The New York Times answered the top Social Security questions from its readers.
Question 1. Is Social Security in good financial shape?
Social Security is in good financial shape today and at least for another 15 years. By 2035, however, Social Security will face a shortfall. If Congress does not make changes, Social Security would be able to pay out only 80 percent of scheduled benefits. Congress can and always has made changes to keep it paying out full benefits.
There is good reason for Congress to act. According to Richard W. Johnson at the Urban Institute, unless Congress acts, another one-third of retirees could be pushed into poverty. Fortunately, there’s a bill in Congress, the Social Security 2100 Act that would strengthen Social Security over the long term. All it would take is increasing payroll tax rates by 0.1 percent a year through 2043 and applying payroll contributions to all earnings over $400,000.
In 1977, Congress intended for Social Security to cover 90 percent of people’s earned income. But, it now only covers 83 percent of wages. The average wage has not increased as quickly as wages above the Social Security cap, which is $132,900 today.
Question 2. How do Social Security spousal benefits work?
If you have been married for at least one year, you can claim a benefit as high as 50 percent of your partner’s benefit if your partner is claiming benefits. You can claim the benefit before your full retirement age, but it will be lower because you are claiming before your full retirement age.
Usually, you must file for your own benefit and your spousal benefit at the same time. Social Security will pay you your own benefit and your spousal benefit as well, but only if your personal benefit is less than half of your spouse’s benefit.
If you were born before 1954, you can file for a “restricted claim.” You would then get only your spousal benefit and you could continue to accrue retirement credits on your account until age 70.
You also get a survivor benefit if a spouse dies so long as you were married for at least nine months before your spouse died. This benefit is usually 100 percent of your former spouse’s benefit.
If you are divorced but had been married for at least 10 years and are now single, you can get a spousal or survivor benefit from your ex-spouse. If you get married again, you lose these benefits. You cannot get spousal or survivor’s benefits from your new partner unless you have been married a minimum of one year.
Spousal benefits apply to same-sex married couples.
Question 3. Will I get benefits for the rest of my life and will they be taxed?
Once you claim Social Security benefits, you will get them for the rest of your life, and they will be adjusted up a bit for inflation. They may be taxed if your gross income, nontaxable interest income and half your Social Security benefit are greater than $25,000 for an individual or $32,000 for a couple filing jointly.
If you file a federal income tax return as an individual and your combined income is above $34,000, as much as 85 percent of your benefits may be taxable. If your income is between $25,000 and $34,000, you may need to pay income tax on as much as 50 percent of your benefits.
If you file a federal income tax return as a married couple and your combined income is above $44,000, as much as 85 percent of your benefits may be taxable. If your combined income is between $32,000 and $44,000, you may have to pay income tax on as much as 50 percent of your benefits.
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