Age 65 has been the ideal retirement age in America for a long time, for more than 30 years. But life expectancy has increased by almost a decade. Living longer means you need more money to retire on. There’s a new approach to retirement designed to coincide with Social Security and qualified plan required minimum distributions at age 70
Social Security is a system of social insurance benefits available to all covered workers in the United States. Begun in 1937, the Social Security system covers a wide range of social programs. The term “Social Security,” as it is commonly used, refers to the benefits provided under one part of the system, known by its acronym, OASDI, or Old-Age, Survivors and Disability Insurance. OASDI benefits are funded primarily by payroll taxes paid by covered employees, employers, and self-employed individuals. Both the OASDI portion of the payroll tax, as well as that part of the tax that goes to finance hospital insurance, HI (Medicare), are provided for under the Federal Insurance Contributions Act, FICA.
To qualify for benefits, a worker must be either “fully” insured or “currently” insured. An insured status is acquired by earning “credits”, based on the wages or self-employment income earned during a year. In 2013, an individual must earn $1,160 in covered earnings to receive one credit and $4,640 to earn the maximum of four credits for the year. A worker generally becomes fully insured by earning 40 credits, typically by working 10 years in covered employment.1 To be considered currently insured, a worker must have at least six credits in the last 13 calendar quarters, ending with the quarter in which he or she became entitled to benefits. All benefits are available if a worker is fully insured. Some benefits are not available if the worker is only currently insured. Special requirements apply to disability benefits.
The Available Benefits
• Worker’s benefit: This is a monthly income for a retired or disabled worker.
• Spouse’s benefit: Refers to monthly income for the spouse or former spouse of a retired or disabled worker.
• Widow(er)’s benefit: Refers to monthly retirement income for the surviving spouse or former spouse of a deceased worker.
• Child’s benefit: A monthly income for the dependent child of a deceased, disabled, or retired worker. To qualify, a child must be under age 18, or 18 or 19 and a full-time elementary or high school student, or 18 or over and disabled before 22.
• Mother’s or father’s benefit: Monthly income paid to a surviving spouse who is caring for a worker’s dependent child who is under age 16 or disabled before age 22. If under age 62, the spouse of a retired worker receives the same benefit.
• Parent’s benefit: Monthly income paid to the surviving dependent parent or dependent parents of a deceased worker.
1 For those working less than 10 years, an alternative test to determine fully-insured status may apply