The quick answer is yes – but there’s a long list of criteria for qualifying. Here we’ll take a brief look at what you can receive if you qualify.

The Social Security Administration says that disabled workers and their dependents get 12.8% of the total benefits that the SSA pays out.

There are two types of benefits are paid to disabled people under Social Security.

1. Social Security Disability Insurance (SSDI) – This is paid if you becomedisabled after you’ve worked long enough and have paid the required Social Security taxes. In addition, you must not be able to do the work you did before becoming disabled, and must not be able to adjust to other work due to your disability. The disability must be expected to last for at least a year, or result in your death. No benefits are offered for short-term disability.
2. Supplemental Security Income (SSI) – This is paid to disabled people who haven’t worked long enough to qualify for Social Security Disability Insurance. To qualify, you must meet a financial needs test. SSI also provides benefits to people over age 65 who qualify based on need. Its purpose is to provide cash for basic needs such as food, clothing, and shelter.

The actual disability benefits are based on the age of disability and the number of years worked. To give you an idea of what to expect, here are some average payments.

In 2010, the average monthly benefit paid to a disabled worker was a little bit over $1,100. If the disabled worker had a spouse and one or more children, the average benefit was $1,600. The average monthly SSI payment was about $400 for a person age 65 or older, $600 for a  child under age 18, and $515 for people between age 18 and 64.

Photo by Fabricator of Useless Articles

Percentage Reduction in Spousal Benefits

• If your spouse wants to receive benefits at 64, the amount collected will be around 46% of the working spouse’s full amount.
• At age 63, the benefit amount is around 42% of the full benefit.
• At age 62, the amount is 37.5% of the full benefit.

If your spouse is eligible for benefits on their own work record, Social Security will pay those benefits first. But your spouse may still receive some of your benefits, since Social Security will pay the difference if your spouse’s benefit are less than yours.

Example

For instance, suppose you and your spouse retire today at age 66. While raising your children, your spouse didn’t work for several years, and then only went back to part-time work. She qualifies for $820 in benefits.

You, however, qualify for $2,100 in benefits. Your spouse qualifies for 50% of that amount, or $1,050. In this case, your spouse would receive a combination of benefits from his or her own work record and yours, totaling the higher amount. She’d get $820 from her work history, and $230 from your benefits for a total of $1,050.

Benefits as a Survivor

Spouses also receive benefits as a survivor of a deceased worker. If a husband dies, his widow can start receiving benefits at age 60. If disabled, benefits can start at age 50. The amount that can be collected depends both on the age when the survivor starts receiving benefits, and the amount the deceased husband was entitled to receive.

If the survivor begins collecting at age 60, they’re only entitled to receive 71% of the deceased husband’s benefit. But if the survivor waits until their full retirement age, they can get the full 100%. If disabled, the survivor who begins collecting between ages 50 and 59 will receive 71% of the deceased husband’s benefit.

Benefits as a Caretaker

When you retire, there is an instance where your spouse doesn’t have to wait until full retirement age to receive the 50% share of your benefits. If he or she is taking care of a child under the age of 16, or a disabled child, they can collect 50% of your benefits regardless of their age. If you die, their benefit would increase to 75% if they are still caring for children and not eligible to retire.

Photo by ProgressOhio; Post included in The Wealth Builder Carnival and the Carnival of Wealth

One of the six categories of social security benefits is Medicare. Within Medicare, there are actually four parts. In this post, we’ll look at the first part – Medicare Part A.

Medicare Part A Benefits

Here’s a list of services that are covered under Part A:

• Inpatient care in hospitals (such as critical access hospitals, inpatient rehabilitation facilities, and long-term care hospitals)
• Inpatient care in a skilled nursing facility (excludes custodial or long term care)
• Hospice care services
• Home health care services
• Inpatient care in a Religious Nonmedical Health Care Institution

Medicare Part A Cost

How much does it cost? If you or your spouse paid Medicare taxes for at least 10 years while working, then you don’t have to pay a monthly premium for Part A coverage. Part A is also known as “premium-free Part A.”

