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U.S. Department ofHealth and Human Services
Social Security Administration
SSA Publication No. 05-10024 January 1995

Why We Hope You Will Read This Document

Whether you're young or old, male or female, single or with a family this document is for you and about you. That's because Social Security has programs that affect everybody. Chances are you're either paying Social Security taxes or getting Social Security benefits or you're related to somebody who is. Whatever your situation, this booklet has information you will find helpful and useful.

It was prepared by the Social Security Administration and tells you what you need to know about Social Security while you're still working and what you need to know when it's your turn to collect benefits. It also provides an overview of Medicare and Supplemental Security Income (SSI) benefits.

The information in this booklet is not intended to cover all provisions of the law. For specific information about your case, contact a Social Security office. Other booklets are available that explain all of the Social Security programs in more detail. And we have prepared a series of leaflets and factsheets that provide information about some of the finer points of Social Security.

What's Inside

Part 1 Social Security's Future And Yours!
Is Social Security In Your Future?
When Will You Need Social Security?
How To Reach Us When You Need Us
Your Future ... And This Booklet

Part 2 What You Need To Know About Social Security While You're Still Working
How Social Security Works The General Idea
Your Social Security Number
The Taxes You Pay
You Become Eligible For Social Security By Earning Credits
How Much Will You Get From Social Security?
How Your Benefit Is Figured
If You Haven't Earned Enough Credits To Get Social Security

Part 3 What You Need To Know When You Become Eligible For Social Security
How And When To Sign Up For Social Security
What Records Will You Need?
Direct Deposit
Retirement Benefits
Disability Benefits
Benefits For Your Family
Survivors Benefits
Supplemental Security Income

Part 4 What You Need To Know After You Sign Up For Social Security
What You Need To Report To Us
If You Disagree With A Decision We Make
How Your Earnings Affect Your Benefits
Your Benefits May Be Taxable
When Somebody Needs Help Managing Benefits

Other Booklets Available

Examples of Benefits

Fingertip Facts

Part 1 Social Security's Future ...And Yours!

Is Social Security In Your Future?

Many people wonder where their Social Security tax dollars go.

Generally, out of every dollar you pay in Social Security taxes: 69 cents goes to a trust fund that pays monthly benefits to retirees and their families and to about 8 million widows, widowers, and children of workers who have died; 19 cents goes to a trust fund that pays for the health care of all Medicare beneficiaries; and 12 cents goes to a trust fund that pays benefits to people with disabilities and their families. Your Social Security taxes also pay for administering Social Security. The administrative costs are paid from the trust funds described above and are only about one cent of every Social Security tax dollar collected.

Money not used to pay benefits and administrative expenses is invested in U.S. government bonds, generally considered the safest of all investments. The government uses the money it has borrowed from Social Security just as it uses money you may have invested in savings bonds to pay for all the services and projects it provides for our citizens. And just as the government pays you back with interest when you redeem your bonds, so will it make good on its obligations to Social Security.

You also need to know about Social Security's financial stability. Each year, Social Security's Board of Trustees reports on the financial status of the Social Security program. These reports serve as valuable tools for evaluating and ensuring the economic health of the Social Security system. The latest report indicates that the Social Security system, as currently structured, will be able to pay benefits for about 30 more years. This means Congress has the time it needs to make changes to safeguard the program's financial future.

You can count on Social Security being there when you need it.

When Will You Need Social Security?

Now you may be asking yourself: When will I need Social Security? If you're like most people, you tend to think of Social Security as a retirement program. Although it's true that most of our beneficiaries (about 60 percent) receive retirement benefits, many others get Social Security because: they are disabled; they are a dependent of someone who gets Social Security; or they are a widow, widower, or child of someone who has died.

So, depending on your circumstances, you may be eligible for Social Security at any age. In fact, Social Security pays more benefits to children than any other government program.

Today, 44 million people, about one out of every six Americans, collect some kind ofSocial Security benefit.

How To Reach Us When You Need Us

The Social Security Administration has about 1,300 offices in cities and towns across America. Of course, you're always welcome to visit the office nearest you. The easiest way to reach us is to call our toll-free number:1-800-772-1213. You can get information 24 hours a day. You can speak to a service representative between 7 a.m. and 7 p.m. on business days. Our lines are busiest early in the week and early in the month, so if your business can wait, it's best to call at other times.

When you call have your Social Security number handy. If you have a touch-tone phone, recorded information and services are available after 7 p.m. weekdays and all day on weekends and holidays. People who are deaf or hard of hearing may call our toll-free TTY number, 1-800-325-0778, between 7 a.m. and 7 p.m. on business days.

