WHAT ARE SOCIAL SECURITY BENEFITS?
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Social Security benefits are not based on financial need. They are based on average lifetime earnings and the amount of time you have worked. Anyone who pays Social Security taxes can get Social Security benefits when they retire. By paying Social Security taxes, you are also eligible to receive disability and death benefits, as well as Medicare. However, you must earn enough Social Security credits to qualify.
Besides retirement income, Social Security also pays disability benefits to those who cannot work due to physical or mental problems. These benefits are available to you at any time if you have earned enough credits. In addition, family members such as a spouse or children may be eligible for benefits in the event of your death. This is known as a survivor benefit.
In general, people over 65 who qualify for Social Security benefits also qualify for Medicare, as do those who have been getting disability for at least two years.
At retirement, your monthly Social Security benefit is based on your past work history in which you made the most money. Your monthly benefit comes from a formula using your average indexed monthly earnings (AIME). At present, retirees can expect to earn about 40 percent of their annual average lifetime earnings in Social Security benefits each year. Benefits may be adjusted each year to keep up with inflation.
Social Security benefits are progressive. People who earn less have a greater percentage of their wages returned to them through Social Security benefits than higher wage earners.
But how do you know if you are eligible for Social Security? We'll find out in the next tutorial section.