However, if you’re not eligible for premium-free Part A, you may be able to buy Part A if you meet one of two conditions:

• You’re 65 or older, you’re entitled to (or enrolling in) Part B, and you meet the citizenship or residency requirements.
• You’re under 65, disabled, and your premium-free Part A coverage ended because you returned to work.

If you don’t get Part A premium-free, you’ll have to pay up to $461 a month in 2010. And if you only have between 30 to 39 quarters of Medicare-covered employment, you’ll have to pay $254 a month.

It’s important to note that if you do buy Part A, in most cases you’ll also need to have Part B and pay monthly premiums for both.

Medicare Part A Eligibility

You’ll be eligible for Medicare when you turn age 65, even if you’re not yet eligible for full Social Security retirement benefits. If you’re age 65 or older, you can get Part A without paying premiums if

• You already get retirement benefits from Social Security or the Railroad Retirement Board
• You’re eligible to get Social Security or Railroad benefits but haven’t filed for them yet.
• You or your spouse had Medicare-covered government employment.

If you’re under age 65, you can get Part A without having to pay premiums if either of the following applies to you:

• You’ve received Social Security or Railroad Retirement Board disability benefits for 24 months.
• You have permanent kidney failure requiring a dialysis or transplant.

When To Apply For Medicare

If you’re already getting Social Security retirement or disability benefits or railroad retirement checks, you’ll be contacted a few months before you become eligible for Medicare and given the information you need.

If you’re not getting retirement benefits yet, you should contact your local Social Security office three months before your 65th birthday to sign up for Medicare. You can sign up for Medicare even if you don’t plan to retire at age 65.

Medicare Benefit Period

The number of days that Medicare covers your care in a hospital or skilled nursing facility is measured in benefit periods. A benefit period starts on the first day you receive services in a hospital or skilled nursing facility, and ends after you haven’t received care for 60 consecutive days. If you go into a hospital or skilled nursing facility after one benefit period has ended, a new benefit period begins. This is important to know because you must pay the inpatient hospital deductible for each benefit period.

Medicare Part A Deductible And Coinsurance Amounts For 2010

Deductible – $1,100.00 per benefit period

Coinsurance

• $275 a day for the 61st – 90th day each benefit period
• $550 a day for the 91st – 150th day for each lifetime reserve day
• 100% of the costs for each day beyond 150 days

All days over day 90 in a benefit period are considered lifetime reserve days. There are only a total of 60 lifetime reserve days, which don’t renew with each new benefit period.

Skilled Nursing Facility Coinsurance – Up to $137.50 a day for the 21st – 100th day each benefit period.

But did you know that when you receive your social security benefits in retirement, they may be taxed again?

How To Determine If Your Social Security Benefits Are Taxable

The taxable amount of your social security benefits, if any, depends on a combination of your benefits and your other income. Usually, as this total increases, a bigger percentage of your benefits is subject to tax.

More specifically, if your total other income, which is described below, plus half of your net benefits (box 5 of Form SSA-1099) is greater than the base amount attributed to your filing status, some of your benefits will be taxable. We’ll discuss the base amount later.

Total Other Income

Your total other income includes taxable pensions, wages, interest, dividends, and tax-exempt interest income. In addition to this, some exclusions – such as interest from qualified U.S. savings bonds, exempt adoption benefits from your employer, foreign-earned income, foreign housing, and income earned in American Samoa or Puerto Rico by bona fide residents – must also be included in your other income.

Other Income And Half Of Your Social Security Benefits

To calculate this number to compare to your base amount, go through these following steps:

1. Calculate the total amount from box 5 of all your Forms SSA-1099.
2. Calculate half of the amount from line 1.
3. Calculate the total amount of your taxable pensions, wages, interest, dividends, and other taxable income.
4. Calculate the total amount of any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier).
5. Add lines 2, 3, and 4.

