What are Social Security Benefits?
By Peggy B. —
Published February 25, 2018
Social security benefits are something you’re likely to have heard of quite often. But, have you wondered what these benefits exactly are? Well, if you have, you’ve come to the right place.
Social security benefits are, basically, payouts that you receive every month after retirement. They are also paid to the spouses of retirees. The benefits paid aren’t “free money” as a lot of people tend to think. These are payments that are taken out of your social security fund.
Employees in the US are required to contribute a certain sum of money every month to the social security system. However, the government does set aside some of the money for individuals who are partially or completely disabled. The money is, as you guessed it, used to fund their needs.
In order to qualify for social security benefits, one must be able to meet certain criteria put forth by the Social Security Administration. A deeper look
Social security benefits are actually taxable. However, that depends on the actual level of your income. The most recent updates were made in 2016. As of now, single taxpayers (unmarried) with an annual income of over $25,000 will have their social security benefits taxed.
Similarly, those who are married and earn an annual income of $32,000 or more will have their social security benefits taxed.
Disabled individuals earning social security benefits are exempt from paying taxes. A little history
The US’s social security system is essentially part of the OASDI or the Old-Age, Survivors and Disability Insurance federal program. It was in 1935 that President Franklin Roosevelt signed the original social security act into law.
Of course, as with all laws, the social security act has undergone several amendments since it came into being. The current version includes a range of social welfare programs and social insurance schemes.
One of the most significant benefits of the OASDI program is the payment of social security benefits. These benefits basically function as a type of social insurance and are mainly designed to benefit low-income earners as a way to prevent them from retiring in poverty. The process
The money that goes into the social security system comes in from payroll taxes. Payroll taxes are mandatory by law under the Federal Insurance Contributions Act (FISA) and the Self-Employed Contributions Act (SECA).
The IRS or Internal Revenue Services collects the tax deposits. The funds are then formally entrusted into the hands of a Social Security Trust fund. There are groups of such trust funds. For example, you have the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Supplementary Medical Insurance Trust Fund, the Federal Hospital Insurance Trust Fund, and the Federal Disability Insurance Trust Fund etc.
Barring a microscopic number of exceptions, the IRS, along with the Social Security Administration, keeps an eye on all employee earnings throughout their career. Based on the data they acquire regarding each employee’s salary, they calculate the tax payments to be made under FICA and SECA.
As for estimating the actual benefits, the Social Security Administration currently uses a 10-yeard old tool. In fact, the tool is available for use to the general public. You can access it by heading over to the administration’s website.
Workers, who are supposed to receive benefits, but aren’t, and are not Medicare beneficiaries can use the tool. The tool allows one to acquire an idea of how much, approximately, they can receive in the form of social security benefits.
Another importing thing to know is that the benefit payouts are different for each age bracket.
Retirees who fall under a non-SECA or non-FICA taxation system will have to consult an expert. The rules are far more complex for such people.