10 Things You Need To Know About
Social Security Benefits
by John M. Roberts
When most people think about Social Security benefits, what comes to mind is the elderly, the disabled, and retirement. Of course, they are right, but there is much more to Social Security and the benefits it pays.
Below is a list of facts that will help you understand why Social Security is important to you and your family:
- The Social Security program was signed into law by President Franklin D. Roosevelt in 1935 as a means to provide supplemental security income and survivors insurance. It is a social program that uses public funds to provide a source of income for individuals who are retired, sick, or mentally or disabled.
- Social Security provides income for children of retired workers and surviving children of deceased workers. In most cases, the children receive monthly benefits until the age of 18.
- The Social Security program is set up on the concept of pay as you go. This means that as you work, taxes are taken out of your income and put in a trust fund that will pay benefits to you and your family if they are needed in the future. In order to receive benefits, you must pay into the system. Today, over 55 million Americans pay Social Security taxes and approximately 1 in 4 households receive Social Security benefits in one form or another.
- In theory, benefits are paid in accordance with the amount of Social Security taxes an individual pays into the system. But in reality, this is not true in many cases due to the fact that there is a cut off amount that higher wage earners can receive in benefits while lower wage earners may be paid the same amount without paying as much into the Social Security trust fund.
- Both employees and employers pay into the Social Security fund. Employees pay 6.2 percent of their earnings up to whatever the cap is for that year and employers pay a matching amount which when added together equals 12.4 percent. Those who are self-employed pay the full 12.4 percent.
- Many wealthier Social Security recipients are required to pay income taxes on their benefit incomes. This additional revenue goes into the Social Security trust fund to help keep the Social Security program solvent.
- Medicare: In 1965, President Lyndon B. Johnson signed Medicare into law. Medicare provides basic medical care for the elderly and the disabled. It covers inpatient hospital care, outpatient diagnostic services, extended care, and certain in home services along with coverage for doctor’s fees.
- Medicaid: Title XIX of the Social Security Act, known as Medicaid, is a combined federal and state joint venture that was also signed into law in 1965. Medicaid pays for medical assistance for individuals and families with low income. Individual states, acting under federal rules and regulations, are empowered to administer its own guidelines for eligibility, payment rates, benefits packages, and handle the program administration.
- Your Social Security earnings record is very important to you and your family. As you work and pay Social Security taxes, it is imperative that you review your yearly earnings statement very carefully and on a regular basis and you should make sure that the correct data is recorded.
- By all accounts, Social Security is an investment that pays dividends when they are most needed. It should be treated as an important investment vehicle and it should not be viewed as a handout, because it isn't. Since it is a long term investment, you should pay strict attention to the amount you pay into Social Security and how much you can expect to get back. You should keep records of the amount of money you invest in it from the time you begin working and paying into the fund.