Social Security is a government program that
started back in the 1930's. Although it fulfills a number
of purposes it is perhaps best known for
providing individuals with retirement benefits.
However, many people are unaware that
it also provides benefits for the surviving spouse in
the event that a recipient passes away. Let. s take a
look at how this process works and what affect it should
have on retirement savings.
A person qualifies for social
security by building up "credits". These credits are
awarded by earning certain levels of money at your place
of employment (and paying taxes into the system) Up to 4
credits can be earned on an annual basis, and a total of
40 credits are needed to meet the government
requirement. Once an individual has qualified he can
begin collecting his monthly retirement benefits as
early as age 62. Although at this point a person would
only receive 80% of his potential payments. However, if
an individual waits until his official retirement date
(varies depending on date of birth, but generally 65-67)
he will receive his full amount. The amount depends on
the number of years that are worked and the amount of
money that is earned over the course of a career. It is
important to note that if a person chooses to receive
his benefits early then he will continue to receive a
partial payment for the duration of his retirement. It
does not increase to the full 100% when the individual
reaches his official retirement age.
In many situations there will be a primary
breadwinner within the family. Consequently, a couple
would rely heavily on that individual's social security
payments during their retirement years. In other
situations couples rely equally on both of the SS checks
to make ends meet. The government realized that both
of these circumstances could lead to severe financial
hardships in the event of a death. This led them
to create a provision that passed along social security
benefits to widows and widowers. Typically, the surviving
spouse will qualify for 75% to 100% of the recipient.
s benefits.
Although this is an extremely
helpful source of income for a surviving spouse it
should not be relied on as the sole source of retirement
income. This is true for a couple of different reasons.
First, Social Security only replaces a portion of an
individual's normal earnings. As a result, life becomes
much more comfortable if SS is used as a supplement to
additional savings. Secondly, there is no guarantee that
SS will continue to exist in the future. The Baby Boom
generation is going to put a serious strain on the
current system due to their sheer size. The following
generations are going to have a very difficult time
funding the program and many analysts fear that it is
headed for a collapse. This could have catastrophic
results for those individuals who do not have additional
savings in place.
