Retirement is inevitable. Yet, many of us don’t save up for the day, hence putting our family at a financial risk.
According to a retirement study conducted by Ramsey Solutions, over 40 percent of people don’t save for retirement. Additionally, approximately 48 percent of Americans have merely $10,000 in their savings.
At such a time, social security acts as a way to financially secure the future of you and your family.
What is social security?
According to the National Academy of Social Insurance, approximately 169 million Americans pay taxes for social security, out of which 61 million obtain monthly benefits as a result. In other words, every one in four households receives income via social security.
Therefore, social security is an integral source of economic security for a lot of Americans, whether it be disabled individuals, retirees, or families of disabled, retirees, and deceased workers.
Like many other insurance policies, social security is a pay-as-you-go policy whereby the active workforce of today has to pay social security taxes. The money is then pooled and given back to those beneficiaries who need the money.
When the need arises, one can apply to receive social security benefits. There are times when such applications are denied based on eligibility. If you are sure that you qualify for it, you can then proceed by filing a social security appeal for further probing in your case.
How does social security financially secure your family?
Here is how social security help in financing securing your family.
1. It provides disability and life protection
Apart from being an excellent retirement plan, social security benefits also come into effect when a given worker passes away or becomes disabled. In fact, one-fifth of the beneficiaries of the insurance, as of June 2019, were the families of the deceased.
While some might think that the risk of death or disability is not much for an average healthy person, statistics prove otherwise. According to the CDC, every year, 900,000 people die a premature death owing to various ailments.
Additionally, adults belonging to the age bracket of 45-64 are much likely to report the onset of disabilities than others.
With such stats, making sure that your family is taken care of should always be a priority for people. While one should hope for the best, it is equally important to prepare for the worst – which is what social security offers.
2. It is a progressive benefit
As per the Bureau of Labor Statistics, the cost of living in the US had increased by 3 percent between 2015 and 2018. Also, according to Statista, average consumer spending is also on the rise.
In other words, the value of money is decreasing. While you might be able to be financially secure from a given amount today, the same amount cannot guarantee that your finances will be met years from now.
The good thing about social security is that it is a progressive benefit. In other words, its value increases as per the rise in the cost of living. The benefits keep up with rising inflation.
Moreover, the benefits represent a decreasing proportion as the earning level increases. For starters, for a low earning employee, the benefits might be 45 percent of his wage, while for a high earning employee, the benefits would constitute 1/4th of his earning.
3. It supports children
Social security benefits aren’t just realized by the elderly or the working population. Instead, it helps the young dependents of the family as well. In 2018, an estimate of 6 million minors was part of the families whose income was derived from social security.
As shown in the chart below, the program has also helped in lifting over 1.4 million children out of poverty.
4. It provides relief to the elderly
As mentioned in the start, many Americans either don’t save up for retirement or have a hand-to-mouth earning that restricts their ability to save.
Regardless, as per the insights driven from the Population Survey of 2018, in the absence of social security, at least 4 in 10 elderly Americans would have received income below the poverty line.
Therefore, social security helps the elderly in the family from going broke, thus ensuring a secure future for them.
How do you qualify for social security?
To obtain the retirement benefits, you must have working experience of at least ten years. You are assigned credits on the taxes you pay. For instance, in 2020, every $1,410 in earning is given a credit of one. And you need 40 such credits to claim your retirement benefits.
Your spouse can also receive social security benefits upon your retirement. This holds even if they have not been part of the workforce. But, they have to be at least 62 years old. The payment given to your partners will not affect your payment.
Also, people who have children who are still minor but they themselves have reached the age of retirement can have their kids receive the monthly payments as well. Here, the amount will be up to half the amount of the parent.
In case of premature death of the working individual, the family of the deceased can receive survivor benefits if the deceased had earned at least six credits before their death.
For the disabled benefits, one must qualify under the strict definition of the term as used by SSA. The disability must last at least a year for you to be eligible for the program. And you must be part of the workforce before the disability began.
Also, enough credits must be earned. Forty credits are required if you are 62 and a minimum of 6 for those under the age of 24.
Social security benefits can help families against both the known and the unknown. Whether it be the crippling cost of living after retirement, losing the breadwinner of the family, or experiencing disability, social security helps against it all.
Know what requirements you have to meet and how you have to apply for receiving benefits. Make sure you are ready for the rainy days.