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Fresno, CA Attorney Blog

Monday, January 2, 2017

Most Americans Don’t Understand How Social Security Benefits Work

Q: How well do you understand how Social Security benefits work?

Studies show that most Americans know very little about how Social Security benefits work and are fearful that it won’t be available when they need it. In light of that, here are some interesting facts you may not know.

Most Americans work to support themselves over the course of their lifetimes and pay into the Social Security system through their payroll taxes during those working years. When they retire, if they’ve satisfied the work credit minimum requirements, they can collect monthly checks from Social Security. Even people who stop working for a few years or permanently--either to raise a family, due to job loss, or for any other reason-- may have accumulated enough prior work credits to collect their own Social Security retirement benefits when they become eligible at age 62.

Currently, over 60 million people receive Social Security benefits, with two thirds of that number receiving their own retirement benefits. Over 5 million new retirees recently began collecting benefits indicating a spike that is expected to continue through 2030 as the baby boomer generation continues retiring in large numbers.

In order to receive Social Security retirement benefits, you must work a total of 40 lifetime work credits, with one work credit equaling $1300 in wages. You cannot accumulate more than 4 work credits per year, meaning that you must work a minimum of 10 years before you qualify for your own Social Security retirement benefits.

Since about 70% of the workforce doesn't have private long-term disability insurance, it's good to know that in the vast majority of cases, Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) through the Social Security Administration will cover you in the event of a qualifying long-term disability.

For over 60% of retirees, their Social Security income equals at least half of their monthly income. In fact, Social Security keeps many retirees out of poverty. The average retired worker brings home $1350 a month or $16,000 per year. Unfortunately, medical inflation exceeds the cost of living advances on Social Security awards, making it tough on seniors to get by given that their population tends to have more medical expenses and prescription drug costs than younger folks who are still employed.

Many people are concerned about the future of Social Security, with over half of the people surveyed believing Social Security will not be there for them when they retire.

Currently, Social Security has approximately $2.8 trillion in spare cash to invest, with a “current workers: beneficiary” ratio of “2.8 workers: 1 beneficiary”. The problem is that such large numbers of baby boomers will be retiring and there are not sufficient workers to maintain the current worker to beneficiary ratio. By 2020, it is projected that the spare cash will begin dwindling and by 2034--if no new laws or action is taken-- the spare cash will be exhausted.

While that sounds frightening, Social Security will always be collecting payroll tax revenue from the United States workforce, so it is reportedly incapable of going bankrupt. Social Security will be there, however benefits may need to be cut across the board at some point. Although, a payroll tax increase of approximately 7.5% (or 15 percent for self-employed workers) reportedly would "alleviate all funding concerns through 2090." It remains to be seen what future changes will be made to keep the Social Security benefits system stable.

If you have any questions about Social Security benefits, the Fresno Social Security Disability Law firm of Peña & Bromberg, PLC can assist you. Call us at 559-644-0031 for a free consultation. We assist Social Security Disability and Veterans Disability clients nationwide as well as serve local clients throughout Central Valley California.


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| Phone: 559-644-0031

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