Social Security provides financial protection to nearly every American at some point during their lives. Between retirement benefits that kick in after the end of your career to disability benefits that offer an income if you become unable to work, Social Security offers support not only to workers but also members of their families to help make ends meet.
However, not everyone is eligible for Social Security. As you'll see in more detail below, the Social Security Administration looks at a number of factors in deciding who qualifies to receive retirement and disability benefits, including the length of your work history. Only if you meet the requirements will you be able to claim Social Security benefits. Moreover, different people qualify for various levels of retirement benefits at different ages, so there are a lot of intricacies involved in determining exactly how much you can expect to receive from Social Security.
What is Social Security?
Social Security is a government program that provides financial benefits for older Americans and their families, as well as for those who suffer permanent disabilities during their working lives. Dating back to the 1930s, Social Security was created with the idea of providing some additional income for retired Americans after the end of their careers. Over time, the scope of the Social Security program has expanded to cover spouses and other family members as well as going beyond retirement to provide disability benefits as well.
Those who are eligible to receive Social Security get payments on a monthly basis. As you'll see in more detail below, the amount of those payments varies from person to person, based on factors that include the length of your career, your typical earnings, and when you elect to start receiving benefits from Social Security. Although the goal of Social Security isn't to replace your pre-retirement income fully, it is designed to supplement other income sources in order to help Americans plan more fully for their financial needs after they retire.
Basic requirements to receive Social Security retirement benefits
The first test a potential Social Security recipient has to meet involves immigration status. If you're a U.S. citizen, then you meet this test. However, you don't have to be a U.S. citizen if you're lawfully present within the U.S. under ordinarily accepted statuses. That includes officially recognized permanent residents, but it also can cover other lawful nonimmigrants such as those who've sought and received political asylum.
Once you've established eligibility based on citizenship or lawful immigration status, Social Security then turns to your work history to see if you've worked long enough in a job that pays Social Security payroll taxes into the system in order to qualify for benefits. The SSA has a credit-based system in which workers can earn up to four credits every year. In 2018, it takes $1,320 to earn a credit, so workers who earn a total of $5,280 will have earned the four-credit maximum for the year. It takes 40 credits to qualify for retirement benefits, so at four credits per year, it usually takes a person 10 years to become eligible.
Finally, for retirement benefits, you have to reach a certain age before Social Security will make payments. As you'll see below, the age at which you qualify for full retirement benefits varies depending on when you were born, but all retirees can claim early benefits before reaching that full retirement age. However, when you start receiving benefits also has an impact on how much Social Security will pay you.
How much Social Security pays retirees -- and why it matters when you claim
To understand the impact of when you claim has on your benefits, it's useful to understand Social Security's general rules for determining the size of your monthly payment. The SSA looks at the 35 top-earning years in your career after adjusting your earnings for inflation, but it only looks at those earnings up to the specific wage base limit for that particular year. That's the amount on which Social Security payroll taxes apply, and in 2018, it's $128,400. So whether you earn $130,000, $300,000, or $25 million in 2018, your Social Security benefit will be calculated as if you had made $128,400 in earnings.
If you take those 35 years, add them up, and then divide first by 35 and then by 12, you'll have an average indexed monthly earnings amount. Social Security then uses a formula to determine the amount you'll get at full retirement age, which it calls the primary insurance amount. This formula varies from year to year, but for 2018, you take 90% of the first $895 in average indexed monthly earnings, add 32% of the amount between $895 and $5,397, and finally add 15% of the amount above $5,397.
The resulting primary insurance amount tells you what you'll get if you claim at full retirement age, but it doesn't tell you what your full retirement age is. The following chart will help you look up the appropriate age based on your year of birth.
|If You Were Born In||Then Your Full Retirement Age Is|
|1937 or earlier||65|
|1938||65 and 2 months|
|1939||65 and 4 months|
|1940||65 and 6 months|
|1941||65 and 8 months|
|1942||65 and 10 months|
|1943 to 1954||66|
|1955||66 and 2 months|
|1956||66 and 4 months|
|1957||66 and 6 months|
|1958||66 and 8 months|
|1959||66 and 10 months|
|1960 or later||67|
Data source: Social Security Administration.
