Have you ever wondered where the Social Security program initially came from and how it works? In this article, we're presenting some informative Social Security facts that can help you get a better understanding of these important benefits.
The first social security check
The name Ida May Fuller may not ring a bell, but you may be interested in knowing that on January 31, 1940, Miss Fuller was the very first American to receive a monthly Social Security benefit check. Claims were grouped in batches of 1,000 and a Certification List for each batch was sent to Treasury. Since Miss Fuller's claim was first on the list, it was the first Social Security check issued -- check number 00-000-001 in the amount of $22.54.1
How it works
The Social Security program is based on contributions that American workers pay into the system. For example, while you're employed, you pay into Social Security by way of Federal Insurance Contributions Act (FICA) taxes that are withheld from most paychecks. When it's your turn to retire, you'll receive those benefits in the form of income. Just how much you'll receive depends on how many credits you have accumulated based on your earnings and your age when you apply for benefits. In 2016, you'll receive one credit for every $1,260 you earn, up to a limit of four credits per year.2 Any accumulated credits will remain on your record even if you stop working. No one needs more than 40 credits to receive a Social Security benefit.3
Income for retirement
For many Americans, Social Security provides a base of income protection in retirement. In fact, Social Security replaces nearly 40 percent of an average wage earner's income after retiring.4 But at what age should you apply for your benefits? Should you begin taking your Social Security benefits as soon as you are eligible, or should you wait until you reach your full retirement age?
The question of when to start taking social security benefits is a significant decision. It involves several factors that are based largely on your health, how long you plan on working, as well as your total assets. Signing up before you reach full retirement age will allow you to receive your benefits as early as age 62, however, to get the full payout you are entitled to you'll need to wait to claim your benefits at your full retirement age. For many baby boomers, that magic number is age 66, and age 67 for people who were born in 1960 or later.5 Once you have reached retirement age, your monthly payments will increase by eight percent for each year that you delay your filing until reaching age 70.
If you die before you retire
According to the Social Security Administration (SSA), the number of credits needed for survivor benefits to be paid to your loved ones depends on your age when you die. The younger you are, the fewer credits you must have for family members to receive survivor benefits. However, benefits can be paid to your children and your spouse who is caring for the children even if you don't have the required number of credits. They may be entitled to benefits if you have credit for one and one-half years of work (6 credits) in the three years just before your death. No one needs more than 40 credits (10 years of work) to be eligible for any Social Security benefit.6 For more details on survivor benefits, visit the SSA's website.
At Protective Life, we understand what Social Security can mean to you and your family's financial future, and the importance of knowing when to apply for your benefits. If you'd like to read additional information on understanding Social Security and retirement planning, visit the Protective Learning Center.