Compare the amount on line 5 to the base amount for your filing status. If the amount on line 5 is less than or equal to the base amount, none of your benefits are taxable. If the amount on line 5 is more than your base amount, some of your benefits may be taxable.

Base Amount

Your specific base amount is:

• $25,000 if you are single, head of household, or qualifying widow(er),
• $25,000 if you are married filing separately, and lived apart from your spouse for all the tax year,
• $32,000 if you are married filing jointly, or
• $0 if you are married filing separately, and lived with your spouse at any time during the tax year.

Other Important Points

In most cases, up to 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if either of the following situations applies to you.

• The total of half of your benefits and all your other income is more than $34,000 ($44,000 if married filing jointly).
• You are married filing separately and lived with your spouse at any time during the tax year.

If some of your benefits are taxable, use the social security benefits worksheet – found in the instructions for IRS Form 1040 (page 28) or 1040A (page 29) – to calculate the actual amount of your taxable benefits. And for more detailed information, check out IRS Publication 915.

Have you had to pay taxes on your social security benefits?

This post was included in the Carnival of Financial Planning at My Trader’s Journal.

Retirement Benefits

This is the one that most people are aware of. Full benefits are available at full retirement age – while reduced benefits can be taken at age 62 – to those born in 1929 or later who have earned 40 Social Security credits. Because of a change to Social Security law in 1983, full retirement age began to rise from age 65 for people born in 1937 or earlier, increasing in two-month increments to age 67 for people born in 1960 or later. Those who delay retirement beyond full retirement age will get an increase in their benefit when they retire.

Disability Benefits

Recipients of this benefit must have a medical condition that is expected to prevent them from doing “substantial” work for at least a year, or result in death. For 2010, earnings of $1,000 (if not blind) and $1,640 (if blind) or more per month are considered substantial. The number of credits you need in order to qualify depends on your age when you become disabled, and is separated into three age ranges: before age 24, between 24 and 30, and age 31 or older. This program has incentives to smooth the transition back to the workforce, including continuation of benefits and health care coverage.

Family Benefits

This is provided to certain family members of workers who are eligible for retirement or disability benefits. Such members include spouses age 62 or older, spouses under age 62 who are caring for a child under age 16, unmarried children under age 18, unmarried children under age 19 who are full-time students in a secondary school, and unmarried children of any age who were disabled before age 22.

Survivors’ Benefits

This benefit applies to members of the deceased worker’s family, if the worker earned enough Social Security credits. The members who are entitled to this benefit include those listed for family benefits, and may also include the worker’s parents if the worker was their primary means of support. In addition, a one-time payment of $255 may be made to the spouse or minor children upon the death of a worker covered by Social Security.

Medicare

The two major parts of Medicare provide hospital insurance (Part A) and medical insurance (Part B). Workers who have reached full retirement age, or who have been receiving disability benefits for at least 2 years automatically qualify. Others must fill out an application.

The other parts of Medicare include a prescription drug coverage plan (Part D), and a plan to receive all health care services through one provider organization (Part C).

Supplemental Security Income Benefits

This is another benefit that provides monthly payments to those who reach full retirement age or are disabled. However, workers must have a low income and few assets to qualify. Generally, those who receive SSI also qualify for other governmental assistance such as Medicaid and food stamps.

This post was included in the Carnival of Personal Finance during the week of July 12, 2010. Check out Funny About Money’s blog for a variety of great articles!

There are two basic steps to determining your monthly benefits. The first step is computing your average indexed monthly earnings, or AIME. The second step, which incorporates the AIME, is to determine your primary insurance amount, or PIA. The PIA is the basis needed to calculate social security benefits that are paid to you when you retire.

Average Indexed Monthly Earnings

The purpose for indexing your earnings is to reflect the change in wage levels that occurred during your working years. This ensures that your benefits will reflect the rise in the standard of living that occurred during your working lifetime. Out of your entire earnings from age 22 to 62, your highest 35 years of indexed earnings are used in the AIME computation. If you work and are age 25 or above, you can find your specific earnings in the social security statement that is mailed to you annually.

