If you’re planning on relying solely on your social security check for retirement, you may want to reconsider. Here’s why.
Every month, nearly 63 million people bring home a traditional Social Security benefit check.
By “traditional,” I mean as an eligible retired worker, a survivor of a deceased worker, or as a long-term disabled worker. Of these close to 63 million beneficiaries, an estimated 22.1 million are kept out of poverty as a direct result of their monthly check. Social Security is simply that important.
But what you may have overlooked is that far more people are covered by this program than you realize. In addition to making monthly payouts to tens of millions of beneficiaries, approximately 175 million workers and their immediate families are afforded protections by America’s most important social program.
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Data from the Social Security Administration (SSA) pegs long-term disability protection at 90 percent of the current workforce between ages of 21 and 64, while 96 percent of the workforce between 20 and 49 have survivors insurance protection in place for their spouse and/or young children.
Not everyone will receive a Social Security benefit
Yet Social Security is still not an entitlement. Being an American citizen doesn’t guarantee you’ll qualify for these protections, or a retired worker benefit. Rather, it’s a program that awards benefits through work. Earn 40 lifetime work credits, of which a maximum of four can be earned per year, and you’ll guarantee yourself these protections and a retired worker benefit when you retire.
This, of course, means that some folks won’t receive a retirement benefit from Social Security. Though more than nine out of 10 adults in this country will receive a Social Security retirement benefit, the following five groups will not.
1. Infrequent workers
One of the most common reasons to not receive a Social Security retired worker benefit is simply not hitting the required 40 lifetime work credits needed to earn one. Some folks drop out of the labor force and become full-time parents or perhaps caretakers for a sick parent or friend. Whatever the reason, not accruing enough work credits can disqualify someone from receiving a retirement benefit.
However, you should be aware that the bar for earning these credits is pretty low, with each credit working out to $1,360 in earned income in 2019. Thus, to max out your work credits for 2019, you’d only need $5,440 in earned income. Do this for 10 years, and you’d qualify for a Social Security retirement benefit.
2. Late-arriving legal immigrants
Legal immigration into the United States is a vital component in Social Security’s success. Migrants into this country tend to be young, which means they’re likely to spend decades in the workforce, contributing a portion of their earnings into the program via the payroll tax. In addition, by spending many years in the workforce, these legal migrants will earn themselves a Social Security benefit when they retire.
The same can’t be said for late-arriving immigrants. Legal migrants in their 50s, 60s, or even older may not have the physical ability to work long enough to accrue the 40 lifetime credits needed to earn a retired worker benefit. This can leave older legal migrants in a precarious spot, since they may not have a source of income during retirement.
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3. Undocumented immigrants
Despite what you might have heard, undocumented immigrants aren’t eligible for a Social Security benefit. Period. What you might be thinking of is Supplemental Security Income (SSI), a program run by the SSA, but funded in a completely different way. SSI can be paid to asylum seekers, refugees, and people admitted for lawful permanent residence. But make no mistake – an SSI payment is not a traditional Social Security benefit.
Interestingly enough, though, undocumented workers do somewhat contribute to Social Security’s well-being. Some undocumented immigrants will use a fake Social Security number (SSN) or a friend’s SSN to receive pay, which will be hit with the payroll tax. A recent analysis from New American Economy found that undocumented workers paid $13.3 billion into Social Security in 2016, and these workers will never receive a dime of this money back.
4. Noncovered workers
There’s also a group of Americans who’ve worked more than enough over their lifetime to reach the 40 required credits to receive a Social Security benefit, but who’ll never receive a benefit as a result of their employment.
Noncovered employees, such as state and local government workers, typically have pension plans set up with their respective counties or states. This pension takes the place of the Social Security benefit they would have received had they been part of the 175 million covered employees. The SSA estimates that around 170,000 Americans aged 60 to 89 today don’t receive a benefit today as a result of being noncovered workers.
5. Those who die before receiving benefits
Last, but not least, even workers who meet the required 40 lifetime work credits may not collect a Social Security benefit. That’s because not everyone will make it to age 62, which is the earliest point at which benefits can begin for a retired worker. In some instances, workers might opt to claim at a later time than age 62 and simply pass away before collecting a penny from the program. This is ultimately the greatest unknown of claiming a Social Security benefit: We don’t know our expiration date.
In sum, if you’re collecting a Social Security benefit, understand that you’re in the majority, but that it’s also not a guarantee for everyone.
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