Social Security recipients will get a hefty raise in 2023, with benefits rising 8.7%, the most in four decades.
The inflation-related bump may coax some retirees into tapping their benefits early, before they reach full retirement age. It also may spark a few questions.
- How do you apply for Social Security?
- How are benefits calculated?
- Are they taxable?
The cost-of-living adjustment, or COLA, will boost the average retiree’s monthly payment by $146 to $1,827 next year, according to the Social Security Administration (SSA). Yet for 70 million retirees, disabled people and others, the increase will simply help them catch up to inflation that hit a 40-year high of 9.1% earlier this year, outpacing the 5.9% COLA they received in 2022, says Mary Johnson, a policy analyst for the Senior Citizen League, an advocacy group.
Here’s what you need to know:
What is Social Security?
Social Security is “the most successful anti-poverty program in our country’s history,” according to the SSA. President Franklin D. Roosevelt signed the Social Security Act into law in 1935 as a retirement program for workers. It was part of the historic New Deal, and the first lump-sum payments were made in 1937.
Payments for workers’ survivors were added by Congress in 1939 and regular monthly checks started in 1940. Disability benefits were added in 1956.
Today’s workers pay Social Security taxes into the program, and the money is disbursed as monthly income to beneficiaries in a “pay-as-you-go” system, according to the National Academy of Social Insurance.
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One in five Americans receives benefits, including more than 47 million retired workers and dependents, 10 million disabled workers and dependents, and 6 million survivors of deceased workers.
How to apply for Social Security
To apply for benefits, you must be at least 61 years and 9 months old and want your benefits to start in no more than four months, according to the SSA.
You can apply online or by calling 800-772-1213 (TTY 800-325-0778). As COVID eases, SSA has been scheduling more in-person appointments at local offices.
How much Social Security will I get?
SSA calculates your benefit based on the monthly average of up to 35 of your highest earning years rather than, say, your last five years. The earnings are indexed to the change in overall wage levels and the rise in the nation’s standard of living while you were employed. Your future benefits thus will reflect that rise.
A Social Security calculator can help you figure out your benefits.
When checking whether your earnings record is correct or not, keep in mind there’s no statute of limitations on correcting errors related to wages, according to Kurt Czarnowski, a principal at Czarnowski Consulting.
“A person needs to provide proof of what the correct amount of earnings was,” Czarnowski said at a recent National Association of Personal Financial Advisors conference. “But even if it’s something back in 1976, if (you) happen to have (your) W-2, (you) can make that correction.”
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Also, be aware that someone who chooses to draw benefits at the earliest possible age – 62 – would see their payment reduced by as much as 30%. By contrast, workers who delay retirement past their full-retirement age – 66 or 67 for most people – would see an 8% increase in benefits for each year they wait until 70.
Is Social Security taxable?
It depends on your income. You’ll be taxed on up to 50% of your benefits if your income is $25,000 to $34,000 for an individual, or $32,000 to $44,000 for married couples filing jointly, according to AARP. Up to 85% of your benefits are taxable if your income is more than $34,000 for an individual or $44,000 for a married couple.
How to get a new Social Security card?
If you lose your Social Security card, you don’t need a replacement in most cases. Just knowing your number is enough, SSA says.
If you do need a replacement, you can apply online with a free my Social Security account or in-person. If you can’t use your account to request a replacement card, you can still start the process and complete it at a local Social Security office, typically more quickly, SSA says. In that case, though, you’ll need to provide required documents, such as a birth certificate, driver’s license and passport.
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Why did I get two Social Security checks this month?
If you’re owed back payments, you could get two checks, according to GOBankingRates, a personal finance website. Also, if you receive either retirement or disability benefits, as well as Supplemental Security Income, or SSI, because your income is below certain thresholds, you also could receive two payments.
How to apply for disability
People who can’t work because of a medical condition that’s expected to last at least a year or result in death are eligible for Social Security Disability Insurance benefits as long as they’ve worked long enough, SSA says. Once a disability begins, a worker must wait five months before receiving benefits.
You can apply for benefits online or by calling 800-772-1213. SSA will send your application to a state agency that makes the decision based on information provided by your doctors. Seventy percent of applicants are denied in their initial application, according to Disability Benefits Help, a group that provides information to applicants and those rejected.
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But denials can be appealed and the success rate for appeals is much higher, according to Disability Benefits Help. Many people hire lawyers to help with their appeals.
People with disabilities can also receive benefits under the Supplemental Security Income program, which is based on financial need.
Contributing: Robert Powell and Elisabeth Buchwald