The Social Security Administration treats all calls confidentially whether they're made to our toll-free numbers or to one of our local offices. We also want to ensure that you receive accurate and courteous service. That's why we have a second Social Security representative monitor some incoming and outgoing telephone calls.

Your Future ... And This Booklet

A final message about Social Security's future, your future, and this booklet: Social Security will be there whenever you may need it. Even though Social Security will be ready for you, will you be ready for Social Security?

This booklet will help you w ith the kinds of plans and decisions you need to make now in order to ensure a brighter and more secure financial future for you and your family.

Part 2 What You Need To Know About Social Security While You 're Still Working

How Social Security Works, The General Idea

The basic idea behind Social Security is a simple one. You pay taxes into the system during your working years, and you and members of your family receive monthly benefits when you retire orbecome disabled. Or, your survivors collect benefits when you die.

Here's An Important Point: Social Security is not intended to be your only source of income. Instead, it is meant to supplement the pensions, insurance, savings, and other investments you will accumulate during your working years.

Your Social Security Number

What's your Social Security number? You probably know it as well as you know your own phone number. We use your Social Security number to track your earnings while you're working and to track your benefits once you're getting Social Security.

Almost everybody reading this booklet already has a Social Security number. Today, even most young children have a number because the Internal Revenue Service requires that a Social Security number beshown on tax returns for all dependents age one and older. In fact, most parents apply for a Social Security number for their newborn child when they provide information for the child's birth certificate. That's because most states make applying for a Social Security number part of the birth registration process. This is taken care of before the mother and child leave the hospital.

In addition to its official uses, banks, insurance companies, and many other businesses and government agencies use the Social Security number for recordkeeping purposes. Although we can't prevent others from asking for your number, you should know that if you give it to them they can not use it to get your Social Security records. We will not give out your records, without your written consent, unless the law requires or permits it.

The Social Security Administration is aware of concerns about the increasing uses of the Social Security number for identification and recordkeeping purposes. That concern centers on the issue of your right to privacy and the increasing possibility that it could be invaded if all your records are kept under one number.

If a business or other enterprise asks for your Social Security number,you can refuse to give it to them. However, that may mean doing without the purchase or service for which your number was requested. Our primary message is this: be careful with your Social Security number and protect its privacy whenever possible.

If you need a Social Security number, if you lost your card and need another one, or if you need to change your name on your current card, just call or visit a Social Security office. We'll ask you to fill out a simple one-page application form. And we'll ask to see certain documents depending on your situation. (We need to see originals or certified copies.)

Some typical examples are:

The Taxes You Pay

Social Security taxes are used to pay for all Social Security benefits. In addition, a portion of your taxes is used to pay for part of your Medicare coverage. General tax revenues, not Social Security taxes, are used to finance the Supplemental Security Income (SSI) program.

If You Work For Someone Else

You and your employer pay taxes for Social Security and Medicare.In 1995, you and your employer each pay 7.65 percent of your gross salary, up to $61,200. The deduction might be labelled FICA on your pay slip. That stands for Federal Insurance Contributions Act,the law that authorized Social Security's payroll tax.

If You Work For Yourself

If you're self-employed, you pay 15.3 percent of your taxable income into Social Security, up to $61,200. However, there are special deductions you can take when you file your tax return that are intended to offset your tax rate.

For More Information:

If you would like to learn more aboutself-employment tax rates, call or visit Social Security to ask for a free copy of the factsheet If You're Self-Employed (PublicationNo. 05-10022).Extra

Taxes For Medicare

If you earn more than $61,200 in 1995, you continue to pay the Medicare portion of the Social Security tax on the rest of your earnings. The Medicare portion of the tax is 1.45 percent for employers and employees each, and 2.9 percent for self-employed people.

You Become Eligible For Social Security By Earning Credits

You must work and pay taxes into Social Security in order to get something out of it. (Of course, some people get benefits as a dependent or survivor on another person's Social Security record.)As you work and pay taxes, you earn Social Security credits. In1995 you earn one credit for each $630 in earnings you have up to a maximum of four credits per year. (The amount of money needed to earn one credit goes up every year.)

Most people need 40 credits (10 years of work) to qualify for benefits. Younger people need fewer credits to be eligible for disability benefits or for their family members to be eligible for survivors benefits if they should die.

During your working lifetime, you probably will earn many more credits than you need to be eligible for Social Security. The fact that you earn these extra credits does not increase your eventual Social Security benefit. However, the income you earn while workingwill increase your benefit, as you will learn in the next twosections.

For More Information:

If you want to learn more about the number ofcredits you would need to qualify for benefits, call or visit Social Security to ask for a Personal Earnings and Benefit Estimate Statement (see the next section), or ask for a free copy of one ofthe following booklets: Retirement (Publication No. 05-10035),Survivors (Publication No. 05-10084), or Disability (Publication No. 05-10029)

How Much Will You Get From Social Security?

