The Social Security Act of 1935

What are social security taxes

The Social Security Act was signed by President Franklin Roosevelt on August 14, 1935. This is a federal program (run by the Social Security Administration (SSA)) and uses social security taxes (and the balance goes into a trust fund) to provide benefits to people who are eligible (Old-Age, Survivors, and Disability Insurance (OASDI) ).

When do you pay tax on Social Security

Basically, it’s a pay-as-you-go program

It works like insurance (not a retirement program– which is pre-funded and funds held in a personal account to be paid as benefits in old age).

Workers pay premiums (Tax called FICA withheld at payroll) equivalent to 12.4 % (employees pay 6.2% while the employer pays 6.2%) of their wages and in turn secure coverage for themselves (and their spouse and young children) against the occurrence of a specific event (loss of income-not being no longer able to work).

Withholding tax on social security

Source: ssa.gov

The taxes are based on earnings while the benefits received are based on earnings records.

Social security income limits

For the year 2022, you will not pay taxes on earnings greater than $147,000.

This figure is usually adjusted yearly (Cost of Living adjustment-COLA) in relation to changes in national wage levels.

Social security benefits are paid in three instances:

• Retirement(Depend on circumstances and can be As early as age 62 for reduced old-age benefits),
• Death(survivors and defendants e.g. current and divorced spouses, children, and parents), and
• Disabilities (Qualifying)

Eligibility of social security

2022 Work credits

Eligibility is based on the worker’s contribution to FICA taxes. As the employee works, so will they pay taxes and earn “credits.”

Workers are allowed to earn up to a maximum of four credits per year (money needed to earn one credit usually goes up every year). In 2022, for every $1,510 earned (until $6,040), one credit is granted. For 2023 one credit will be granted for $1,640 (until $6,560).

When eligible for Social Security…..

You will need at least 40 credits (which is at least 10 years of work) to qualify for benefits.

If you stopped working before you had enough credits to qualify for benefits, they will remain in your record. Should you return to work later, more credits may be added.

Younger individuals need fewer credits for eligibility for disability benefits or for their spouses, children, or dependent parents to be eligible for survivor’s benefits when the employee dies.

How to sign up Social Security

This can be filed by phone at 800-772-1213 or visit the local office in person. Retirement, spousal and disability benefits can be applied online using My Social Security account.

Follow the below guidelines when applying for various benefits.

Social Security age benefits| Spousal Social Security death benefits

Filing can be done Online, by phone, or in person. The following personal and work information is required:

• Date and place of birth.
• Marriage history and number of children.
• Details of start and stop for any jobs held in the last two years (and net income from self-employment covering the same period) or Military service (if applicable).
• Payment details include the bank routing number, bank account number, and type of account.

Survivor benefits for social security spouse| Social security benefits for a divorced spouse

This can be done by phone or in person. The following information will be required:

• The Social Security number (SSN) and death certificate of the deceased worker.
• Your SSN and of any dependent children.
• A birth certificate or any other acceptable religious record of your birth
• Marriage certificate (divorce documents if filing as a former spouse).
• Tax records documenting your earnings.

The applicant has to be at least 60 to receive survivor benefits (age 50 exceptions for widows and widowers who are disabled or caring for children who are under 16 or disabled (no age restriction). Eligibility can be affected if a spouse is remarried.

Social Security benefits for child

This benefit is available for children whose parents:

• Earned enough credits.
• Was entitled to Social Security retirement or disability benefits, or is deceased.

To be eligible, a child must be unmarried, dependent, and either:

• Below the age of 18.
• 18-19 years old and a full-time student.
• 18 or older with a disability before they were age 22.

In some cases, stepchildren, grandchildren, step-grandchildren, or adopted children are also eligible.

Disability Insurance (SSDI)

Disability requirements Social Security

Filing can be done Online, by phone, or in person. Documentation required includes;

• Birth certificate
• Employment and earnings records
• Medical and treatment history
• Adult Disability Report.

The SSDI process will include an oral interview, in person or by phone.

There is no minimum age for SSDI but the worker must have at least acquired credits.

Apply social security card online

You can put down requests to replace the SSN card (available in many states and the District of Columbia) via the secure my Social Security account.

The account can be created by any individual who is 18 years or older and is registered, with a valid email address, and U.S. mail address.

To create an account, go to www.ssa.gov/myaccount

When to apply Social Security

Applications for benefits are to be made about four months before the date you want your benefits to start.

Applications for disability or survivor benefits can be filed as soon as the person is eligible. This can be done at www.ssa.gov/benefits/retirement

Maximum on Social Security benefits

The maximum benefit is dependent on the age of retirement. This is very useful in deciding when to start accessing Retirement Benefits.

 Maximum social security benefit for 2022

• What is maximum social security benefit at age 62  

The employee can make early access at age 62. However, this will reduce their benefit to a maximum of $2,364.

• What is maximum social security benefit at age 67

The full retirement age is 66 years for those born from 1943 to 1954. For individuals born after 1960, full retirement benefits are payable at age 67. At full retirement age, Individuals can access is $3,345.

• What is maximum social security benefit at age 70

It’s advisable to delay access beyond your full retirement age. However, there is no tangible benefit in delaying the claim beyond age 70.

Also, you can get to access the highest amount if you contributed the maximum amount ($4,194) and worked for 35 years.

• maximum social security benefit married couple

The benefits accruing to each couple match their earnings records and their age when making the claim. One couple’s payment does not offset or affect the other.

For context, the average monthly Social Security retirement benefit is as below;

• All retired workers: $1,657. 23
• Retired worker with only an aged spouse: $2,753.
• Workers with a disability: $1,358.
• Worker with a disability with a young spouse and one or more children: $2,383.
• All aged widows and widowers: $1,553.
• Young widow or widower with two children: $3,187.

Social Security payout dates

Beneficiaries, people with disability, and survivors (from May 1997) will receive their benefits depending on their birth date:

The actual dates of payment for 2022 are;

SSI benefits are payable on the first of each month. Should the first fall on a weekend, then the new payment date is the last Friday of the prior month.

Bottom Line

This is the foundation of income on which employees start building a plan for their retirement. It also provides a safety net for families should the breadwinner die or become disabled.

Taxes are based on wages (paycheck) not income (broader as it includes wages plus other sources).