Social security almost feels like a myth sometimes to people who aren’t retired. However, it’s very real and, for many seniors and retirees, very important. Social security is a federally run program known more prosaically as the Old-Age, Survivors, and Disability Insurance (OASDI) program. It was signed into law in 1935 by President Franklin D. Roosevelt, who realized that the only way for a society to deal with grave economic problems like the Great Depression, which was in full swing at the time, is to fund a robust social safety net.
There have been many changes, additions, and tinkering with the law since its inception but it has retained broad political consensus. Most people agree that once senior citizens reach a certain age, they should be able to retire and live comfortably; most people agree that folks who have disabilities or debilitating life circumstances should be able to supplement their income or household with social welfare.
However, despite its ubiquity, many people are confused and misinformed about certain aspects of Social Security
Here are the 3 most common questions that confuse people:
Is every American citizen automatically entitled to Social Security?
The answer: no, which strikes some as surprising. Social Security is not actually an entitlement program, which means to qualify for it you have to earn 40 lifetime work credits (this isn’t as hard as it may sound).
However, there are other ways to qualify. If you are disabled or the spouse of a worker who earned Social Security, you can qualify for benefits.
People are also frequently surprised to learn that while the federal government runs the Social Security Administration, there are privately owned entities that can help with services like replacing a lost social security card or changing a name on an existing card. One private social security office Phoenix residents prefer allows them to avoid the long lines often seen in the local federal agency offices.
Are Social Security benefits taxed?
The answer: it depends on several factors, including your other income sources. If your only source of income is Social Security benefits, your money will most likely not be taxed. On other hand, if you are retiring with 401(k) distributions, a pension, dividends, capital gains or most any other income totaling over $25,000 ($32,000 for couples), you can expect about half of your Social Security to be taxed. If your income total is over $34,000 ($44,000 for couples), about 85 percent of your Social Security will be taxed.
How much do you pay in & how much do you get?
As of the year 2020, worker wages are taxed 6.2% for Social Security purposes. That extends up to $137,700 for high-income workers. That 6.2% is matched by an additional employer-paid 6.2% (self-employed workers pay 12.4%).
There is a complex formula for determining how much Social Security you get. It factors in the income from your 35 highest-earning years.