When did it start, where’s the money come from?
Poverty rates among seniors exceeded 50% during the Great Depression so Franklin D. Roosevelt started the “Old-Age, Survivors, and Disability Insurance” (OASDI) federal program in 1935. Now called “Social Security”, it pays out money to seniors and the disabled.
The program is funded by FICA taxes paid by employees and employers. The tax rate for the last 25 years has been about 6.2% for employees and 6.2% for employers. Put simply, Social Security is a mandatory savings plan: You and your employer pay taxes while you’re working, then you get that money back later.
When can I collect Social Security?
Beginning at age 62 you may file for benefits and receive a monthly check from the Social Security Administration if you have accumulated enough “credits”. You should apply three months before you want your payments to start.
How much do I get?
The amount of your monthly benefit depends mostly on how much $ you earned while working and how old you are when you begin to take benefits. Monthly benefits significantly increase if you wait longer (up to age 70). For example: IF your benefit at 65 is $2000/month, it would be approximately $3000/month if you waited to start benefits at age 70.
Get an estimate of your SS benefits by going to https://ssa.gov/retire/estimator.html.
Read this to find out how benefits are calculated: https://www.ssa.gov/pubs/EN-05-10070.pdf
Note: the amount of your monthly check may change in the future. By 2019 Social Security may be using reserves to make payments (paying out more money than they take in from taxes). Before that happens, Congress may enact legislation to decrease benefits, increase age requirements, etc. This is why it’s important to VOTE in elections!
Three ways to apply for Social Security Benefits
There are different strategies for getting the most out of your SS benefits. Options include filing at 62 versus filing at “Normal Retirement Age” or later, “filing and suspending” benefits, filing for spousal benefits, and others. Several options may change in 2016 due to recent laws passed in Congress (see "2016 Changes in Social Security" article below). When and how you file will depend on your personal (health, family, work & financial) situation. RAFA encourages retirees to carefully research Social Security before making decisions; you may want to visit a SSA office for a consultation (make appointment first).
https://ssa.gov or 1-800-772-1213 7am-7pm
2013 AARP article: When to take Social Security: http://www.aarp.org/work/social-security/info-10-2013/when-to-claim-social-security-benefits.html?intcmp=AE-WOR-ENDART-REL
2017 AARP article: Don't Rush Social Security
If you intend to begin collecting Social Security before April 30, 2016, be aware that the federal government has closed several loopholes on claiming benefits. The claiming strategies being eliminated are part of the federal budget bill, expected to be signed into law by President Obama. They were used mostly by married couples who coordinated collecting benefits. The new restricted rules apply to those who reach age 62 after 2015.
The budget includes a section to close “unintended loopholes,” ending two income-bolstering approaches that largely benefited married couples and, in some cases, their dependents.
Claiming Social Security benefits is incredibly complex, but retirees generally stand to receive higher checks the longer they wait to collect. The strategies being eliminated essentially allowed individuals to collect spousal benefits while their own checks continued to grow.
The New York Times quoted Michael Kitces of the Pinnacle Advisory Group: “The main takeaway is that couples who want to coordinate on their claiming strategies have far fewer choices on how to do it. Any dual-income couple is impacted by this.”
Among tactics being targeted is “file and suspend” that allowed married retirees to file for benefits but then suspend them immediately, enabling individuals to collect benefits on their spouses’ record, while the spouses waited to collect their own benefits. The spouses’ benefits, meanwhile, would continue to grow by 8 percent a year.
The second strategy permitted married people who reached full retirement age to file a “restricted application.” That allowed individuals to collect only a spousal benefit, while their own benefits continued to increase. In the future, individuals eligible for a spousal benefit will be deemed to have filed for their own benefit as well, according to Kitces. That means retirees will get whichever is larger.
Cristina Martin Firvida of AARP, which supported the changes, told the New York Times that “the claiming strategies impacted would apply entirely to future beneficiaries,” and that those people would “have at least some time to adjust their claiming strategy.”