The Social Security Act was passed by Congress and signed into law by Franklin Delano Roosevelt in 1935.
Initially, the act only provided benefits to retirees and a lump-sum benefit upon death. Currently, Social Security provides benefits to survivors, and certain disabled persons, as well as the elderly and helps keep almost 20% of all Americans older than 64 above the government-defined poverty line.
Employers pay the same rates. Those defined as “self-employed” pay a higher rate of 12.4% on income under $113,700 towards retirement and 2.9% on all income for Medicare.
Wages are adjusted by multiplying annual salaries by wage factors that account for things such as inflation and then the last 35 years’ worth of wages averaged. In a process similar to determining tax rates the AIME number is then divided into brackets and multiplied by different percentages set by congress to determine the monthly allowance paid.
Some people can still receive retirement or survivor benefits at the same time. A person returning to work after full retirement age is entitled to keep all of their benefits after taxes no matter how much they earn.
However, if the person and/or their spouse is younger than full retirement age and earns over a certain amount their SSA benefits will be reduced by $1 for every $2 over the threshold they earn. In 2014, that number was set at $15,480.
The differences between these benefits and who qualifies for them will be covered in future articles.
Mr. Abraham is an experienced attorney and founding member of the Law Firm of Abraham & Bauer. The Towson, MD office of the firm concentrates its practice in Estate Planning, Elder Law, Probate, Medical Assistance (Medicaid), Guardianship, Asset Preservation and Fiduciary Representation.
He is an active member in a number of professional organizations that focus on law, the senior community, and estate planning. He works with clients in Central Maryland, especially in Towson, Hunt Valley, Lutherville/Timonium, Parkville, White Marsh, Bel Air & Northern Baltimore City.
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