Social Security Benefits Part 1

In order to get benefits form Social Security, you must work and pay taxes into the system. An exception would be an at-home spouse or a child of a worker who would collect benefits as a survivor or a dependent.

In order to get benefits form Social Security, you must work and pay taxes into the system. An exception would be an at-home spouse or a child of a worker who would collect benefits as a survivor or a dependent. You earn Social Security "credits" that count toward eligibility for future Social Security benefits. You can earn a maximum of four credits each year. In 2001, you need to earn $830 fro each credit. The amount of money needed to earn one credit increases every year.

Most individuals need 40 credits (10 years or work) to qualify for retirement benefits. Younger people need fewer credits to be eligible for disability benefits or for their family members to be eligible for survivor benefits if they die.

During your working lifetime, you will hopefully earn more credits that you need for eligibility. These extra credits do not increase your final benefit. However, the income you earn will increase your benefit because the more you earn the longer you work, the larger your benefit will be because of the way the benefit formula is set up.

In 2001,  you and your employer each will pay 6.2 percent of your gross salary, up to $80,400, to Social Security. Self-employed individuals will pay 12.4 percent of their taxable income into Social Security (again, up to the annual limit). Self-employed individuals are allowed a deduction when filing taxes for one half of the amount paid. The limit on the taxable income goes up every year, so the more you make, the more you'll pay.