The amount of your Social Security benefit is based on factors such as your date of birth, the type of benefit you are applying for, and most important, your earnings.

This booklet will explain in a general way how a Social Security benefit is figured. In the back of this booklet, you will find tables that give examples of Social Security benefits. If you would like a detailed, personal estimate of your Social Security retirement, disability, and survivors benefits, call or visit Social Security and ask for it. We will send you a form you can use to get a Personal Earnings and Benefit Estimate Statement.

How Your Benefit Is Figured

In general, a Social Security benefit is based on your earnings averaged over your working lifetime. This is different from many private pension plans that are usually based on a relatively small number of years of earnings.

In its simplest terms, here's how your Social Security benefit is figured:

Step 1 We determine the number of years of earnings to use as a base.

Retirement benefits: For everybody born after 1928 and retiring in 1991 or later, which includes most people reading this booklet, that number is 35 years. Fewer years are used for people born in 1928 or earlier.

Disability and survivors benefits: We use most of the years of earnings posted to your record.

Step 2 We adjust these earnings for inflation.

Step 3 We determine your average adjusted monthly earnings based on the number of years figured in step 1.

Step 4 We multiply your average adjusted earnings by percentages in a formula that is specified by law.

That formula results in benefits that replace about 42 percent of a person's earnings. This applies to people who had average earnings during their working years. The percentage is lower for people in the upper income brackets and higher for people with low incomes. (That's because the Social Security benefit formula is weighted in favor of low-income workers who have less opportunity to save and invest during their working years.)

If You Haven't Earned Enough Credits To Get Social Security If you haven't worked long enough to get Social Security, or if you get only a small amount, you may be eligible for Supplemental Security Income, or SSI. For more information, see page 23.

Part 3 What You Need To Know When You Become Eligible For Social Security

How And When To Sign Up For Social Security

You can apply for benefits at any Social Security office. The easiest way to file a claim is to call our toll-free number ahead of time for an appointment. That number is:1-800-772-1213. For disability, survivors, and SSI benefits, you should apply as soon as you're eligible. (The rest of this chapter will help you decide if and when you are.) When signing up for retirement, we suggest you talk to a Social Security representative in the year before the year you plan to retire. That's because the rules are complicated, and it may be to your advantage to start your retirement benefits before you actually stop working.

What Records Will You Need?

To show that you are eligible for Social Security and to help us decide how much your benefits should be, there are certain documents we may ask you to provide. The ones you'll need depend on the circumstances of your claim. Here is a list of some of the documents you may need when you sign up for Social Security:

This is just a partial list to help you get prepared.When you actually sign up for Social Security, we'll let you know if other documents are needed.

Here's An Important Point: If you don't have all the documents you need, don't delay signing up for Social Security. We'll help you get the information you need.

Direct Deposit

Direct deposit is the preferred method of payment for Social Security benefits. Through the electronic transfer of funds, benefits are automatically credited to the beneficiary's bank account unless he or she asks to receive the monthly checks by mail. Most people choose direct deposit because it's safer and more convenient than receiving checks. It's also more efficient and saves money for the government because it's cheaper than preparing and mailing monthly checks. Be sure to have your checkbook or other papers that show your bank account number with you when you apply for Social Security benefits.

Retirement Benefits

This section of the booklet provides a brief overview of Social Security retirement benefits. If you want to learn more about the program, call or visit Social Security to ask for a free copy of the booklet Retirement (Publication No. 05-10035).

Full Retirement

If you were born before 1938, you will be eligible for your full Social Security benefit at the age of 65. However, beginning in the year 2000, the age at which full benefits are payable will increase in gradual steps from 65 to 67. This affects people born in 1938 and later. For example, if you were born in 1940, your full retirement age is 65 and 6 months. If you were born in 1950, your full retirement age is 66. Anybody born in 1960 or later will be eligible for full retirement benefits at 67.

Reduced Benefits As Early As 62

No matter what your full retirement age is, you may start receiving benefits as early as 62. However, if you start your benefits early, they are reduced five-ninths of one percent for each month before your full retirement age. For example, if your full retirement age is 65 and you sign up for Social Security when you're 64, you will receive 93 percent of your full benefit. At 62, you would get 80 percent. (Note: The reduction will be greater in future years as the full retirement age increases.) Here's An Important Point: There are disadvantages and advantages to taking your benefit before your full retirement age. The disadvantage is that your benefit is permanently reduced. The advantage is that you collect benefits for a longer period of time.

Each person's situation is different, so make sure you check with Social Security before you decide to retire.

