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Social Security Benefits

Many of us in this day and age are familiar with the Social Security Act of 1935 as the roots still bury deep in American history. It was on August 14, 1935, an important day in time, when former President Franklin D. Roosevelt drafted his signature to carry out the Social Security Act (FDR Signs Social Security Act, History).

In President Roosevelt’s very own words, “We can never insure one hundred percent of the population against one hundred percent of the hazards and vicissitudes of life, but we have tried to frame a law which will give some measure of protection to the average citizen and to his family … This law did just that. Initially, under the 1935 law, what we now know as Social Security only compensated retirement benefits to dominant workers. A 1939 reform in the law supplemented survivor’s benefits and benefits for the retiree’s spouse and children (Social Security: A Program and Policy History). In 1956 disability benefits were coined.

Altogether, this would mean that the unemployed, disabled, and retired citizens and their loved ones would not only receive a retirement program but a safety net in the form of income which would in turn create better quality of life when citizens are no longer able to carry out their jobs due to unlikely circumstances and old age. According to Social Security: A Program and Policy History, this program opened doors for unemployment insurance, old-age insurance, and means-tested welfare programs vital during this time of history (Social Security: A Program and Policy History).

It all began with the nation’s most trying time in antiquity, The Great Depression. The Great Depression which began in 1929 was the hardest and inveterate economic downfall in the history of the industrialized realm. In the United States, the Great Depression took place immediately after the stock market had collapsed in October of 1929. As a result of this crash, Wall Street faced a panic that unfortunately obliterated millions of investors and their stocks. It was safe to say that this traumatic time in history served as the rock-bottom on which we would rebuild as a nation.

The Great Depression though stripped us economically was an impetus that allowed for the birth of the Social Security Act of 1935, and some of its attributes. The most popular among the Social Security Act was the means testing which would lower benefits to participants whose current income or assets exceed specified thresholds. It was offered to support and provide immediate help for families in need if they met the requirements and some would determine if one qualifies to file for bankruptcy or not. (Social Security: A Program and Policy History).

There has been a lot of controversy as to what is included and excluded in the means test. The means test generally excludes any aid one might receive under the provisions of the Social Security Act and the federal government benefits for state unemployment systems also in conferment to the social security act. A few courts of bankruptcy have made comments that suggest that t that unemployment is a benefit received under the SSA and that therefore you should not include it as income on the means test (Current Monthly Income for the Bankruptcy Means Test? ).

On the contract other bankruptcy courts, argue that income received for unemployment purposes is not something that falls under the Social Security Benefit and that one must be cognoscente of this fact and include in their means test calculations. Generally, means test can look at calculations in a variety of ways. According to an informative web source, in a streaming article called ‘Few understand that Social Security is already means-tested’, Wages that exist of more than $767 a month but no greater than an amount of $4,624 a month receive credit at a 32 percent rate.

This signifies the increase of retirement benefits at an even lower rate. Likewise, to any calculations associated with Social Security or any attribute of it’s realm, earnings is something’s that receives a lot of focus. In addition, we also learn from this web page that contrary to the beliefs, more equates to less for wages that are greater than $4,624. This is a month higher than the wage base maximum which they conclude is $113,700 for 2013. This would mean that the crediting rate would only be 15%.

Furthermore, we come to understand that all the wages earned including the employment taxes paid which would also be considered, that are over a certain amount would receive benefits at only a fraction of the rate for the lowest wage earners. As a result, the social security formula of how these benefits are calculated reduces the benefits that accumulates to even greater wage sums by 85 percent. All together this The higher your means, the lower your benefit (Burns, Scott. “Few Understand That Social Security Is Already Means-tested).

Next, how are social security benefits calculated and what are some special situations to consider. Ultimately there are three steps into the calculation. First, the Social Security Administration revisit an employee’s past earnings and analyze this data in regards to the guidelines of today’s wages. This is done in efforts to display how much more or less an employer has made from the last time he/she has worked. Second, the highest earnings for the last 35 years one has worked is evened out and broken down through division by the number of months in 35 years.

This will give us a quotient which we know as the Average Indexed Monthly Earnings (AIME). Social Security typically says that one should work for at least 35 years. If they possess less than 35 years of work history/earning for example if a worker was working odd jobs and they were to get laid off or medically discharged from a position for a couple of months or years, they will want to work an additional couple of years to meet the full 35 years’ worth of earnings.

Thus, we learn from a communicative source that the Social Security Administration “will average in zeroes for any years less than 35” (How Are Social Security Benefits Calculated? ). In terms of the outcome of the net result, one’s social security retirement benefit will be curtailed. This is due in part to the result of the average indexed monthly earnings which was zero if one did not have a work history where they received earning for 35 years. If we seek an example, we look into the mathematics of one’s income.

For example, Professor Hobbs collected $60,000 for the 35 years the Social Security Administration was looking for. Her average income per year would be $60,000. Now, let’s say Professor Clark also collected $60,000 for 35 years however in four of those years, he received no monthly earnings/income due to being laid offs or suspension. Then, his average earnings over 35 years would be somewhere around $55,714. That would mean, $4,286-$4,300 lower than what Professor Hobbs made. The key part to take away from this is that though the two professors collected the same wage their averages would be different.

If Professor Clark decides that he wants to make up for the years lost by working four additional years at $60,000 he will have met the full 35 years’ worth of earning recommended. Then Professor Clark and Professor Hobbs averages will be aligned (How Are Social Security Benefits Calculated? ). Now the third step, the Social Security calculations applies to the Average Indexed Monthly Earnings to formulate what we know as the Primary Insurance Amount (PIA), and the benefits transferable at the retirement age (FRA).

The PIA is the benefit, the benefit that is before the administration rounds to the next and lowest whole number, a person would collect in the even that they are chosen to continue in the process of receiving benefits for retirement purposes. We will apply the social security calculation to compute the PIA. The FRA is the age that a person will become eligible to the full or unreduced benefits for retirement. If one’s FPRA is older than 65 they are able to take ownership of their benefits at the earliest age being 62. Over the Social Security Act was a remarkable way of providing aid for diverse groups of people.

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