based on average lifetime earnings. Individuals can qualify with a lower number of credits than is typical for retirement benefits:
Workers younger than 24: You need six credits earned in the three years before the onset of disability. As with other Social Security benefits, you can earn up to four credits per year for covered work.
Workers ages 24 to 31: You need to have worked in Social Security–covered employment 50 percent of the time between age 21 and the onset of the disability.
Workers ages 31 and up: The credit requirements steadily increase. At 31, you’re expected to have built up 20 credits, and this moves up to 40 credits for applicants ages 41 and older. Also, applicants generally are expected to have earned 20 credits within the ten years before the onset of disability.
If you meet the strict qualifications for disability insurance, you may receive a benefit that is 100 percent of your primary insurance amount, which is the same as the retirement benefit you qualify for at full retirement age. Significantly, a worker’s disability benefit is not reduced for age (after all, job-related disability takes place before you retire).
The average monthly benefit for a disabled worker is a bit over $1,255, but if you’re disabled with above-average earnings, your benefit is higher. A worker’s disability benefit switches automatically to a retirement benefit when the worker reaches full retirement age. The payment level doesn’t change.
When a worker qualifies for SSDI, benefits may also go to other family members. Not only does the breadwinner get income, but payments may also be made to a dependent child and spouse. The child’s benefit may be 50 percent of the breadwinner’s amount (as long as the child is younger than 18, or up to 19 if still in high school and unmarried). A dependent spouse without a child may qualify for 50 percent of the disabled worker’s benefit if the spouse has reached full retirement age. If the spouse is younger, the benefit becomes available at 62. If the spouse is caring for the disabled worker’s child, the dependent spouse benefit of 50 percent is available at any age. When multiple Social Security benefits are flowing into one household, they may be reduced by the family maximum (see Chapter 10).
When the Need Is Great: Supplemental Security Income
Supplemental Security Income (SSI) targets the neediest Americans — specifically, those who are 65 or older, blind, or disabled — with cash payments to help them survive. Its benefits are designed to pay for life’s necessities: food, clothing, and shelter. SSI also has child disability benefits for children under 18.
The SSA runs SSI, but SSI isn’t considered a Social Security benefit. Instead, it’s a cash assistance or welfare program that you qualify for based on financial need. This is a big difference from basic Social Security benefits, including SSDI (see the preceding section).
You contribute to the basic Social Security programs, including SSDI, through the payroll tax, and then you qualify for benefits you’ve earned through work credits that add up over time.
SSI, on the other hand, is financed by general tax dollars. People don’t need to build up work credits or demonstrate a work history to qualify. They just have to demonstrate an extreme level of need. The rules on income and assets are strict, however. To get SSI in most states, people must earn below the federal payment standard of $783 per month for an individual and $1,175 per month for a couple (as of 2020). Assets (the things people own, such as cash or property other than your home) generally can’t exceed $2,000 in value for an individual and $3,000 for a couple.
Chapter 3
Deciding When to Start Collecting Retirement Benefits
IN THIS CHAPTER
I know people who are sick of their jobs, fed up with the demands of the work world, and ready to begin collecting Social Security the very first day they can get it. I also know people who love their jobs, see themselves as forever young, and are pained even to think about collecting retirement benefits. Where do you fit on the spectrum?
Of course, the decision on when to start collecting Social Security is personal. Your priorities and needs, your spouse’s needs, your financial resources, your health, and your expected longevity all can shape your attitude about collecting Social Security.
Your decision on when to begin collecting Social Security retirement benefits may be the most important financial decision you ever make. Starting too early can cost you tens of thousands of dollars. Worse, jumping the gun may hurt the most in your final years, when it’s too late to do anything about it.
In this chapter, I fill you in on the most important factors to consider in order to make the right decision for you. There is no one right answer. My goal is for you to make the decision about when to collect Social Security fully armed with all the information you need.
Paying Attention to Your Full Retirement Age
A key consideration in choosing a start date for collecting Social Security is something called your full retirement age. The Social Security Administration (SSA) gives you a window of several years before and after your full retirement age in which to begin collecting your retirement benefits, starting at 62. In the following sections, you find out how to determine this age (based on your year of birth) and how it affects the amount of your monthly benefit.
Determining your full retirement age
Your first question is probably this: How much Social Security am I going to get? The answer: It depends. The first step is knowing your full retirement age. If you collect Social Security before reaching your full retirement age, you’ll get less each month — potentially a lot less, for the rest of your life. If you collect Social Security after reaching your full retirement age, you’ll get more each month.
The earliest age at which you can start collecting retirement benefits is 62, and the latest is 70. Your full retirement age falls somewhere in between. Table 3-1 shows a person’s full