However, you're allowed to claim retirement benefits at an age different than the full retirement age listed above. You can retire as early as 62, and if you do, then your benefits are reduced by five-ninths of a percent per month for the first 36 months, and then by five-twelfths of a percent per month for any additional month beyond 36. On the other hand, you can also wait as long as age 70 before claiming benefits. Waiting earns you delayed retirement credits of two-thirds of a percent per month.
When you apply those percentages to two common situations -- one person with a full retirement age of 66, and another whose corresponding full retirement age is 67 -- you get the following reductions or additions.
Adjustments to worker retirement benefits by claiming age
|Age||Addition or (Reduction) if FRA Is 66||Addition or (Reduction) if FRA Is 67|
|65||(6 2/3%)||(13 1/3%)|
Data source: SSA.
Qualifying for family retirement benefits
In addition to paying retirement benefits to workers, certain family members can also receive benefits based workers' career earnings. Most spouses are eligible, as are children who meet certain requirements. These benefits fall into two basic categories: spousal and children's benefits that you can receive while the worker is alive, and survivor benefits that eligible family members can get after the worker's death.
A spouse who's been married to a worker for at least a year can claim spousal benefits on that worker's earnings record if the spouse is at least 62 and the worker has claimed retirement benefits. Like retirement benefits, spousal benefits are subject to reduction if they're taken before the spouse's full retirement age. In general, the full retirement age payment is equal to half of the worker's full retirement age payment, but the following reductions apply if the spouse claims early.
|Age||Addition or (Reduction) if FRA Is 66||Addition or (Reduction) if FRA Is 67|
|65||(8 1/3%)||(16 2/3%)|
Data source: SSA.
Note that there are no delayed retirement credits available for spousal benefits. Spouses who are caring for children under age 16 are also eligible to claim spousal benefits even if they haven't yet reached age 62.
In some cases, a divorced person can collect spousal benefits based on an ex-spouse's work history. To qualify, the couple must generally have been married for at least 10 years. Moreover, if you remarry, then you can no longer claim spousal benefits based on the work record of your ex.
Children can also be eligible to receive Social Security benefits on your work record. Like spouses, each eligible child can receive up to half of your full retirement age benefit amount. However, only children who are under 18, are in high school and no older than 19, or are any age and become disabled before age 22 can get benefits.
Social Security survivor benefits
The eligibility requirements for survivor benefits under Social Security work a little differently from regular retirement benefits, because they're designed to kick in to help families get through tough financial situations. The most important element of survivor benefits is that the number of Social Security credits that the worker must have earned in order for family members to qualify for survivor benefits varies according to age. Older workers still need to earn as many as 40 credits, but extremely young workers can qualify with as few as six credits.
For a spouse to be eligible to receive survivor benefits, the couple must have been married for at least nine months prior to death unless the cause of death was accidental or associated with military duty. Benefits generally kick in when the surviving spouse turns 60, except that those caring for a child under age 16 can get survivor benefits until the child's 16th birthday.
For a child to receive survivor benefits, the same qualifications must apply as for retirement benefits: under 18, in high school and no older than 19, or those who became disabled before their 22nd birthday.
Divorced spouses can also get survivor benefits if they qualify. The requirements are similar: The marriage must have lasted at least 10 years, and if the surviving spouse remarried before reaching age 60, then no benefits are payable. However, an ex-spouse can get benefits even after a remarriage if it occurred after the ex-spouse's 60th birthday.
Typically, survivor benefits are equal to 75% of the deceased worker's base amount. Unlike spousal benefits, survivor benefits do take into account the claiming decision of the deceased worker. So if the worker claimed reduced benefits early, then the survivors' benefits will also be reduced.
