Social Security is a benefit that helps citizens collect income when they can no longer work. It is paid to people who have reached a certain age or have become disabled.
Qualifying for Social Security
In order to qualify for social security retirement benefits, you will need to have earned a minimum amount over several years. The Social Security Administration quantifies this as earning more than a set amount over the course of a year. The exact amount is adjusted every year. It takes a certain amount to earn a social security credit and you can earn up to four credits per year.
The amount required to earn a credit is fairly small – in 2016, it was just $1,260 – and you need to have 40 credits to qualify for social security retirement benefits. However, if you become disabled or pass away before earning the minimum amount, you may still be able to collect benefits.
Paying into Social Security
Contributions to Social Security are withheld from your paycheck as FICA (Federal Insurance Contributions Act) taxes. If you work for someone else, you pay 6.2 percent of your gross wages to social security and your employer pays 6.2 percent of your gross wages on your behalf.
If you are self-employed, you pay 12.4 percent of your net earnings towards social security. You only have to pay FICA taxes on the Social Security wage base. For 2016, this figure was $127,200, meaning that if you earned more than that amount, you only pay Social Security on the first $127,200 of your wages in 2016.
Social Security Payouts
FICA taxes cover Social Security and Medicare benefits for qualified persons. The idea is that you pay into the program while you are working and that money pays for current retirees and disabled persons. When it is your turn to collect benefits, be it from retirement or disability, you collect from the pool of current workers’ FICA contributions.
How Much You Receive
The amount you receive for your social security benefits depends on the age at which you retire and how much you earn during your working life. You can start collecting Social Security retirement benefits as young as 62 years of age, but the full retirement age (that is, the age at which you qualify for full benefits) is a few years older.
It varies by your year of birth. It could be as young as 65 or as old as 67. At 70 years of age, you can get the maximum social security retirement benefit, which is more than the amount you would receive if you retired at your full retirement age.
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