Does Everyone Get Social Security?

Social Security is a retirement benefit offered by the federal government. It provides a basic level of income for you when you reach age 62. You may delay this payment until later, but the basic premise is the same: you contribute money to the Social Security system and you receive an income in return. Because of this, not everyone qualifies for Social Security.

Qualifications

You must have 10 years of work to qualify for Social Security benefits if you were born in 1929 or later. This translates into 40 credits, according to the Social Security Administration (SSA). If you do not earn enough credits, your credits will remain on account, but you won't earn any benefits. Instead, you may return to work to earn the credits you need to claim retirement benefits.

Significance

The Social Security retirement system is a government owned and operated system that collects money from workers and pays benefits at a later date. If you don't contribute to the system, you don't get any money from it.

Benefit

The more you earn during your lifetime, the more you receive from Social Security. This is because you pay more in Social Security taxes if you earn more. Even if you're self-employed, you pay self-employment tax which is credited toward your Social Security payment. You receive a statement from Social Security each year about three months before your birthday. This details how much you're earned in Social Security benefits and how much you'll be paid according to when you retire.

Disadvantage

Social Security payments are not paid when you don't pay into the system. You may work your entire life and pay in very little if your income comes primarily from dividend payments from a corporation or if you're living on an inheritance. Even if you're paying into the system, there is no guarantee that you'll receive a significant income from the system. Additionally, Social Security benefits are only collected on income up to $106,000. Beyond this income, no further taxes are collected. Consequently, no future benefit payments are made based on income earned above this amount. The only exception is for self-employed businesspeople. Taxes are collected on all their income.

References

• "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
• SSA: Retirement Benefits
• SSA: Update 2011
• SSA: Estimate Your Retirement Benefits