06 Jul I need money. Can I borrow from my Social Security?

Q. I need money. Can I borrow from my Social Security?

— Out of work

A. No, you cannot borrow from your current or future Social Security.

Through the years, there have been talks about allowing the option for loans from Social Security. However, the system was never designed to allow such a thing.

Social Security was established in 1935 by Franklin Delano Roosevelt.

“The system was designed to economically protect United States workers in old-age, and make provisions for the blind, dependent and disabled children,” said Nicholas Scheibner, a certified financial planner with Baron Financial Group in Fair Lawn. “The original retirement age of 65 was chosen as the most reasonable and manageable age to maintain the program without too much payroll taxation.”

The ability to tax payroll was done through the Federal Insurance Contributions Act, or “FICA” which you see on your paycheck, he said.

The original benefit for Social Security were “Retirement Benefits.” Social Security has since added benefits such as survivor, disability and spousal benefits, Scheibner said.

He said in order to qualify for your own retirement benefits, you need 40 credits.

“You receive one credit each time you earn more than the required income for that year,” he said. “In 2020, you receive one credit for each $1,410 of earnings up to the maximum of four credits per year.”

This is typically described as 10 years of work (4 quarters of 10 years = 40 credits). However, you can earn all four credits in a single month during the year, he said.

The credit system only determines if you qualify for benefits. It does not determine what your benefit will be, he said.

“If you do qualify for benefits, Social Security will calculate an average of your monthly wages for your highest 35 years of work,” Scheibner said. “If you work more than 35 years, this means higher income years can replace lower income years and increase your average.”

He said you can begin taking your own retirement benefits as early as age 62. But if you do, you will see a 30% reduction in your Full Retirement Age (FRA) benefit.

Also, if you are working, you will be subject to Social Security’s working income limits, he said.

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This story was originally published July 6, 2020.

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