Social Security FAQs
» by Shari Hooper, CSA®, Senior Wealth Advisor
Almost all U.S. workers must contribute a portion of their paychecks to Social Security. Established during the Great Depression, it was created as a safety net designed to reduce poverty and provide care for the elderly. Navigating its ins and outs is challenging, and many senior citizens don’t know where to look for information. To help, we’ve put together this FAQ guide.
How Does Social Security Work?
Every business institutes a payroll tax created by the Federal Insurance Contributions Act of 1935 (FICA). The employee and employer pay this tax, and the current rate is 6.2%. This program operates on a pay-as-you-go basis, meaning you put money into it for as long as you’re working. The Social Security Administration (SSA) uses your 35 highest-earning years to generate your monthly benefits once you reach full retirement age.
Can You Opt Out of Social Security?
Yes, but the opt-out rules are strict. The following guidelines need to be met to be exempt from FICA:
Qualified Religion Groups
Members of qualified religious groups can claim a religious exemption. However, the group’s founding needs to be before 1950, and the religious organization needs to prove that it can provide its members with a satisfactory standard of living. Only groups that meet these qualifiers are eligible to apply for an exemption.
Nonresident aliens, though not considered U.S. citizens, are required to pay Social Security taxes. However, some are eligible for exemption. Temporary international students, professors, teachers, or other education workers can apply for FICA exempt status. Along with a temporary status with an academic institution, certain visa statuses make you eligible to apply.
Foreign Government Employees
Foreign government employees working in the United States normally are exempt from paying Social Security. To be eligible, they must be working in an official capacity and have official business related to their employer.
Temporary Student Exemption
U.S. students are eligible for an exemption if they work for the same school they attend. Students can only apply if their employment relies on them remaining a student and they can’t work at the school before enrolling.
Can You Receive Social Security Disability and Retirement?
The SSA created Social Security Disability Insurance (SSDI) in 1956. This allows people who can’t work to receive benefits even if they’re not old enough to file. SSDI enables you to withdraw your full retirement benefits until you qualify but ceases once you file for Social Security. You can’t receive money from both programs at the same time.
What Are the Social Security Changes for 2022?
Every year, the SSA provides updates on changes to the Social Security program. It’s important to stay up to date on these changes because it affects everyone. The biggest change in 2022 is that the SSA is altering how they distribute statements. Since 1999, these statements have been mailed out to individuals in documents ranging from two to six pages and have given estimates on the amount you would receive at retirement. However, the SSA is ceasing the mailed statements and is now switching to an online model. People interested in tracking their benefits have to create an account at ssa.gov. The registration process takes 10 minutes and allows you to see your full earnings report. Other changes for Social Security in 2022 include:
- The maximum taxable wage base is $147,000.
- The full retirement age is now 67 for people turning 62 in 2022.
- If you turn 62 in 2022 and claim Social Security, your monthly amount is reduced by 30% of your full retirement age benefit.
What Are the Future Social Security Projections?
Under the current structure, Social Security will exhaust its funds by 2034. A 2021 study by the SSA estimates that current tax income will sufficiently pay for 78% of scheduled benefits. That means that adjustments are necessary to maintain the program’s effectiveness. One of those adjustments could be raising the retirement age, last done in 1983 when Congress passed legislation to increase the full retirement age from 65 to 67.
Worried About Your Social Security Benefits? Contact Summit Wealth Partners
The advisors at Summit understand that many investors consider their future Social Security benefits a major part of their long-term financial planning strategy. That’s why we stay up to date on the latest Social Security trends and how they affect your retirement income. Our experience and comprehensive wealth management services allow us to develop a personalized strategy that allows you to focus on what really matters. Contact Summit Wealth Partners today to learn more about Social Security.
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