What you need to know about Social Security benefits: CHECK the fact sheet

In recent months, many VERIFY readers have reached out with questions about Social Security benefits that provide people with income when they retire or are unable to work due to a disability.

We answer some of the most common Social Security questions, including how benefits are calculated, whether they are taxed, and whether people can receive them based on a family member’s earnings.

How are Social Security retirement and disability benefits calculated?

Your Social Security retirement benefit depends on how much you have earned throughout your career.

“Higher lifetime earnings lead to greater benefits,” says the Social Security Administration (SSA). “If you have been unemployed for several years or have had low earnings, your benefit may be lower than if you were working steadily.”

SSA uses a three-step process to calculate your benefits, AARP explains.

First, the agency adjusts your earnings for historical changes in U.S. wages and uses your 35 highest paying years of service to come up with what SSA calls your average indexed monthly earnings.

Second, SSA applies a formula to this monthly average to determine your basic insurance amount (PMI), or the amount you will receive each month if you claim benefits at full retirement age (more on this later).

Third, SSA takes into account the age at which you receive benefits. If you claim them before you reach full retirement age, your benefit will be less.

Social Security Disability Insurance (SSDI) benefits, which provide income for people who can no longer work due to disability, are usually calculated in the same way as retirement benefits with one key difference: how many years of income are used to determine benefits. quantity.

Basically, SSA will determine your benefit amount based on your average earnings in the years before you became disabled.

Under the SSA, disability benefits are the same as full unreduced retirement benefits. If you have Social Security Disability Benefits when you reach full retirement age, they will be converted to retirement benefits.

The SSA website has benefit calculators to help you determine specific amounts.

When can you get Social Security retirement benefits?

When you reach full retirement age, you are eligible to receive 100% of your monthly benefit amount.

Anyone born in 1960 or later can start receiving full retirement benefits at age 67. The full retirement age is gradually lowered for people born before 1960.

The SSA table below lists a person’s full retirement age based on their year of birth. SSA also has a retirement age calculator available on its website.

You can start receiving Social Security retirement benefits as early as age 62. But your benefits will be reduced if you start receiving benefits before you reach full retirement age.

If you wait until age 70 to apply for benefits, your payment will increase even more because you will receive deferred retirement benefits, the AARP explains.

Does Social Security change the benefit amount each year?

SSA adjusts benefits annually for inflation through the Cost of Living Adjustment (COLA).

COLA is calculated from the percentage increase in the Consumer Price Index for Urban Wage and Office Workers (CPI-W), a measure of inflation measured by the US Bureau of Labor Statistics (BLS). It measures the average change over time in the prices that workers pay for a “basket of consumer goods and services”.

SSA explains on its website that COLA equals the percentage increase in CPI-W from the previous year’s third quarter average to the same current year average. If there is an increase, it is rounded up to the nearest tenth of a percent. The same increase applies to monthly Social Security payments.

Social Security payments increased by 8.7%, or about $140 per month for the average recipient, in 2023 due to COLA. This is the highest COLA since 1981, when it was 11.2%.

Do Social Security recipients get an extra $200 on their checks?

Several VERIFY readers asked if they would see an extra $200 a month in their Social Security checks in addition to the COLA increase. The answer is no.

The proposed bill, called the Social Security Extension Act, did include a $200 monthly increase in Social Security benefits for new and existing recipients, separate from COLA. This means that people would receive, on average, an additional $2,400 per year.

The Social Security Extension Act was introduced in the House and Senate in June 2022. But the law didn’t pass.

This means it needs to be re-introduced in 2023.

Senator Bernie Sanders (D-Mass.) announced in a Feb. 13 press release that he and Sen. Elizabeth Warren (D-Mass.) are re-introducing the Social Security Extension Act to the Senate.

Representatives Jan Szakowski (D-Illinois) and Val Hoyle (D-Oregon) are re-introducing the bill to the House of Representatives, Sanders said.

Congress will still have to pass legislation before President Biden can sign it.

Are Social Security benefits taxable?

You will have to pay federal taxes on a portion of your Social Security benefits if your income is within a certain level. These benefits include a monthly pension, survivor benefits and disability benefits. According to the IRS, supplemental insurance income (SSI) payments are never taxed.

For complete information on how much of your Social Security benefits will be subject to federal taxation based on your income, click here.

Twelve states also tax some or all of residents’ Social Security benefits, according to the AARP. You can find more information about individual states here.

Can family members receive Social Security benefits after a person dies?

The widow or widower of a deceased person who received Social Security benefits may receive monthly checks after the person’s death. They are called survivor benefits.

Surviving spouses are eligible for monthly benefits if they are 60 or older, or 50 or older if the survivor has a disability. They will receive between 71.5% and 100% of their late spouse’s Social Security benefits, depending on their age, according to the AARP.

In addition, a widow or widower of any age may receive survivors’ benefit if they are caring for a child of the deceased who is under 16 and/or has a disability.

There are other factors that can affect payments to a surviving spouse, such as whether they are already receiving Social Security benefits.

Divorced surviving spouses can also receive the same benefits as widows or widowers if the marriage has lasted 10 years or more. According to the AARP, the eligibility rules are basically the same.

Other family members may also receive Survivor’s Benefit.

• An unmarried child of the deceased under the age of 18 (or under 19 if he is a full-time elementary or high school student); or 18 years of age or older with a disability that began before age 22.
• Dependent parent(s) of the deceased aged 62 or older.

For complete information on survivor benefits payments for your situation and how to apply, click here.

Can people receive Social Security benefits based on their ex-spouse’s earnings?

If you’re divorced from someone who qualifies for Social Security benefits, you may be eligible for a percentage of benefits based on your ex-spouse’s income history, SSA says. But you must meet certain requirements.

You must be at least 62 years old and unmarried, and your marriage to your former spouse must have lasted at least 10 years. If you have since remarried, you cannot receive Social Security benefits based on your former spouse’s income history, unless your last marriage was annulled by annulment, divorce, or death.

Also, if you are eligible for benefits based on your own earnings history, the amount of that benefit must be less than what you would have received based on your ex-spouse’s work. Social Security will pay the larger of the two benefits, but not both.

The AARP explains that you can get up to 50% of your ex-spouse’s benefit amount.

Former spouses can receive the maximum benefit amount if they apply after reaching full retirement age, AARP says. If you claim benefits early, the amount will be reduced.

If your ex-spouse is eligible for retirement benefits but is not yet receiving it, you can still claim his benefits. But the divorce had to take place at least two years before.

For more information about benefits for divorced spouses, click here.