When it comes to planning retirement or becoming disabled, it's possible that you or your spouse will underestimate the value of Social Security benefits. These benefits are, however, a financial asset that you or your spouse may be fortunate enough to receive as you age or when times get rough.
With the help of Social Security checks, which you can think of as annuity, it's possible that you or your spouse may be in better shape than you thought possible when you age or die. Social Security benefits come in two forms, such as retirement benefits and surviving spouse benefits.
Overview of Social Security Benefits
One confusing aspect of an employee's transition from work to retirement, the inability to work due to a disability or the death of a spouse is moving from an earned wage to an annuity-like stream of income. An individual might rely on one of three types of Social Security benefits at a particular time: benefits for older Americans, known as retirement benefits; benefits for workers who become disabled; and benefits for families in which a spouse or parent dies.
Social Security Retirement Benefits
The Social Security check serves as a financial safety net for older Americans. The money you receive is based on the contributions you make to the system when working. As you work, you pay into Social Security and later on, when you retire, you receive the benefits. Your contributions take the form of the Federal Insurance Contributions Act (FICA) taxes that are withheld from your paychecks.
When you retire, the Social Security retirement checks are paid to you, the retired worker or, in the event of your death, to certain members of your family:
- A spouse who is 62 years of age or older.
- A spouse, regardless of age, who cares for a child who is 15 years of age or younger.
- A spouse, regardless of age, who cares for a child who became disabled prior to the child's 22nd birthday.
- A divorced spouse who is 62 years of age or older, whose marriage to the deceased lasted 10 years or more.
- An unmarried child of the deceased, who is 18 years of age or younger and a student at a primary or secondary school.
- A child who was disabled before the age of 22.
Social Security Retirement Benefit Amount
As for the amount, the Social Security Administration (SSA) says that your Social Security check will replace a percentage of your pre-retirement income as determined by your lifetime earnings. According to the administration, the particular amount of your average wages that the retirement benefits replace is determined by your earnings and the point at which you start receiving the benefits.
If you elect to receive the benefits at "full retirement age," the SSA says the amount can range from about 75 percent of your pre-retirement income if you were a "very low earner," around 40 percent for the "medium earner" and close to 27 percent if you were a "high earner." If you start benefits after full retirement age, these percentages would be higher. For more information about your situation, you should speak with a Social Security representative.
Read More: How to File for Social Security
Social Security Disability Benefits
The Social Security Disability Insurance (SSDI) program pays you and certain family members benefits if a disability – a physical or mental problem that lasts 12 months or more – prevents or limits your ability to work, assuming you meet other requirements. Those requirements include having worked for a certain time during a particular period and you paid Social Security taxes on your earnings.
One determinant of the SSDI payment you receive is the number of Social Security credits you've earned, the maximum being 40. Other factors are your age and your average lifetime earnings before the disability began. The severity of your disability or your current earnings is not factors. The disability payments don't begin until five months after the disability is diagnosed.
According to attorney Bethany K. Laurence, the majority of SSDI recipients receive payments between $800 and $1,800 per month, the 2020 average being $1,258. If you receive disability payments from another source, however, your SSDI payments may be reduced.
Note: If you're approved for SSDI, your dependents might qualify for benefits as well. For specific information about your situation, you should speak with a Social Security representative.
Social Security Survivor Benefits
Survivor benefits are paid to the family members of a deceased, fully insured worker. The benefits the person receives are dependent on the relationship of the survivor to the deceased, the age of the survivor, the survivor's physical status and if the survivor cares for children of the deceased. For instance, if the surviving spouse has reached full retirement age, the person will receive 100 percent of the deceased's benefits. If the spouse is disabled and between 50 and 59 years of age, the person receives 71 percent of the SSI benefits.
What's more, a single, divorced spouse who is 60 years of age or older is eligible for benefits, as are the unmarried children of the deceased who are 17 years of age or younger. Also, the legally dependent parents of the deceased can receive benefits. For more information, contact Social Security.
A worker or a family member receives one of three types of Social Security checks: retirement, disability and survivor benefits. The points at which a person is eligible to receive a benefit varies greatly, as does the amount of the Social Security check received. For more information, contact the Social Security Administration at 1 (800) 772-1213.
- SSA: SSA Retirement Benefits July 2020
- SSA: Retirement Benefits for Your Spouse
- SSA: SSA Disability Benefits
- SSA: SSA Understanding the Benefits
- SSA: Contact Social Security
- Disability Secrets: How Much in Social Security Benefits Can I Get?
- Disability Secrets: Dependent and Spouse Benefits Under Social Security Disability
- SSA: If You Are the Survivor
- SSA: Survivors Benefit Amount
- Social Security Administration. "Social Security History: Fifty Years of Social Security." Accessed Feb. 21, 2020.
- Social Security Administration. "Retirement Benefits," Page 1. Accessed Feb. 21, 2020.
- Social Security Administration. "Retirement Benefits," Page 4. Accessed Feb. 21, 2020.
- Social Security Administration. "Retirement Benefits," Page 7. Accessed Feb. 21, 2020.
- Social Security Administration. "Retirement Benefits," Page 10. Accessed Feb. 21, 2020.
- Social Security Administration. "Retirement Benefits," Page 9. Accessed Feb. 21, 2020.
- Social Security Administration. "Benefit Planner: Survivors, If You Are the Survivor." Accessed Feb. 21, 2020.
- Social Security Administration. "Disability Insurance Trust Fund." Accessed Feb. 21, 2020.
- Social Security Administration. "Disability Benefits," Page 10. Accessed Feb. 21, 2020.
Billie Nordmeyer is an IT consultant of 25 years standing. As a senior technical consultant for SAP America and Deloitte Touche DRT Systems, a business analyst, senior staff, and independent consultant, Billie has worked across the retail, oil and gas, pharmaceutical, aeronautics and banking industries. Billie holds a BSBA accounting, MBA finance, MA international management as well as the Business Analyst and Software Project Management certificates from the Cockrell School of Engineering at the University of Texas at Austin.