The Social Security System Flashcards
Funding Social Security System
Funding is provided by both employee and employer through the Federal Insurance Contributions Act (FICA) tax. The employer withholds the employee’s tax and pays it along with the employer’s portion. Self-employed individuals pay an amount equal to the total of an employer and employee payment.
Based on one’s taxable income and number of years in the workforce, each covered employee earns credits toward being eligible for Social Security benefits. The credits are based on annual income and allow a worker to accumulate up to four credits, or quarters of coverage, per year.
Once eligible, the amount of monthly Social Security benefits is based on a basic formula which determines each covered worker’s Primary Insurance Amount (PIA).
Fully Insured
Fully insured status requires an individual to have earned a minimum of 40 quarter credits, or approximately 10 years of employment. A fully insured worker has permanent coverage under Social Security and cannot lose this status.
Benefits that may be received monthly under a fully insured status are:
Retirement at age 62 or older
Spousal retirement at age 62 or older
Widows and widowers can begin receiving Social Security benefits at age 60
Currently Insured
A worker must earn at least 6 quarter credits during the full 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or is entitled to retirement benefits.
Types of Social Security Benefits
Retirement- At Full Retirement Age, a retired worker is eligible to receive monthly income equal to their PIA. The Full Retirement Age (FRA) varies based on year of birth, but is up to age 67. Covered workers may begin receiving retirement benefits as early as age 62;
Death Benefits –A one-time lump sum payment of $255 in total may be made after the taxpayer’s death. This death benefit is only payable to a surviving spouse or minor children
Survivor Benefits
-A monthly Survivor Benefit is payable to eligible dependents of a fully-insured deceased worker.
A surviving spouse with a dependent child under age 16 is entitled to monthly income until the youngest child reaches age 16 (or a disabled child reaches age 22).
An unmarried surviving spouse may start receiving retirement benefits at age 60. The blackout period is the time between when the youngest child reaches age 16 and the spouse is eligible for retirement benefits at age 60.
Surviving children of a deceased worker are eligible for benefits and covered to age 18 or 19 if still enrolled in high school.
Beginning at age 62, surviving parents are also eligible for monthly survivors benefits if they are being at least one-half supported by the deceased worker.
