The U.S. Social Security benefit system is a significant reason why many immigrants choose to move to the United States. This system was established in 1935 and is administered by the U.S. Department of Health, Education, and Welfare. Currently, this system is widely accepted by Americans and has become an essential part of their lives. Generally, the U.S. Social Security benefit system is divided into the following major parts:
(I) Social Security Card
The Social Security card, also known as a work card, is an essential document for U.S. residents. This card is issued by the U.S. Social Security Administration. Applicants must go to a Social Security office (there are over 1,300 locations across the U.S., mostly in major cities in each state) to fill out a detailed form and present documents such as a passport and birth certificate. Once verified, the Social Security card can be received within one or two months. Each American receives only one Social Security card in their lifetime; if lost, a duplicate can be requested.
The Social Security card has many functions. It is not only proof of identity but must also be presented or its number provided when applying for jobs, opening bank accounts, obtaining loans, applying for school, or applying for benefits. However, for the average person, its primary use is for tax purposes; its role in applying for benefits only becomes apparent in cases of unemployment, disability, or retirement due to old age. The Social Security card records the holder's entire history of income and tax payments. Only based on this record is one eligible to receive benefits in the future.
U.S. social welfare funds mainly come from two private taxes: the Federal Insurance Contributions Act (FICA) tax and the state disability insurance tax.
(II) Contents of Social Security Benefits
Social Security Card
Every American uses only one Social Security number. The amount of Social Security benefits they can receive in their lifetime is calculated based on the income recorded under their Social Security number. Furthermore, the name used by each person while working must be identical to the name on their Social Security card. If a name is changed and the change is not updated on the Social Security card, it can cause significant trouble. This service in the U.S. is free. Additionally, children have their own Social Security cards. When Americans fill out tax returns, they must also include their children's Social Security numbers in the immediate family section.
Paying Social Security Tax
If an American is employed by an employer, the employer will deduct the required Social Security Tax and Medicare Tax from their wages, pay them to the Internal Revenue Service (IRS) on behalf of the employee, and report the employee's income to the Social Security Administration. If an American is self-employed, these taxes are paid by the individual when filing tax returns. The IRS will inform the Social Security Administration of each American's income. The amount each person must pay is equal to the sum of the employer and employee contribution rates.
Earning Social Security "Credits"
When Americans work and pay taxes, they earn Social Security "credits," which determine whether each person will be eligible for Social Security benefits in the future. According to regulations, each person can earn a maximum of 4 credits per year. Most people need to earn 40 credits (which requires ten years of work) to be eligible for retirement benefits in the future. For younger people, the required credits may be lower when applying for disability or survivors' benefits.
Calculation of Social Security Benefits
The Social Security benefits each person can receive are a certain percentage of their average wages over their working years. When a person retires or becomes disabled, Social Security benefits should not be the only source of income for their retirement life. Similarly, after they pass away, their Social Security benefits should not be the only source of income for their family. Most Americans make other arrangements for their later years, such as pension plans, savings, and other investments. The benefit percentage for low-income individuals is slightly higher than that for high-income individuals. For an average-income earner, the benefits they can receive are 40% of their average wages over their working years. There are specialized agencies in the U.S. that provide free services to citizens to evaluate the amount of benefits they will receive.
Types of Social Security Benefits
After paying Social Security taxes, everyone can enjoy the following five types of benefits: retirement benefits, disability benefits, family benefits, survivors' benefits, and Medicare. (Supplemental Security Income is not funded by Social Security taxes and will be explained in other chapters)
Retirement
Anyone who has earned enough Social Security credits and has reached retirement age can receive retirement benefits (individuals aged 62 can also receive benefits, but the amount is reduced by a certain percentage). The retirement age for those born before 1938 is 65. The retirement age for those born after 1938 gradually increases, and for those born in 1960 (including those born after 1960), the retirement age is 67. Anyone who delays retirement, meaning they delay receiving retirement benefits, will earn special credits each month until age 70.
Disability
Anyone who has earned enough Social Security credits and suffers from a serious physical or mental illness that prevents them from engaging in regular work for more than one year, or who suffers from a terminal illness, can receive disability benefits. Generally speaking, work with a monthly income of over $800 is considered regular work.
Family Benefits
If an American qualifies for retirement or disability benefits, their family members may also be eligible to receive family benefits. Family members include:
1. Spouses over 62 years old
2. Spouses under 62 years old who are caring for a child under 16
3. Unmarried children under 18
4. Children under 19 who are full-time students
5. Children 18 or older who are disabled
If they are divorced, their ex-spouse may also be eligible to receive these benefits. (There are detailed regulations limiting the eligibility of ex-spouses.)
Survivors
If they have earned enough Social Security credits, their family members can receive survivors' benefits after they pass away. Family members include:
1. Widows or widowers aged 60 or older
2. Widows or widowers aged 50 or older who are disabled
3. Widows or widowers of any age who are caring for a child under 16
4. Unmarried children under 18
5. Children under 19 who are full-time students
6. Children 18 or older who are disabled
7. Parents who relied on the deceased as their primary source of financial support
Widows, widowers, and minor children may also receive a special one-time payment. If they were divorced, the ex-spouse may also be eligible to receive survivors' benefits. (There are detailed regulations limiting the eligibility of ex-spouses.)
Medicare
Medicare consists of two parts: Hospital Insurance (also known as Part A) and Medical Insurance (also known as Part B). Generally, anyone who is 65 or older and eligible for Social Security benefits is automatically eligible for Medicare. Those who have received disability benefits for two consecutive years are also eligible for Medicare. Others must submit an application to receive it. Hospital Insurance (Part A) is funded by Social Security taxes and covers hospital stays, skilled nursing care, and other services. Medical Insurance (Part B) is funded by premiums (paid voluntarily each month). It is used to pay for doctor's fees, outpatient treatment, and other medical expenses, including some costs not covered by Hospital Insurance, such as physical therapy and home health care.
Supplemental Security Income (SSI)
Supplemental Security Income provides monthly living subsidies to low-income and impoverished individuals. Only those aged 65 or older and the disabled are eligible. Adults or children can also receive disability payments under SSI. As the name implies, SSI is intended to supplement an American's income so that every American can reach the standard of living in their state. The federal government pays a basic amount, and the state government is responsible for an additional subsidy to help every American reach a certain standard of living. Generally speaking, those who qualify for SSI are also eligible for Medicaid, food stamps, and other subsidies. SSI is not funded by the Social Security trust fund, nor does it depend on the individual's previous wage income. It is paid for by the nation's general tax revenue to ensure that the elderly and disabled maintain a basic standard of living.
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