How Social Security disability benefits work
Most people focus more on retirement benefits, and the vast majority of those who receive money from Social Security are retired workers and their families. However, more than 10 million people get Social Security disability benefits. The requirements for receiving disability benefits have some similarities to the process for retirement benefits, but there are also some big differences.
The first test you need to meet is a time-of-work requirement that looks a lot like how the Social Security credit system works for survivor benefits. The disabled person needs to have had enough recent work, based on their age. Those under 24 need to have worked for at least a year and half out of the past three years. Those between 24 and 30 need to have worked at least half the time since their 21st birthdays. If you're 31 or older, then you need to have worked at least five years out of the last 10.
There's also a minimum career work requirement. For those in their 20s, 30s, and early 40s, if you meet the recent time-of-work requirement, you'll also have enough total career work to meet this test. Once you hit 44, you'll need five and a half years of lifetime work, and 46-year-olds need six years. The amount rises by half a year of necessary work for every two years older you get, with those in their 60s needing nine and a half years.
Finally, the health event must qualify as a disability for Social Security purposes. In general, what this means is that the worker must no longer be able to do the work that the worker was doing before the injury or illness occurred. In addition, the limitations of the worker's condition must prevent the worker from doing other types of employment. Finally, only long-term events qualify for Social Security disability benefits, with an expectation that the illness or injury must last at least a year or be a terminal illness.
How disability benefits get calculated
Coming up with the amount of disability benefits you're entitled to receive involves a similar process as for retirement benefits, except that the length of time over which your average indexed monthly earnings are based is necessarily shorter. Rather than needing a full 35-year history as you'd have with retirement benefits, the SSA looks at the work history you've had up to the date that the disabling injury or illness took place. It then takes a certain number of years' worth of earnings to calculate the appropriate average indexed monthly earnings amount.
Here's how the SSA figures out exactly how many years of work history it considers in coming up with your benefit amount:
Step 1: First, you figure out how many years in your adult career you've had, by taking your age right now and then subtracting 22. So if you're 45 years old, you've had 45 minus 22, or 23 years in which you could have worked as an adult.
Step 2: Take that number and divide it by 5, with a minimum of 2 and a maximum of 5. In the example above, 23 divided by 5 is 4.6, which you round down to 4.
Step 3: Subtract the second number from the first. In our example, 23 minus 4 gives 19.
The answer -- 19 years in our example -- tells you how many top-earning years the SSA will look at to calculate your average indexed monthly earnings. Then, the average indexed monthly earnings amount gets run through the same formula as with retirement benefits to get a primary insurance amount. That amount defines how much the worker is entitled to receive.
How much in disability benefits family members can receive
Often, when a disabled worker is able to receive disability benefits, other family members also become eligible to receive family disability benefits. The rules for spousal disability benefits are similar to the spousal benefits for retired workers: If you're 62 or older or if you're caring for a child who's under age 16 and receiving Social Security, then you're entitled to those benefits.
Children can get family disability benefits if they're under 18, a high school student and no older than 19, or if they became disabled before their 22nd birthdays. Each family member is generally eligible to receive 50% of the primary insurance amount for the disabled worker.
General limits on all family Social Security benefits
When multiple family members are eligible to receive Social Security payments based on the same worker's record, the SSA puts a limit on the total benefits paid. The calculation of the Social Security family maximum is complicated, but it generally works out to 150% to 180% of the worker's full retirement age benefit. If the total would exceed this amount, then individual payments to family members can get reduced by the amount necessary to fall within the limit.
Get the Social Security benefits you deserve
There are many ways that workers and their families can become eligible for Social Security benefits, especially when you consider the opportunities both for older workers who claim benefits after they retire as well as those who become disabled during the peak of their careers. The eligibility rules for each type of Social Security benefit have a lot of similarities, but they can also be subtly different in important ways. Understanding the ins and outs of how each part of the overall Social Security system works will help make it easier for you to navigate the complex sets of requirements you'll need to meet in order to receive the benefits that you've earned for yourself and your family over the course of your career.