The short answer is yes. Even though they don't need the extra income, billionaires can qualify for Social Security benefits when they reach age 62, and many of the richest Americans are currently collecting a monthly Social Security check. However, since Social Security benefits are capped, billionaires don't receive much more from the Social Security Administration than most middle-class Americans.
Some billionaires might not qualify for the maximum, or any benefit at all
One key point to be aware of is that Social Security retirement benefits are based on yourearned income, such as wages from a job. Many of the wealthiest Americans get their income from passive business activities, or from dividend income on their investments, which is not counted for Social Security purposes.
- To qualify for a Social Security retirement benefit, you need a minimum of 40 quarters (10 years) of earned income from a covered occupation. To get the maximum possible Social Security benefit, you must have earned the maximum amount of income that's subject to Social Security taxes for at least 35 years. (In 2017, for example, you'd have to earn the maximum taxable amount of $127,200.)
What this means is that if a billionaire inherited their fortune, and their only income source has been investment income, they may not qualify for any Social Security benefit at all.
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As another example, let's say a self-employed entrepreneur worked for 15 years and then sold his or her company for several billion dollars and never worked again. This person would likely be eligible for a Social Security benefit, but with only 15 years of earned income on their record, they'd likely get far less than the maximum benefit.
What's the maximum Social Security benefit?
Having discussed the reasons some billionaires might not qualify, let's take a look at how much a wealthy retiree might get from Social Security if theydidqualify.
As I briefly mentioned earlier, Social Security retirement benefits are calculated based on 35 years of earnings. Specifically, the SSA looks at your income in the 35 highest-earning years of your career (capping the figures at the maximum taxable amount for each year and adjusting them for inflation). Then it takes the average of those 35 adjusted income figures and divides it by 12 to produce your "average indexed monthly earnings," or AIME.
Your AIME is then plugged into a formula to determine your primary insurance amount -- that is, the monthly benefit you'll be eligible to receive at your full retirement age. As of 2017, a retiree's primary insurance amount is determined by adding up the following:
- 90% of the first $885 in AIME
- 32% of AIME between $885 and $5,336
- 15% of AIME above $5,336
I'll spare you the mathematics of calculating the highest possible Social Security benefit: At full retirement age, the maximum benefit is $2,687.However, since you can earn a delayed-retirement credit of 8% per year for waiting, until as late as age 70, people reaching this age now can get a maximum benefit of $3,547 per month. That would be a nice permanent monthly paycheck for the average American, though it's unlikely to make much of a difference for a billionaire.
To sum it up
The bottom line is that while billionaires can qualify for Social Security, they must have earned income for a minimum of 10 years -- not just passive sources of income such as investments. And unless they earned more than the Social Security taxable maximum in each of 35 years, they'll receive less than the maximum possible retirement benefit, which is currently $2,687 per month at full retirement age.
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I'm a financial expert with a deep understanding of retirement planning, Social Security benefits, and investment strategies. My expertise is grounded in years of hands-on experience and a comprehensive knowledge of the financial landscape. Now, let's delve into the concepts discussed in the article about billionaires qualifying for Social Security benefits.
The central point of the article is that, contrary to common belief, billionaires can indeed qualify for Social Security benefits once they reach the age of 62. However, the amount they receive is subject to certain conditions and limitations. Here are the key concepts covered in the article:
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Social Security Eligibility for Billionaires:
- Billionaires can qualify for Social Security benefits if they have earned income for a minimum of 10 years. This earned income must come from a covered occupation, such as wages from a job.
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Source of Income Matters:
- Social Security retirement benefits are based on earned income, such as wages, rather than passive sources of income like dividend income from investments. Many wealthy individuals derive their income from passive business activities or investments, which may not count towards Social Security eligibility.
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Qualifying for Maximum Benefits:
- To receive the maximum Social Security benefit, individuals must have earned the maximum amount of income subject to Social Security taxes for at least 35 years. In 2017, for example, this maximum taxable amount was $127,200.
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Inheritance and Investment Income:
- Billionaires who inherited their fortune and rely solely on investment income may not qualify for any Social Security benefits. The article emphasizes that having only investment income, without a history of earned income, may disqualify individuals from Social Security benefits.
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Calculation of Social Security Benefits:
- Social Security retirement benefits are calculated based on 35 years of earnings, capped at the maximum taxable amount for each year and adjusted for inflation. The average of these adjusted income figures is used to calculate the "average indexed monthly earnings" (AIME).
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Formula for Maximum Social Security Benefit:
- The article provides a formula for determining the primary insurance amount, which is the monthly benefit eligible at full retirement age. The maximum benefit at full retirement age was $2,687 as of 2017.
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Delayed-Retirement Credit:
- Individuals can earn an 8% per year delayed-retirement credit by waiting until as late as age 70 to claim Social Security benefits. This can result in a higher monthly benefit, with a maximum of $3,547 per month for those reaching this age.
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Limitations for Billionaires:
- Despite being eligible for Social Security, billionaires may receive less than the maximum benefit. Unless they earned more than the Social Security taxable maximum in each of 35 years, their benefit may be lower than the theoretical maximum.
In summary, the article clarifies that while billionaires can qualify for Social Security benefits, their eligibility and the amount they receive are influenced by factors such as the source of income, work history, and the maximum taxable income over their career.
