A Financial Caregiver’s Guide to Social Security Benefits in 2020

by Cameron Huddleston

A Financial Caregiver’s Guide to Social Security Benefits in 2020

Contents

    About 65 million Americans will receive more than $1 trillion in Social Security benefits in 2020 alone. Because this government program is a major source of income for older adults, it’s important for you to be aware of how it works if you are a financial caregiver for a parent

    You likely think of Social Security as a retirement program. It is true that the bulk of its funds do go toward retiree benefits. However, Social Security provides other sorts of benefits – benefits that your parents might be eligible to receive. It can be a complex topic, but here's what you need to know.

    Key Takeaways

    1. To receive full Social Security retirement benefits, your parents must wait until their full retirement age -- which ranges from 66 to 67 depending on year of birth -- to start collecting benefits. The amount they receive will be reduced if they claim Social Security benefits early, and it will be increased if they delay claiming benefits.
    2. Social Security isn’t just a retirement program. It also provides disability benefits, survivors benefits for widows and widowers, and Supplemental Security Income for low-income seniors who are 65 and older, blind or disabled.
    3. You can use the Social Security Administration’s Benefit Eligibility Screening Tool  to find out what benefits your parents are eligible to receive.
    4. If you manage your parents’ finances because they no longer can, you need to apply with the Social Security Administration to be their representative payee to manage their benefits.

    Retirement benefits

    Most Social Security beneficiaries are retirees. However, Social Security benefits were not meant to be the sole source of income for retirees, according to the Social Security Administration. They replace just a percentage of pre-retirement income. 

    The average monthly benefit in 2020 is $1,503, which adds up to $18,036 a year. That might not be enough for your parents to live comfortably. Their benefits could be higher or lower, depending on their earnings while working. Plus, the age at which they start collecting benefits affects how much they get.

    If your parents haven’t started receiving Social Security retirement benefits yet, it’s important to consider the financial pros and cons of claiming benefits early, at full retirement age or delaying benefits.

    Your parents can start collecting Social Security retirement benefits as early as age 62. However, their benefits will be reduced by one half of 1% for each month they start receiving benefits before their full retirement age. The full retirement age is 66 for those born in 1943 to 1953. For those born in 1954 or later, the full retirement age gradually increases to age 67.

    If, for example, your parents were born in 1958 and their full retirement age is 66 and 8 months but they started receiving benefits at 62, they would get only 71.7% of their full benefit amount, according to the Social Security Administration. 

    Their benefits can be increased if they delay receiving benefits past their full retirement age. For each year they delay collecting up to age 70, benefits are increased by a certain percentage (depending on the year your parents were born). 

    If your parents haven’t started receiving Social Security retirement benefits yet, it’s important to consider the financial pros and cons of claiming benefits early, at full retirement age or delaying benefits. They can estimate their benefit amounts based on the age at which they retire by using the Social Security Retirement Estimator.


    [ Read: 10 Tips and Tricks for Managing Your Parents' Finances ]

    Disability benefits 

    If you’re a caregiver for a parent who can’t work because of a disability, be aware that your parent might be eligible for Social Security disability benefits. The disability can be a physical or mental condition, but it must be expected to last at least a year. 

    To qualify for benefits, your parent must have worked a certain number of years before becoming disabled (at least 9.5 years if age 60 or older). Then your parent’s state Disability Determination Services office will use a five-step evaluation process to determine if your parent is disabled. To qualify for benefits, your parent must be unable to do the work he or she did before becoming disable as well as any other type of work. 

    See the Social Security Administration’s guide to disability benefits for more details.

    Survivors benefits

    If one of your parents dies, the surviving parent might qualify for monthly Social Security survivors benefits based on the deceased parent’s earnings. The surviving spouse must be at least 60 years old (50 if disabled) to qualify for reduced benefits and full retirement age to get 100% of the deceased spouse’s benefit amount. 

    You can use the Benefit Eligibility Screening Tool to find out which Social Security benefits your parents might be eligible to receive.

    Be aware that your parent can’t get survivors benefits if he or she remarries before reaching age 60. Also, if your parent has worked and is eligible to receive Social Security on his or her own, that parent can claim survivors benefits then switch to his or her own benefit amount once eligible for retirement benefits if that benefit amount is higher. 

    Even if your parents were divorced, the surviving parent might qualify for survivors benefits if he or she is at least 60 and your parents were married at least 10 years. See the survivors benefits guide for more details.

    [ Read: How to File a Tax Return for a Parent ]

    Supplemental Security Income 

    This program pays benefits to adults 65 and older -- and those who are blind or disabled -- who have limited income and resources. To qualify in 2020, monthly earned income must be less than $1,651, and monthly unearned income (which includes Social Security benefits and pensions) must be less than $803.

    The monthly benefit amount in 2020 is $783 for individuals, $1,175 for couples. However, it can vary depending on where beneficiaries live and what other sources of income they have. See the Social Security Administration’s guide to Supplemental Security Income for more details. 

    You can use the Benefit Eligibility Screening Tool to find out which Social Security benefits your parents might be eligible to receive.

    Managing your parents’ benefits

    If you manage your parents’ finances because they no longer can, be aware of the requirements for managing their Social Security benefits. You must apply with the Social Security Administration to become your parent’s representative payee if you are using their benefits to pay for their needs. Then, you will have to fill out an annual report detailing how your parent’s benefits are used. 

    You also should set up a my Social Security online account for your parents. This will allow you to see their statements and set up direct deposit for their benefits. Keep in mind that it will be your responsibility as your parents’ representative payee to manage their Social Security benefits in their best interests.

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    Cameron Huddleston

    Cameron Huddleston is the author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances. You can learn more about her at CameronHuddleston.com or follow her on Twitter @CHLebedinsky.

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