Social Security benefits are a form of government-sponsored retirement benefits.
When employed, individuals contribute to the Old Age, Disability, and Survivors Insurance (OASDI) taxes, commonly known as Social Security taxes. These contributions are made through payroll deductions, where the employer withholds a portion of an employee’s wages.
The withheld Social Security taxes are then remitted to the federal government by the employer, usually on a regular basis, such as monthly or quarterly.
The federal government collects these taxes through the Internal Revenue Service (IRS) and the Social Security Administration (SSA). Employers are responsible for reporting and submitting the withheld taxes to the IRS using specific tax forms, such as Form 941 (Employer’s Quarterly Federal Tax Return) or Form 944 (Employer’s Annual Federal Tax Return).
Once the taxes are collected, they are deposited into a dedicated fund known as the Social Security Trust Funds. The Trust Funds comprise two separate accounts: the Old-Age and Survivors Insurance (OASI) Trust Fund and the Disability Insurance (DI) Trust Fund. These funds are managed by the Department of the Treasury and invested in special-issue Treasury bonds to earn interest and ensure the funds’ growth.
The government utilizes the collected taxes and interest from the Trust Funds to provide Social Security benefits to qualified recipients. This includes retirees, disabled individuals, survivors of deceased workers, and their dependents. The SSA administers the Social Security program and distributes benefits to eligible individuals.
These benefits are distributed to retired people, disabled persons, survivors of deceased employees, and their dependents (e.g., children and spouses).
How Does Social Security Differ from Other Retirement Benefits?
Social Security benefits are distinct from other types of retirement benefits, such as pension plans.
Pension benefits are typically pre-funded by the employer and accumulate over the course of an employee’s working years. When an employee retires, the pension funds are already available for distribution.
On the other hand, the Social Security benefits program operates on a “pay-as-you-go” basis. This means that current employees contribute taxes to the system, which are then used to provide Social Security benefits for today’s retirees. In essence, the benefits for current retirees are financed by the active workforce.
Who is Eligible for Social Security Benefit Payments?
Eligibility for Social Security benefits is determined by several factors, including an individual’s work history, lifetime earnings, and age:
- Length of Work: As a person works and pays Social Security taxes, they earn credits. To qualify for benefits, an individual must accumulate a specific number of credits. Four credits are equivalent to approximately one year of work. Individuals born in 1929 or later must earn at least 40 credits to be eligible for benefits.
- Lifetime Earnings: The total earnings accumulated during a person’s career influence their monthly benefit amount. Higher lifetime earnings result in a higher monthly benefit rate.
- Age: Workers can start receiving Social Security benefits at age 62 but only partial or reduced benefits. Full benefits are granted when an individual reaches their full retirement age, currently set at 67 for those born in 1960 or later.
In addition to individual retirement benefits, family members may also be eligible for benefits, including:
- Spouses aged 62 or older: John is a retired individual receiving Social Security benefits. His spouse, Jane, is 62 years old and has not yet claimed her own retirement benefits. Jane may be eligible to receive spousal benefits based on John’s work history if she meets the age requirement.
- Former spouses, if they are 62 or older: Lisa and Mark were married for 15 years before getting divorced. Lisa is now 63 years old and has not remarried. Based on Mark’s work history, she could be eligible for spousal benefits if she meets the age requirement and other qualifying factors.
- Children up to age 18: Sarah and Tom receive Social Security benefits. Their 16-year-old son, Michael, may be eligible for dependent child benefits based on his parents’ work records since he is under 18.
- Children up to age 19 who are full-time students yet to graduate from high school: Emily is a 19-year-old full-time high school student who has not yet graduated. Her mother, Susan, is receiving Social Security benefits. Emily may qualify for dependent child benefits based on her mother’s work history since she is a full-time student under 19.
- Disabled children: Peter and Laura are both receiving Social Security benefits. Their 25-year-old son, Alex, has been disabled since childhood. Despite being over the typical age limit for dependent child benefits, Alex may still be eligible to receive benefits based on his parents’ work records due to his disability.
Are Surviving Spouses and Non-Income Earning Spouses Entitled to Benefits?
Under specific circumstances, widows, widowers, and spouses with little or no income may qualify for benefits. These situations include:
- Widows and widowers: People aged 60 or older who have been married for at least nine months are entitled to a “widow’s benefit” upon the death of their spouse. This benefit increases the survivor’s benefit rate to match the deceased spouse’s.
- Spouses with Low Earnings or No Employment Income: Spouses with low or never earned an income are entitled to up to half (50%) of their spouse’s full benefit amount.
What Benefits Are Disabled Individuals Entitled To?
Individuals with disabilities may be eligible for Social Security benefits based on their disability status. To qualify, a worker must have a mental or physical impairment that is likely to prevent them from performing substantial work or is expected to result in death.
Disabled individuals can receive benefits through one of two Social Security programs:
- Social Security Disability Insurance (SSDI) benefits disabled individuals and specific family members. To qualify, the disabled person must be under 65, have worked for a sufficient time, and have paid Social Security taxes.
- The Supplemental Security Income Program (SSI) benefits disabled adults and children with limited financial resources. The following requirements must be met to be eligible for SSI disability benefits:
- The individual must be 65 or older OR be disabled or blind;
- The individual must have limited resources and limited earnings;
- The individual must reside in the U.S.; and
- The individual must be a United States national or citizen or a qualified alien who meets specific eligibility requirements.
Do I Need a Lawyer for Help with Social Security Benefits?
It is advisable to consult with a Social Security attorney to ensure that you receive the benefits you are entitled to. An experienced government attorney in your area can guide your eligibility for benefits and assist you in the application process.
They can also help you navigate potential issues or complications while applying for and receiving Social Security benefits. Working with a knowledgeable attorney can help you better understand your rights and entitlements, increasing the likelihood of a successful outcome.
Use LegalMatch to find a lawyer to answer your questions and represent you in court today.