Field Notes Blog > Social Security - 84 years young!

  • Social Security - 84 years young!

    March 08, 2019

    Featured Guest Writer: Leslie Hoover, AgChoice accounting officer 

    In 1935 Social Security was signed into law by President Roosevelt; which means it celebrated its 84 birthday in 2019. And just as people change through the years so has Social Security.

    As the United States of America was coming out of the Great Depression millions were out of work, and a large amount of concern for the elderly and those retired. Thus began a social insurance program where workers contributed to a fund to help support those entering retirement, aid to dependent children, disability, and unemployment insurance.

    84 years later and Social Security is still providing benefits:

    • Retirement benefits: Workers who have contributed to Social Security through W-2 wage deductions or through their income tax return may apply for benefits to help with everyday living expenses  and to offset the loss of wages or business/farm income. Benefits may be applied for early but it’s important to know that the earlier benefits are received the more reduced payments may be.
    • Survivors and death benefits: Under certain instances a worker’s spouse and/or dependent children may receive benefits.
    • Disability benefits: Applicable to those who have paid into Social Security for a minimum amount of time who have a serious physical or mental disability that interferes with their ability to work.
    •  Medicare: Health care benefits for those over 65 years of age and have contributed by paying Medicare taxes through wages or income tax return.

    Step One: Earning Credit

     To receive any of the benefits offered, applications must have contributed. For farmers this means paying self-employment tax through their income tax return on net farm profit. To qualify a farmer needs to earn 40 credits. In 2019, a schedule F filer can earn the maximum of four credits for the year with a net profit of $5,440.

    For years where there is no net profit, credit can be still be obtained by using optional self-employment. By working with your tax preparer to elect optional self-employment, a farmer can gain the maximum four credits for a year.

    Over a lifetime of farming more than 40 credits will hopefully be earned. But with repetitive years of low prices and high costs it’s important to plan; and optional-self employment can help. Especially when statistics show that a majority of retired persons depend on social security for half of their income in retirement.

    Step Two: Earnings History

    Meeting the credit requirement only determines your eligibility. Extra credits do not increase your benefit amount. 

    An applicant’s benefit amount is determined by the average of their earnings over their working years. This one reason is why determining when to begin collecting benefits is important.

    One Last Point

    When you begin collecting benefits don’t forget that they could be taxable!

    At the time of filing your income tax return, you could pay tax if your combined income meets the following thresholds:

    Individual

    Combined Income

    Benefits Taxed Up To

    $25,000 - $34,000

    Up to 50%

    $34,000 +

    Up to 85%

     

     

    Married Filing Jointly

    $32,000 - $44,000

    Up to 50%

    $44,000 +

    Up to 85%

     

     

     

    A taxpayers combined income is defined as:

    Adjusted Gross Income + Nontaxable Interest + ½ of your Social Security Benefit

    In summary, remember that Social Security was created 84 years ago to supplement a person’s income, so take the time to plan. Plan how to earn credit, plan to make your earnings history powerful, and plan how your benefits may be impacted when you collect them.

     

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