17 Surprising Facts About Social Security

17 Surprising Facts About Social Security
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Millions of Americans currently receive Social Security benefits, and millions more are counting on it to help fund their retirement. While much has been written about when to collect benefits, how to maximize benefits and whether to work while receiving benefits, the topic is still something of a mystery to many people.

Here are 17 facts about Social Security that you may not know.

1. More than 1 in 6 Americans receive Social Security benefits.

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Around 63 million people received Social Security payments in 2018. That means more than 1 in 6 U.S. residents were beneficiaries of the program. Among those age 65 and older, nearly 90 percent receive Social Security benefits.

2. Social Security is really two insurance programs.

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Social Security provides monthly benefits designed to replace, in part, the loss of income due to retirement, disability or death. We may talk about Social Security like it’s one program, but the payroll taxes American workers pay to finance it are deposited into two separate trust funds: one, the Federal Old-Age and Survivors Trust Fund, pays retirement and survivors benefits, and the other, the Federal Disability Insurance Trust Fund, pays disability benefits. Together, these programs are referred to as Social Security.

The Social Security Administration also oversees another program called Supplemental Security Income, or SSI, which is paid to low-income households. While SSI is administered by the SSA, it’s not a Social Security program in that general tax fund dollars pay for benefits rather than money from Social Security taxes or the trust funds.

3. You’re not intended to live solely on Social Security.

Social Security payment
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Lots of people try to live off Social Security benefits alone. More than 20 percent of senior couples and nearly 45 percent of retired singles rely on Social Security for 90 percent or more of their income.

However, the government never intended people to do that. Instead, Social Security is meant to supplement a pension and personal savings, and your benefits will only replace about 40 percent of average earnings.

4. Spouses can get benefits even if they didn’t work.

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In order to receive Social Security benefits, you have to pay into the system, but there is an exception to that rule. If your husband or wife is eligible for benefits, you can receive spousal benefits in retirement even if you’ve never personally worked and paid Social Security taxes.

5. You don’t get two benefits when a spouse dies.

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Because Social Security provides survivor benefits, some retirees think they will get double benefits when their spouse dies. They assume they will receive both their personal Social Security benefits as well as the survivor benefits. Sorry, it doesn’t work like that. The government uses a formula that will essentially give you the greater of either your benefit amount or your spouse’s.

6. Kids and parents can receive benefits, too.

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It’s not just spouses who can receive benefits off a person’s Social Security record. If a worker who is a parent dies, retires or becomes disabled, unmarried children can receive benefits: those younger than age 18; those 18 to 19 years old and in high school full-time; and certain older disabled children. The goal is to provide the necessities of life and help make it possible for those children to complete high school.

Meanwhile, seniors age 62 or older who can show that a child of theirs was providing at least one-half of their financial support may be able to receive parent’s benefits should that worker die.

7. Your ex-spouse may be entitled to some of your Social Security benefits.

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Surprise! You may have put your ex out of your life, but you still might end up supporting him or her in retirement.

OK, it’s not really as bad as it sounds. If you were married for at least 10 years and your ex-spouse hasn’t remarried, he or she is eligible for spousal benefits off your work record. But that in no way affects the amount of your benefits or the amount your current spouse can receive if you’ve remarried.

Social Security expert Russell Settle discusses the details of claiming Social Security benefits after remarriage, in this Social Security Q&A.

8. Widows and widowers can get remarried and still collect survivor benefits.

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Ex-spouses can only receive spousal benefits so long as they remain unmarried. Once they tie the knot with someone new, their claim on your benefits ends. However, it’s different for widows and widowers. They can get remarried after age 60 and still claim survivor benefits from their first husband or wife’s record so long as that marriage lasted at least 10 years.

This Social Security Q&A by Social Security expert Jeff Miller delves deeper into the rules and calculations for collecting survivors benefits.

9. Some people can get retirement benefits before age 62.

Woman with widow's veil talking to lawyer
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All workers are eligible to claim early retirement benefits at age 62, but there is a segment of the population that gets access to Social Security benefits at an even younger age. Widows and widowers can begin claiming benefits at age 60. If they are disabled, they can start their payments as young as age 50.

