Understanding Social Security

An introduction to the U.S. government’s Social Security program.

Currently Social Security and SSI benefits are given to approximately 50 million individuals, and by 2020 that number is expected to rise to 76 million. Generally, Social Security benefits are based on an individual’s date of birth and work history.

What Are Social Security Taxes Used For?

Social Security taxes fund Social Security benefits given to individuals who qualify for disability, retirement, or survivors’ benefits. Most employers are a part of the Social Security program, which means that a portion of each employee’s income is taxed for Social Security purposes. Individuals are not all taxed the same amount. If an individual earns more money, he or she will have greater Social Security benefits, but will pay more money per benefit. Individuals who earn less, ultimately pay less per benefit received.

What Are Credits?

The wages earned by a person are posted to his or her Social Security record and credits are earned according to these wages. A Social Security Number is the number assigned at birth that allows the Administration to keep track of individuals’ records. The amount of earnings equal to one credit continues to rise as the average salary increases. Currently, one credit is equal to approximately $780 in earnings. Individuals can earn up to 4 credits per year. Credits are permanent and do not change if an individual experiences a job change or loss. Special credit rules exist for individuals who are self employed or employed by the military, in domestic work, in farm work, or by a church or church-controlled organization that is exempt from Social Security taxes. For more detailed information on these credit rules, contact your local Social Security office.

How Are Credits Used To Determine Benefits?

Credits are used to determine disability, retirement, or survivor benefits for an individual. The number of credits required depends on the individual’s age and the type of benefit.

Retirement Benefits:

For retirement benefits, any individual born in 1929 or later needs 40 credits, and those born earlier than 1929 need fewer credits.

Disability Benefits:

In terms of disability benefits, an individual younger than age 24 needs six credits in the three-year period immediately before his or her disability. If the individual is age 24 to 30, he or she needs credits for half the period between age 21 and the age of disability. If the individual is age 31 or older, he or she needs the number of credits listed below. Additionally, he or she must earn at least 20 credits in the 10 years immediately before becoming disabled.

  • Age 31-42 needs 20
  • Age 44 needs 22
  • Age 46 needs 24
  • Age 48 needs 26
  • Age 50 needs 28
  • Age 52 needs 30
  • Age 54 needs 32
  • Age 56 needs 34
  • Age 58 needs 36
  • Age 60 needs 38
  • Age 62 or older needs 40

How Are Benefits Delivered?

Benefits are paid each month in the form of a check or direct deposit that must be cashed 12 months from the date of issue. Each individual’s birthday normally determines the day of the month on which he or she receives benefits.

In general, if an individual’s birthday falls on the 1–10 of any given month, he or she will receive benefits on the second Wednesday of every month. Individuals whose birthdays are on the 11–20, receive benefits on the third Wednesday of each month. And individuals with birthdays on the 21–31 receive benefits on the fourth Wednesday of each month.

Exceptions include cases of spousal benefits and individuals who receive both Social Security and Supplemental Security Income. People receiving spousal benefits should look at their spouse’s birthday to determine when benefits will arrive. Those with both Social Security and SSI will receive SSI on the first Wednesday of the month and Social Security on the thirdWednesday.

Does Other Income Affect Social Security Benefits?

Individuals who earn a substantial income in addition to Social Security benefits must pay taxes on their Social Security benefits. The Administration considers other income to include work earnings, and does not include income such as annuity payments, capital gains, insurance payments, interest income, or pension from private employers. Individuals who owe taxes on Social Security benefits can pay these taxes through quarterly estimated tax payments or by filling out a W-4V form and having federal taxes withheld for this purpose. Regardless of how large the extra income is, no individual pays more than 85 percent of his or her benefits.

How Will The Social Security Administration Contact Me?

The Social Security Administration normally contacts people by mail, although occasionally representatives are sent on house visits. If an individual claims to be from the Administration, call your local branch to verify that it sent a representative to your address. Normally, the Administration contacts individuals with important information, including an Annual Earnings Limit, a Cost-Of-Living adjustment form sent in January, and any other changes in benefits. Individuals will cease to receive benefits and other information if the Social Security Administration is unable to contact them. This happens most often due to an unreported address change.

How Can I Contact The Social Security Administration?

Contacting your local Social Security office is easy and can be done in one of three ways:

  • Look up your local office in the Yellow Pages under “US Government” or “Social Security Administration”
  • Call the toll-free number 1-800-772-1213 and request the local phone number
  • Check the Social Security Internet site https://secure.ssa.gov/apps6z/FOLO/fo001.jsp
    • This website also contains forms, reports, program history, and various publications of interest.

When Should I Contact The Social Security Administration?

You should always immediately contact your local office if:

  • You need a replacement Social Security card. To replace or correct a Social Security Card you need original copies of:
    • The Form SS-5
    • One identifying document (adoption record, driver’s license, employer ID card, health insurance card other than Medicare, insurance policy, marriage or divorce record, military records, passport, or school ID card)
    • Documentation of a new and old name for a name change
    • Documents showing your age, citizenship or lawful alien status, and identity for a new card
  • You need to notify the Administration that a loved one can no longer manage his or her own funds
  • You realize that you need to modify your estimated earnings
  • You want to report a change of address or telephone number
  • You want a replacement Medicare card
  • You want to modify your direct deposit information
  • You want to request a benefit verification
  • Your check is stolen or lost.
    • If you wish to report a missing check, the Social Security Administration requests that you wait three days before doing so.

When you call, make sure you have:

  • The appropriate Social Security number
  • A list of any questions you have
  • Any recent correspondence from the Social Security Administration
  • A place to make notes concerning your conversation

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