The 3 Components of Social Security

Submitted by Neville Associates on April 15th, 2021

Many have heard Social Security retirement benefits referred to as part of the "three-legged stool" of retirement: Social Security, a pension or defined benefit plan, and personal savings.¹ The idea is that with these three sources of income, a retiree can ensure several steady streams of income without relying too heavily on just one "leg."

But the Social Security program itself also has three important components: retirement, disability benefits, and survivors' benefits.[1] Learn more about these three components and the benefits each one can provide.

Social Security Retirement Benefits

As of 2020, around 88 percent of all adult workers are insured under the Social Security retirement program—in other words, they've worked enough "quarters" to qualify for Social Security benefits at full retirement age (FRA).² FRA is age 67 for those born 1960 and later, age 66 for those born between 1943 and 1954, and between 66 and 67 for those born from 1955 to 1959.³ Some people elect to draw their benefits early (at age 62) or wait until age 70 when their benefit maxes out.[2]

The amount of your Social Security benefits will depend on a few factors:

How old you are when you first begin drawing Social Security benefits;
How much you earned during your career; and
How many years you worked during your career.

The higher your income, the longer you worked, and the later you claim your benefits, the higher your total benefit amount will be.[3]

Social Security Disability Benefits

Another component of the Social Security program is Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). SSDI is designed for workers who have paid enough into the system to qualify for Social Security retirement, while SSI is for those who have never been able to work or who haven't worked enough quarters to qualify for SSDI or Social Security retirement.[4]

Unlike SSDI, SSI is means-tested; those who have more than $2,000 in "countable assets" (or more than $3,000 for a couple) won't be able to receive these benefits.⁴ But like Social Security retirement, SSDI is available to anyone who has paid into the Social Security program and then becomes disabled.[5]

Social Security Survivors' Benefits

Finally, the Social Security program has a mechanism to provide ongoing benefits to children whose parent or parents passed away before they could begin collecting Social Security retirement benefits, as well as a surviving spouse caring for those children.[6] These survivor benefits are based on the amount the worker would have received had they retired early, and will continue to be paid until after the youngest child graduates high school (or two months after they turn 19, whichever comes first).⁵

If you'd like to learn more about the Social Security benefits that may be available to you, you can log on to your My Social Security account, which provides information on your earning history, potential disability benefits, potential retirement benefits, and potential survivors' benefits.⁶

Important Disclosures:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.

¹https://www.thebalance.com/three-legged-stool-of-retirement-2894310

²https://www.ssa.gov/policy/docs/chartbooks/fast_facts/2020/fast_facts20.html

³https://www.ssa.gov/pubs/EN-05-10035.pdf

⁴https://www.ssa.gov/ssi/spotlights/spot-resources.htm

⁵https://www.ssa.gov/pubs/EN-05-10085.pdf

⁶https://www.ssa.gov/myaccount/

[1] https://www.investopedia.com/personal-finance/social-security-survivor-b...

[2] https://www.cnbc.com/2018/04/18/claiming-social-security-at-70-can-be-va...

[3] https://www.ssa.gov/pubs/EN-05-10070-1951.pdf

[4] https://www.ssa.gov/benefits/disability/

[5] https://www.ssa.gov/benefits/disability/