What About Late Retirement?

Some people continue to work full time beyond their full retirement age and they do not sign up for Social Security until later. This delay in retirement can increase your Social Security benefit in two ways: Your extra income usually will increase your average earnings, and the higher your average earnings, the higher your Social Security benefit will be. In addition, a special credit is given to people who delay retirement. This credit, which is a percentage added to your Social Security benefit, varies depending on your date of birth. For people turning 65 in 1995, the rate is 4.5 percent per year. That rate gradually increases in future years, until it reaches 8 percent per year for people turning 65 in 2008 or later.

How Much Will You Get?

On Page 11, we explained how you can get an estimate of the benefits you are due. In addition, a table on Page 34 gives examples of retirement benefit rates.

Disability Benefits

This section of the booklet provides a brief overview of Social Security's disability program. It concentrates on benefits for people who have worked and earned enough Social Security credits to qualify for disability on their own work record. It is important to note that other kinds of disability benefits are available from Social Security, depending on your circumstances.

These include:

For More Information:

Because disability is one of the most complicated of all Social Security programs, we recommend that you call or visit Social Security to ask for a free copy of the booklet Disability (Publication No. 05-10029), for more in-depth information. For information about benefits available to children with disabilities, see page 24 of this booklet, or call or visit Social Security and ask for a free copy of the publication Social Security and SSI Benefits For Children With Disabilities (Publication No. 05-10026).

What Do We Mean By Disability ?

What is a disability ? The dictionary defines it as a physical or mental condition that prevents a person from leading a normal life. Social Security's definition of disability is more specific and is generally related to your ability to work. To qualify for disability from Social Security, you must have a physical or mental impairment that is expected to keep you from doing any substantial work for at least a year. Generally, monthly earnings of $500 or more are considered substantial. Or you must have a condition that is expected to result in your death. This is a strict definition of disability. Unlike many private pension plans or even other government disability programs, Social Security is not intended for a temporary condition. In other words, there is no such thing as a partial disability payment from Social Security.

What You Should Do If You Become Disabled

If you become disabled, you should file for disability benefits as soon as possible. You can do this by calling or visiting any Social Security office.

You can shorten the time it takes to process your claim if you have the following medical and vocational information when you apply: The names, addresses, and phone numbers of your doctors, and of hospitals, clinics, etc., where you have been treated; and A summary of where you worked in the last 15 years and the kind of work you did.

Here's An Important Point: Social Security's disability rules are different from those of other private plans or government agencies. So the fact that you qualify for disability from somebody else does not mean you will be eligible for Social Security. Further, the fact that you have a statement from your doctor indicating you are disabled does not mean you will be automatically eligible for - Social Security disability payments.

When Do Your Disability Benefits Start?

In most cases your monthly benefits will begin with the sixth full month of your disability. Here's a simple example of how this works: John has a severe heart attack on March 15. He files for disability on March 29, and his claim is approved on May 30. September is the sixth full month that he is disabled, so his benefits begin that month. Social Security checks are usually paid on the third of the following month, so John's first check (the September check) will arrive October 3.

Here's An Important Point: Do not delay signing up for Social Security because of this waiting period. By filing early, all the paperwork will be processed before your first check is due. There is no waiting period for disabled children's benefits or for SSI disability payments.

How Much Will You Get?

On Page 11, we told you how you can get a personalized estimate of any benefits you are due. A table on Page 35 gives examples of disability benefit rates.

Workers' Compensation

If you get workers' compensation or certain other government disability benefits, your Social Security disability benefit may be reduced. Or, your Social Security benefits may reduce your other disability payments. The sum of all disability payments to you and your family cannot exceed 80 percent of your earnings averaged over a period of time shortly before you became disabled.

How Long Will Your Disability Benefits Continue?

You will continue to get disability benefits unless your condition improves or you return to substantial work (see Page 16). We check your claim periodically to determine if this is the case. To help us decide, you may be asked to undergo a special test or examination that we will pay for.

Incentives To Return To Work

There are special rules that help people who would like to return to work but are concerned about the effect this might have on their disability benefits. These rules offer special incentives that permit people to try working without the risk of a sudden loss of their monthly benefits and their Medicare coverage.

For More Information:

If you would like to learn more about these special work incentives, call or visit Social Security to ask for a free copy of the booklet Working While Disabled ... How Social Security Can Help (Publication No. 05-10095).

Benefits For Your Family

This section of the booklet provides a brief overview of benefits payable to members of your family when you are eligible for retirement or disability benefits.

Who Can Get Benefits?

When you start collecting Social Security retirement or disability benefits, other members of your family might also be eligible for payments. For example, benefits can be paid to: