What are Social Security Benefits
Retired workers and their spouses who have, during their working years, paid into the Social Security system receive Social Security benefits monthly. Social Security benefits are also available to qualifying individuals who are completely and permanently disabled, and are determined by a specific and rigid set of criteria issued by the Social Security Administration.
BREAKING DOWN Social Security Benefits
Depending upon a taxpayer’s level of income, Social Security benefits may be taxable. As of 2016, taxpayers without a spouse and with a yearly income that exceeds $25,000 may have a portion of their Social Security benefits taxed. Likewise, married couples that file jointly and earn more than $32,000 per year may also have these benefits taxed. Benefits received due to disability are, in most cases, tax-free.
The History of Social Security Benefits
Social Security in the United States is largely the Old-Age, Survivors and Disability Insurance federal program. President Franklin Roosevelt signed the original Social Security Act into law in 1935. The current law, after a number of amendments, encompasses several social insurance and social welfare programs, including the issuance of Social Security benefits.
The payment of retirement, or Social Security, benefits is the largest component of OASDI. These benefits, a form of social insurance, are biased toward workers at the lowest end of the income bracket to prevent such individuals and families from retiring into relative poverty.
How Social Security and Related Benefits Work
Payroll taxes under the Federal Insurance Contributions Act tax or the Self Employed Contributions Act tax fund Social Security and all its benefits. The Internal Revenue Service collects tax deposits and formally entrusts them to one of the collective group of Social Security trust funds. This group includes the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Hospital Insurance Trust Fund, the Federal Supplementary Medical Insurance Trust Fund and the Federal Disability Insurance Trust Fund. With little to no exceptions, the Social Security Administration and the IRS record each worker’s earnings, throughout his or her career, and effectuate FICA or SECA tax payment on said earnings.
Estimation of Social Security Benefits
In 2008, the Social Security Administration pioneered a new tool on its official government website that allows workers to estimate their Social Security benefits. This tool is best suited for a worker who qualifies for benefits, is not receiving any benefits and is not a beneficiary of Medicare. With this tool, these workers can gain an approximation of the Social Security benefits they can expect to receive in different age brackets at the time of retirement. Retirees with non-FICA or SECA-taxed wages will require additional help because rules for such individuals are more complex.