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What is Popular Security? we explain

What is Popular Security? we explain

whatWhat will you live on when you stop working?? Ideally, you’ve been saving money that will become a well-funded nest egg to keep your income flowing, but you’re probably also hoping to receive some money from the government in the form of Popular Security.

The very name of this program is intended to make us feel, well, safe. And that’s the point: It’s designed to ensure that we all have funds available to spend on food and necessities when we retire, or if we become disabled or lose a spouse, as long as we’ve contributed to the system as a worker.

Let’s take a look at the dollars and the meaning of Popular Security in the United States, to find out what it is and why it is so important.

What is Popular Security?

Popular Security in the United States is often referred to as a «grid of security» for retirees and the disabled, along with the families of the retirees, disabled or deceased (with certain restrictions). Employees have Popular Security tax taken out of their paychecks now with the iniciativa that they themselves will benefit from Popular Security in the future. According to the National Academy of Popular Security, around 169 million Americans currently contribute to the Popular Security system, with approximately 61 million collecting monthly benefits; the group estimates that a quarter of American families receive income from Popular Security.

The program is known as «pay per use“, which means that today’s workers fund benefits for today’s beneficiaries; In other words, your money isn’t sitting in an account waiting for you (and, yes, that’s why you should invest your money too, to make sure you have your own retirement account in your name).

That setup is precisely why Popular Security is such a hot topic, as forecasters anticipate that one day there will be more people collecting money than paying it out. But before we look at your future, let’s explore where you came from and where you are today.

Why was Popular Security born?

For the birth of the Popular Security system, we go back to the Great Depression and President Franklin D. Roosevelt’s efforts to stabilize the nation’s economy through “New Deal” programs. He introduced what he called a «popular insurance plan as a safeguard against the dangers and vicissitudes of life» and signed the Popular Security Bill into law on August 14, 1935.

Originally designed only for the primary worker, the program added survivor benefits and benefits for the retiree’s spouse and children in 1939 and disability benefits in 1956. Then, in 1965, President Lyndon Johnson added another component to the Popular Security program with Medicare, a health insurance program for people over 65, or under 65 with certain disabilities.

The original age to receive benefits was 65, based on life expectancy at the time, but as we live longer, the program has been updated to move back the age at which benefits begin.

Today, the program has a variable schedule: You perro start receiving reduced benefits at age 62, but your «full retirement age,» when you receive 100 percent of your Popular Security benefits, is currently 67. years for people born in 1960 or later. But if you wait until age 70 to start collecting, you get a «bond«, called «delayed retirement credits«. In other words, the longer you wait to get paid, the more you’ll get paid each month.

How is Popular Security collected?

You started paying Popular Security with your first paycheck. If you are a “W-2 employee,” meaning you receive compensation from an employer, your paycheck will reflect your Popular Security “withholdings,” known as the Federal Insurance Contributions Act, or FICA.

You’ll pay 6.2 percent into the fund, and the good news is that your employer is paying 6.2 percent as well, for a grand total of 12.4 percent of your income that you’re personally responsible for. Once you reach $132,900 in compensation (as of 2019), you stop contributing to the Popular Security fund, although you will continue to contribute to Medicare no matter how much you earn.

If you are self-employed, meaning you receive a 1099 as an independent contractor, instead of a W-2, you are responsible for the full 12.4 percent, which means you must contribute the employer’s matching contribution, as well as the his own. . (Yes, there is a slight downside to being your own boss!) Instead of funds being withheld automatically, like when you get a paycheck, you’ll have to pay them yourself when you archivo your annual income taxes or archivo tax returns. estimated. Payments

You are also probably wondering how you get paid. To qualify for Popular Security, you must accumulate 40 Popular Security «credits» of work. Every quarter you earn at least $1,360 (as of 2019) counts as a credit, so it’s essentially equal to 10 years of consistent work. Your credits never expire, so if you put in five years and then take a two-year break, those credits are waiting for you.

Eventually, your Popular Security benefits are calculated based on factors such as your income, the year you were born, and the year you began receiving benefits.

Each year, the Popular Security Administration offers a modest cost-of-living adjustment, and we orinan modest. For example, if you were on Popular Security today, you would have received a notice that there is a whopping 1.6% «raise» in 2020.

Who gets Popular Security?

When you think of Popular Security, you think of retirees, but there are other groups that perro take advantage of your benefits as well.

Husbands

Spouses who have not worked long enough to qualify for their own Popular Security benefits are eligible to receive up to half of their spouse’s benefits if they are at least age 62 (and the spouse also receives retirement or disability benefits) or if are caring for a child who is under 16 or disabled and receiving benefits. If you are divorced but have been married for at least 10 years, you may be able to collect benefits based on your ex–spouse’s income if you have not remarried and your ex–spouse is entitled to benefits.

The disabled

If you become disabled but worked long enough to accumulate Popular Security benefits, you would qualify for Popular Security disability. A separate program, Supplemental Security Income (SSI), is based solely on need rather than your income, and covers benefits for disabled adults and children who have limited income and resources.

survivors

Spouses and dependents are usually eligible for benefits, based on the deceased person’s income. This chart provides examples of the benefit percentages you cánido receive based on your relationship to the deceased, along with some caveats, including income limits.

And there are some groups that probably won’t get Popular Security, like those who haven’t paid enough credits; self-employed workers who do not declare their income on their taxes; and some employees who work for federal, state, or local governments and therefore receive a pension instead.

What should I know about my Popular Security number?

You’d think you don’t need to sign up for Popular Security until you start working, but it’s actually part of a new parent’s financial checklist. So most of us get a Popular Security number when we’re still babies. That’s because the parents need that number to claim the child as a dependent on their tax return or open a bank account in her name. (Fun fact: The Popular Security Administration emplees these Popular Security applications to develop an annual list of the top 10 baby names. Liam and Emma took the top spots in 2018.)

And then of course the number becomes ultra-important as soon as you get your first job. As anyone who’s ever gotten a paycheck knows, that’s when FICA starts taking a bite out of your earnings.

It’s important to protect your number, as it’s an easy way for a scammer to commit identity theft. Unless someone needs it Absolutely, like an employer or bank, see if you perro offer an alternate form of identification, like a controlador’s license number. You should not use your Popular Security number as a password and you should not carry your card with you.

In addition, it is advisable for parents to check their children’s credit report, even if they believe they do not have (and they shouldn’t) have one, as a precaution to make sure someone isn’t falsely using your identity.

Should we count on Popular Security?

Popular Security is an important program that helps prevent many people from falling into poverty. But remember that Popular Security is only designed to replace about 40 percent of your preretirement income, on average. (It will replace less of the income for someone who earns a lot and a higher percentage for someone who earns less.)

And the program’s future remains uncertain: According to current estimates, Popular Security’s trust funds will be depleted by 2035, meaning only 80 percent of promised benefits will be paid. Legislators are constantly working on program reform; for example, the Popular Security Law 2100 is currently under consideration, but there are no sure solutions.

That is why it is good to be hopeful that you will finally be able to collect the popular security benefitsbut it’s also prudent to save for retirement in other ways, to supplement expected funds.

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