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Understanding the Basics of Social Security Benefits

February 28, 2022

During the early 1930s, President Franklin D. Roosevelt recognized the need for a program to supplement the income of older Americans. He signed the Social Security Bill in August of 1935. Over the decades, the program was modified as needed to accommodate deserving individuals. Today, more than 65 million citizens of varied ages receive Social Security benefits. 

Earning and Calculating Social Security Benefits

Employees must earn 40 credits during their work history in order to be eligible to receive Social Security benefits. Workers typically earn four credits annually. Thus, 40 credits accumulate after ten years of employment. As of 2021, employees earn one credit when earning $1,470 of wages. Four credits require $5,880 in wages. 

When an individual applies for Social Security, the administration calculates the benefits based on 35 years when earned wages were at a peak. Depending on historical earnings, older adults reaching the full retirement age of 67 in 2021 could receive a monthly maximum of $3,113. If the same individual does not apply until they reach the age of 70, their benefit rises to $3,895. Mature adults have the option of filing for Social Security at the age of 62. However, the benefits may be reduced anywhere between 25% and 30%. 

Spousal Benefits 

One spouse may receive $2,000 monthly from Social Security, while the other receives only $500. Claiming a spousal benefit increases the second spouse's income to $1,000 monthly. Divorced individuals also have the ability to enhance their monthly benefits via their ex-spouse's earnings if they were previously married for ten years, are single, and at least 62 years of age. 

Child and Survivor Benefits

Children under the age of 18, students up to age 19, or disabled children older than 18 are eligible to receive up to 50% of a parent's Social Security benefit. Similarly, a widow or widower may receive survivor benefits when they turn 60 years of age unless they remarry. 

COLA-Cost of Living Adjustments

The government may adjust Social Security benefits for all recipients each year based on the federal consumer index and inflation rates. In 2009, benefits were raised by 5.8%. But there was no increase for the years 2010, 2011, and 2016. For 2022, the COLA is reported as being a raise of 5.9%.

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Brought to you by Cetera Financial Group and Megent Financial.  Your representatives are Ron Bickel - Investment Executive, Tom Borsellino - Investment Executive, Danielle Burton - Investment Executive, Eric Burton - Investment Executive, Reid Burton - Investment Executive, Nick Corcoran - Investment Executive, Mark Deimling - Investment Executive, Tim Holubik - Investment Executive, Doug Klimah - Investment Executive, Dan Lekki - Investment Executive, Michelle McNally - Investment Executive, Ron Whittingham - Investment Executive, & Lori Whittingham-Derby - Investment Executive.