Unit 6.3

1. Social Security Disability Insurance

(SSDI). This disability program is for workers (and certain family members) who paid into the Social Security system for a certain amount of time, making them eligible for benefits. These benefits include a monthly check and the use of Medicaid.

2. Supplemental Security Income

(SSI). SSI came into being in the 1970s. It is a program for people who have limited financial resources. Recipients must be at least 65 years old or have a disability (such as blindness). The benefits include a monthly check and health insurance. Very specific health and income guidelines restrict eligibility. This benefit is based on financial need; it does not matter whether the person has paid into the Social Security system.

Facts

1. Less than what someone needs to survive in retirement. 2. Workers should supplement this program with savings 3. Workers should not wait until they are close to retirement to start financing retirement... it will be too late.

2 Major Original Provision

1. Title I provides funds to support state welfare programs 2. Title II is what we know now as Social Security. In the original legislation, benefits were to be paid only to the primary worker when he or she (or they) is retired at age 65. Benefits were to be based on the payroll tax contributions the worker made during his or her working life.

How is payment benefit determined?

Based on: - the amount of money earned during the 35 years of employment when they earned the most. Workers with higher earnings will receive more social security payments than those with lower earnings. Social Security payments also depend on the age at retirement. Retirees can begin collecting their benefits at age 62, but their payments will be lower than if they wait until their full retirement age. **As of 2020, for anyone born in 1960 or later the full retirement age is 67. In Summary Social Security is meant to supplement a portion of the income needed in retirement. Most retirees need to supplement their Social Security earnings through savings, investments, employment or decreased consumption.

When can you start collecting on Social Security

Eligibility starts at age 62, but your monthly check will be about 28% less than if you wait until the full retirement age The age for full retirement is 67 for those born in 1960 or later. Retirees can start receiving their benefits as late as age 70. Loop hole! You can collect Social Security payments and continue to earn wages from a job. - If a retiree has reached full retirement age, there's no penalty on their monthly social security earnings from earning wages. -If a retiree chooses to collect Social Security benefits before their full retirement age and wants to keep working, their Social Security benefits will be reduced until they reach full retirement age.

Medicare

Health Insurance for those 65 years or older, or, for those who have a permanent disability. 3 Components: 1. Part A covers inpatient hospital care and some follow-up care in nursing facilities and in the patient's home. No extra payments are required. A person is eligible to apply for Part A at 64 years and 8 months, even if that person is not planning to retire. 2. Part B covers physician's services, some hospital costs (that are not covered by Part A), as well as medical supplies necessary to treat diseases or conditions. Part B is optional and a monthly premium is charged for this plan. The premium due depends on the yearly income of the recipient. Those with higher incomes pay more. 3. Part D is prescription drug coverage. There is an optional extra charge for this, too. Medicare recipients must pay their deductible, a portion of their health care expenses, before their Medicare insurance kicks in each year. Once the deductible is met, the patient pays a portion of their medical expenses called a copayment. Medicare pays the rest. Unlike other forms of insurance, Medicare insurance claims are filed by the health care providers directly. Some health expenses including long-term care hearing aids are not covered by Medicare, so retirees may opt for additional health insurance plans or pay out of pocket for those expenses.

How is the SS (Social Security) program doing?

In most years, the amount of money collected by the federal government exceeds the amount paid out as benefits, and the remainder is placed into the Social Security Trust Fund for long term safekeeping. That is changing though, as Baby-Boomers are retiring while there are smaller numbers of workers contributing to the system.

Baby-boomer (Born: 1946-1964) dilemma

Right now the program pays more in benefits than it takes in from revenues. As a result there is a deficit and it is expected to increase as more members of the baby boomer generation retire and as their life expectancy increases. Eventually, the FICA system will no longer be able to sustain itself with annual payroll taxes alone. The Social Security Administration withdraws money from the Trust Fund to meet current expenses. The Trust fund is projected to be depleted by 2034. The expectation is that payroll taxes and other forms of income for the fund will only cover around 79% of the costs associated with the Social Security Program (see "The Long-Run Financial Outlook" under "Social Security Financing" tab at "Fast Facts & Figures About Social Security, 2018," Social Security Administration, via ssa.gov).

History

Social Security Act signed by Franklin D. Roosevelt in 1935 Payments began in 1940 to retired workers. Today: SS payments not only go to retirees, but they also go to survivors of workers (widows) and their children under the age of 18 The SS FICA Tax is 6.2% of income paid by employees and matched by employers

Social Security as Disability

Social Security pays disability benefits to a person who cannot work because he or she has a medical condition that is expected to last at least one year or that likely will result in death. This disability insurance first came into being in 1956 when an amendment to the Social Security Act was passed to provide compensation to disabled workers between the ages of 50 and 64. In 1960, another amendment eliminated the disabled worker age limit. Disabled "adult children"—dependents who have been disabled before reaching 22 years of age—are also eligible to receive disability benefits. For example, a 30-year old female who has never worked in her life because she was born with cerebral palsy qualifies to receive disability benefits. Today, the Social Security Administration offers two programs that relate to disability benefits:

Social Security as Retirement Income

What determines the amount a retiree will get in their Social Security Check continued... 1. the amount they have contributed to the system during their working years 2. the average earnings during their lifetime under the Social Security system 3. their age when they finally retire Looks specifically at the average of their top 35 years of earning.

How is payment benefit determined?

What determines the amount a retiree will get in their Social Security Check continued... 1. the amount they have contributed to the system during their working years 2. the average earnings during their lifetime under the Social Security system 3. their age when they finally retire Looks specifically at the average of their top 35 years of earning.

Social Security System

__________ _____________ was designed as a safety net to provide income for older people when thy stop working. Paid for through FICA Tax, Federal Insurance Contributions Act.

4 survivor benefis

__________ _____________. There are also survivor benefits in the form of monthly financial support. These are sometimes available to family members left behind after the death of a Social Security recipient. Eligible recipients can include widows or widowers, a divorced spouse (if they had been married for at least 10 years), children, stepchildren, adopted children, grandchildren, step-grandchildren, and dependent parents. To receive monthly payments, survivors must meet certain age and eligibility guidelines. The average lifetime earnings of the deceased determine the amount family members receive.9 To learn more about the guidelines for survivor benefits, visit the Social Security website: ssa.gov.

3. Death Benefits.

__________ ________________There are two different types of Social Security death benefits. There is a one-time lump-sum payment of $255 provided to a family member after the death of a Social Security recipient. Only the spouse or minor child of the deceased is eligible for this payment under certain circumstances.

Medicare

is the national health insurance program for people over the age of 65. This program, created in 1965, assists with medical expenses including doctor visits, hospital stays, and includes optional prescription coverage. The video below introduces the Medicare program, but it will be covered in greater detail in the next lesson.