62 and 65, your benefits will be reduced by $1 for every $2 you earn. On the other hand, if you wait to claim your retirement benefits, your retirement benefit will increase for each year you delay your claim after age 66 (there are no further increases after age 70). The amount of your retirement benefit is based on your individual earnings record, but the maximum full retirement benefit for an individual in 2018 is $2,788 per month.

Social Security Survivors Benefits

Social Security survivors benefits are probably the lesser known Social Security benefits. Survivors benefits are a form of life insurance. But unlike private life insurance, you don’t have to pass a medical examination to qualify for these benefits. Thus, if you die, and were fully insured at your death, your surviving spouse and children who are under the age of 18 (or who are adults with developmental disabilities) will receive survivors benefits. There are two types of survivors benefits: a one-time death payment of $255 and a monthly benefit for your surviving spouse and/or children.

Spouses and children who could potentially claim survivors benefits should file an application for the benefits no later than 6 months after the worker dies. Social Security will not pay more than 6 months of retroactive benefits.

If you are survived by a spouse, or ex-spouse, and have children with this spouse who are under the age of 16, your spouse and each child will receive survivors benefits. If you are not survived by any children under the age of 18 (or adult developmentally disabled children), but are survived by a spouse or ex-spouse, your spouse may be entitled to survivors benefits beginning at age 60 (or 50-59 if disabled). However, if your spouse or ex-spouse remarries after your death and before they reach age 60, they will not be eligible for the survivors benefit. Additionally, for an ex-spouse to be eligible for the survivors benefit, they must have been married to you for 10 years. Dependent parents who are age 62 or older may also be eligible for survivors benefits if you provided at least half of their support. As with retirement benefits, the amount of the actual monthly Social Security survivors benefit will vary depending on your earnings record.

You should be aware that Social Security applies state family and inheritance laws when determining who is a potential spouse or child eligible for survivors benefits. In some cases, a state court order declaring a marriage, or the paternity of a child, may be necessary to claim Social Security survivors benefits if the legal relationship of the child or spouse was not established prior to the worker’s death. Spouses and children who could potentially claim survivors benefits should file an application for the benefits no later than 6 months after the worker dies. Social Security will not pay more than 6 months of retroactive benefits.

Social Security Disability Insurance Benefits

If you become disabled prior to full retirement age and are unable to work, you may be eligible for disability insurance benefits. To qualify for these benefits, you must be insured and you must meet Social Security’s definition of disability. If you are receiving disability insurance benefits and you have dependent children under the age of 18, or adult developmentally disabled children, you will receive a benefit for these children as well. However, unlike Social Security retirement and survivors benefits, there is no additional disability benefit for spouses. And as with other Social Security benefits, the amount of your disability insurance benefit is based on your individual earnings record. After you have received 24 months of disability insurance benefits, you will be eligible for Medicare benefits as well.

It is important to understand that unlike Social Security survivors and retirement insurance benefits, it is not possible to be permanently insured for disability benefits. Recall, that to be insured for disability benefits, you must have 20 quarters of coverage in the 10 years prior to the date you became disabled. Thus, once you stop working, you will eventually become uninsured for disability benefits. Additionally, Social Security will only pay 12 months of retroactive benefits for disability applications. Delaying your application for disability insurance benefits could result in less benefits for you and your family.

Delaying your application for disability insurance benefits could result in less benefits for you and your family.

Finally, Social Security disability insurance benefits should not be confused with SSI (Supplemental Security Income). Although SSI is another disability program administered by the Social Security Administration, it is not part of the Social Security insurance program. Eligibility for SSI is not based on your earnings record, but rather your lack of income and resources. SSI benefits are capped at $750/month for 2018. Although some applicants for disability insurance might meet the income and resource eligibility rules for SSI, it is not possible to receive benefits from both disability programs unless your disability insurance benefits are less than $750/month.

Now that you know what Social Security insurance benefits are, applying for Social Security insurance benefits is just one click away at ssa.gov.

*Adriane S. Grace is a Social Security Attorney who regularly represents individuals in Social Security appeals in Texas. She has also consulted and advised on survivors benefits and has assisted families with Texas court proceedings necessary for obtaining survivors benefits. Attorney Grace is licensed to practice law in Texas and Virginia and is a former Attorney-Advisor to the Social Security Administration. For more information about Attorney Grace, please check out her Attorney Profile.