If you are over 62 years of age and are unable to work, money is likely your primary concern. In the period prior to 1935, seniors suffered due to their dependence on their families and the state for financial support, especially when they had medical emergencies.
To ease this suffering, the federal government put into place the Social Security Act. This Act offers Americans who are 62 years or older a financial safety net in the form of Social Security. Under this system, you contribute to Social Security in the form of Federal Insurance Contributions Act (FICA) taxes while you are working and earning. When you retire and are unable to earn a living, you become eligible for the benefits under this Act.
While Social Security does not pay out enough to end all financial worries, it provides a supplement designed to ease the severe burden that seniors experienced before 1935.
Social Security – Forms of Benefits
Does this mean that you receive your Social Security benefits in the form of cash and you will again have to struggle with budgets for medical and daily expenses? No, Social Security makes things a bit easier for you, as your benefits include Medicare to help with medical expenses. Although Medicare is a separate program, you are eligible for it under Social Security because your FICA taxes contribute towards this program as well.
Social Security – How are Benefits Calculated?
Not everyone who is covered under Social Security gets the same amount of benefits. In fact, benefits are based on the amount of credits you earn over the period you were working. These credits are based on the amount you earned annually and are raised every year. In 2010, for every $1,120 earned by you, you will receive 1 credit. However, you cannot earn more than 4 credits in a year.
Since credits are based on your earnings, does this mean that you lose your credits when you take a break from a job? On the contrary, the credits you have earned will remain with you. However, these credits will not accrue further till you start working again. A change in your job has no impact on your credits.
Most people who were born before 1929 should have started receiving their Social Security benefits. However, those born after 1929 need 40 credits to be eligible for receiving Social Security retirement benefits.