The Confusing World of Social Security and Supplemental Security Benefits

In my practice, I frequently find that people are confused about federal government benefits, so here are some of the basics.  Remember, though, as with all government programs, there are exceptions, so if you want to determine your eligibility or benefits, call or visit the social security administration.

I'll start with Social Security.  Social Security has three components – retirement benefits, disability benefits, and survivor benefits.  In order to qualify for Social Security retirement benefits, you must have 40 "credits."  You earn Social Security credits when you work and pay Social Security taxes. The credits are based on the amount of your earnings.  In 2012, you receive one credit for each $1,130 of earnings, up to the maximum of four credits per year.  (Since the maximum number of credits is four per year, "credits" are often referred to as "quarters.")  Each year the amount of earnings needed for credits goes up slightly as average earnings levels increase.

Once you are eligible, you can file for retirement Social Security benefits at age 62, however, if you file for benefits before your full retirement age, your benefits will be reduced.  Full retirement age ranges from 65 (if you were born in 1937 or earlier) to 67 (if you were born in 1960 or later).  If your full retirement age is 67 and you file for benefits at age 62, your monthly payment will be reduced by 30%.

Your benefits before full retirement age will also be reduced in you continue to work and earn more than $14,640 (the annual limit in 2012).  For every $2 you earn above $14,640, your benefits will be reduced by $1.  In the year in which you will reach full retirement age, your benefits are reduced $1 for every $3 you earn above the limit.  Your benefits are not reduced after you reach full retirement age.

Your Social Security retirement benefits are not tied to your Medicare eligibility.  You are not eligible for Medicare until age 65 regardless of when you elect to receive your Social Security retirement benefits.

Social Security disability benefits are paid to people who cannot work because they have a medical condition that is expected to last at least one year or result in death.  No payments are available for partial disability or short-term disability.

In general, to get Social Security disability benefits, you must meet two different earnings tests: (1) a "recent work" test and (2) a "duration of work" test to show that you worked long enough under Social Security.  Both tests are based on your age at the time you become disabled.  For example, at the low end, if you become disabled before age 28, you must have worked 1.5 years during the 3-year period ending before your disability began.  On the high end, if you become disabled at age 60, you must have worked 9.5 years and 5 out of the 10 years preceding your disability.

Your Social Security disability benefits will stop if you work at a "substantial" level.  For 2012, average earnings of $1,010 or more per month are usually considered substantial.

If you are receiving Social Security disability benefits, you will get Medicare coverage automatically after two years.  Social Security disability benefits will convert to retirement benefits at your full retirement age.  You cannot collect both disability benefits and retirement benefits at the same time.  Also, keep in mind that the amount of your social security benefits can change based on a government pension, workers' compensation payments and other factors.

Social Security survivor benefits are available to your spouse, minor children and dependent parents after your death.  Your spouse can receive your full retirement benefit once she has reached full retirement age.  She can also receive reduced benefits starting at age 60 (or younger if she is disabled).  Your spouse will lose your benefits, however, while she is married if she remarries before age 60.  A child under 18 can receive 75% of your benefit, and your dependent parents can also receive 75% each.  However, there is an overall family benefit limitation that ranges from 150% to 180% of your benefits.

Supplemental Security Income ("SSI") is completely different from social security benefits.  SSI is a welfare program for people with little or no income and few if any assets.

In order to qualify for SSI, you must be 65, blind or disabled, and your resources cannot be worth more than $2,000 (or $3,000 for a married couple).  However, Social Security does not count everything you own in deciding whether you have too many resources to qualify for SSI.  For example, they do not count: (1) the home you live in and the land it is on; (2) life insurance policies with a face value of $1,500 or less; (3) your car (with limitations); (4) burial plots for you and members of your immediate family; and (5) up to $1,500 in burial funds for you and up to $1,500 in burial funds for your spouse.

In addition, your income must not exceed approximately $850/month, although this number varies based on your circumstances and the state in which you live.  There are also certain items of income that are not counted by Social Security, but some that are that may surprise you.  For example, if you live with a friend or relative rent free, the amount of rent you are not being charged counts as income.

The most valuable part of qualifying for SSI may not be the check you receive from the government.  In most states, if you are an SSI beneficiary, you may be automatically eligible for Medicaid.  In other states, you must apply for and establish your eligibility for Medicaid with another agency.  In Illinois, if you are receiving or are approved to receive SSI, Social Security disability or Railroad disability benefits, you do not have to give the Department of Healthcare and Family Services (formerly the Department of Public Aid) documents to prove you are aged or blind or have a disability.

For more information regarding Social Security benefits or Supplemental Security Income, go to www.ssa.gov.  For more information about Medicaid in Illinois, go to www.illinois.gov for a link to the Department of Healthcare and Family Services.