10. Taking early benefits can permanently reduce your and your spouse’s benefit payments.

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If you do decide to claim retirement benefits at age 62, you’ll forfeit close to 30 percent of your full monthly retirement benefit amount. That’s a permanent reduction. The benefit won’t bump up once you hit full retirement age. Plus, the spousal benefits a husband or wife receives will be permanently reduced.

11. Some government pensions can wipe out Social Security benefits.

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Thanks to Social Security’s Windfall Elimination Provision, some government workers aren’t able to claim Social Security benefits at all. Some jobs — teachers in certain states, for one example — that don’t pay into the Social Security system. That means these workers won’t get any Social Security benefits from work in that position. Sounds fair enough, right? You don’t pay in; you don’t get benefits out.

But let’s say that teacher worked a second job in the summer or started a career after teaching in which they did pay Social Security taxes. They may not be able to claim Social Security benefits from that job, either. That’s because the Windfall Elimination Provision can reduce benefits if the worker receives pension income from a job that’s not covered by Social Security. A big enough pension could wipe out the worker’s Social Security benefits entirely.

12. Your benefits are safe from private creditors …

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If you’ve over-extended yourself on credit cards or have medical debt, you don’t have to worry about your retirement benefits being garnished. Social Security is protected from private creditors.

13. … But Uncle Sam can garnish money from your Social Security check.

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However, the protection against garnishment doesn’t extend to debts owed to or overseen by the government. If you’re behind on federal taxes, federal student loans, child support or alimony, the government can and will garnish your Social Security benefits to pay off your obligations.

14. Social Security benefits can be taxed.

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Since you have to pay taxes to receive Social Security retirement and disability benefits, you might assume the money you get from the programs comes tax-free. Well, for some lower income households, that may be correct. For others, at least a portion of Social Security benefits is taxable.

The government is a fan of making things complex, and the formula for determining whether your Social Security is taxable is no exception.

First, calculate your combined income — that would be your adjusted gross income plus any nontaxable interest you receive plus half your Social Security benefits. Now, see where you stand:

  • Individuals with a combined income between $25,000 to $34,000 could pay taxes on up to 50 percent of benefits.
  • If you earn over $34,000, you could owe federal income tax on up to 85 percent of your Social Security income.
  • For married couples, half of benefits are taxable when their combined benefit is $32,000 to $44,000; if their combined income exceeds $44,000, then 85 percent of Social Security benefits could be taxed.

You may be able to reduce the tax you owe, however, as we explain in “5 Ways to Avoid Paying Taxes on Your Social Security Benefits.”

15. Self-employed? You’ll pay more Social Security tax.

Senior freelance
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While almost all workers pay Social Security taxes, those who are self-employed get hit with a percentage that’s double the amount paid by wage and salaried employees.

In 2018, the federal government charged a 12.4 percent Social Security tax on earnings of up to $128,400. Those who work for someone else split the cost with their employer, so workers only end up paying 6.2 percent. However, self-employed workers have to cover the entire 12.4 percent tax themselves. They do get a deduction on their income taxes for half that amount though.

If you need help figuring out your Social Security situation, consult an expert. We can show you how in our Solutions Center.

16. The Social Security trust funds will soon run out of cash.

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It might not be a surprise to hear that Social Security is running out of money. After all, people have been sounding that alarm for years. But you may not realize how quickly the trust funds could be depleted. In 2034 — just 15 years from now — the retirement trust fund is expected to be depleted, according to a 2018 report from the fund’s board of trustees. The disability trust fund is expected to run out of cash in 2032.

17. Benefits will still be paid when the trust funds are depleted.

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Ideally, Congress will act before the Social Security trust funds run out of money. But even if they don’t, you’ll still continue to receive benefits. They might just be reduced. Using expected tax income, Social Security will be able to pay 96 percent of disability benefits after that trust fund runs dry in 2032. After the retirement trust fund is depleted in 2034, the government should be able to continue paying out 77 percent of scheduled benefits.

If you need help figuring out your Social Security situation, consult an expert. We can show you how in our Solutions Center.

Share your thoughts and experiences on Social Security planning at our Facebook page.

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