Indexing your earnings depends on the year in which you are first eligible to receive retirement benefits, which is age 62. So if you reach age 62 in 2011, then that is your year of eligibility. However, your earnings are always indexed to the average wage index two years before your year of eligibility, or when you reach age 60. So if you reach age 62 in 2011, then earnings from your prior working years would be indexed to the average wage index for 2009, which is 40,711.61. You can find the wage index for a specific year here.

Following this example of a worker whose earnings are indexed to the wage index for 2009, earnings in each year before 2009 would be indexed by multiplying the earnings for that prior year by the indexing factor for that prior year.

The indexing factor for a prior year is determined by dividing the wage index for the year the person reaches age 60 by the wage index for that prior year. In our example, the person reaches age 60 in 2009. So if you want to determine the indexing factor for 1980, you would divide 40,711.61 (the index for 2009) by 12,513.46 (the index for 1980), and get an index factor of 3.2534. So if you made $12,000 in 1980, you would multiply this amount by 3.2534 to get and indexed amount of $39,041.

Earnings in the year you reach age 60 and later would not be indexed, but rather are taken at face value.

Once each year’s earnings from age 22 to 62 are indexed, your highest 35 years of indexed earnings are added up. This sum is then divided by 420 to determine your average monthly amount of such earnings. This is your AIME.

Primary Insurance Amount

Once you have your AIME, the next step in determining your monthly social security benefit is calculating your PIA. The PIA is the sum of three separate percentages of portions of AIME. These portions, known as bend points, depend on the year you reach age 62. If you reach age 62 in 2010, your PIA is the sum of

1. 90% of the first $761 of your AIME,
2. 32% of your AIME between $761 and $4,586, and
3. 15% of your AIME over $4,586.

This amount is rounded down to the next multiple of $.10. For example, if your AIME is $5,521, your PIA would be calculated as:

0.9(761) + 0.32(4,586 – 761) + 0.15(5,521 – 4,586) = 2,049.15, which is rounded down to $2,049.10.

If you reached age 62 before 2011, the bend points for earlier years can be found here.

These benefits that can be used on any medigap policy and were never meant to provide full financial support upon retirement. The result of these bend points is that lower wage earners receive a larger percentage of their preretirement income, while higher wage earners receive a lower percentage of their preretirement income.

Early Or Delayed Retirement

Once your PIA is calculated, you now have the basis of determining your estimated monthly benefit amount. This amount, however, also depends on the actual age that you retire. The earliest that you can retire and receive benefits is age 62. But the downside to early retirement is that your benefits are reduced for each month that you retire before your normal retirement age.

The normal retirement age is the age that you receive the full benefits as indicated by your PIA, and it depends on the year you were born. You can find your specific retirement age here, but for most people reading this, the normal age is now 67. Conversely, if you delay your retirement beyond your normal retirement age, you will receive a certain percentage increase for each month that you delay retirement beyond your normal age. Here are the specifics:

If you were to retire early, your benefit would be reduced by 0.555% for each month before normal retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced by 0.416% per month for each month thereafter. This result is then rounded down to the next dollar to arrive at your reduced monthly benefit.

So if your normal retirement age is 67, and you retire at 63, you’d be retiring 48 months early. Your benefit reduction is calculated as 36 months multiplied by 0.555%, plus 12 months multiplied by 0.416%. Therefore, your monthly benefit would be reduced by 25%, and you’d only receive 75% of your PIA. If your PIA were $1,983.10, your reduced benefit would be $1,487.33, which is then rounded down to $1,487.

On the other hand, for most of us reading this, if you were to delay retirement beyond your normal retirement age, you’d receive an increase in your PIA of 0.666% per month of delayed retirement, or 8% a year. The specific percentage of your increase, which is based on your year of birth, can be found here.

So these are the steps to calculate social security benefits.

Do you know how much benefits you’ll receive?

First photo by Aric Riley