Social Security Trustees Report for 2014

The 2014 OASDI Trustees Report, officially called “The 2014 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds,” presents the current and projected financial status of the Social Security trust funds. 

OASDI stands for Old Age, Survivors and Disability Insurance (Social Security). There are separate OASI and DI Trust Funds, with information about each in the Trustees Report. 

Dated July 28, 2014, the full report is available at http://www.ssa.gov/OACT/TR/2014/index.html 

It is well worth your time to read at least the report Highlights and Conclusion, both of which are short.  

Short and long-range Social Security program solvency forecasts are provided using different economic possibilities. Overall, the Trustees Report contains much the same forecast for Social Security solvency as last year.  

While not expected to continue for many more years, it may surprise you to read that overall combined Social Security income is exceeding overall expenses with asset reserves still growing. As since 2010, costs exceeded tax income in 2013. 

From the Highlights: 

At the end of 2013, the OASDI program was providing benefit payments to about 58 million people: 41 million retired workers and dependents of retired workers, 6 million survivors of deceased workers, and 11 million disabled workers and dependents of disabled workers. During the year, an estimated 163 million people had earnings covered by Social Security and paid payroll taxes. Total expenditures in 2013 were $823 billion. Total income was $855 billion, which consisted of $752 billion in non-interest income and $103 billion in interest earnings. Asset reserves held in special issue U.S. Treasury securities grew from $2,732 billion at the beginning of the year to $2,764 billion at the end of the year. 

From the Conclusion: 

Under current law, the projected cost of Social Security increases faster than projected income through about 2035 primarily because of the aging of the baby-boom generation and relatively low fertility since the baby-boom period. Cost will continue to grow faster than income, but to a lesser degree, after 2035 due to increasing life expectancy. Based on the Trustees’ best estimate, program cost exceeds non-interest income for 2014, as it has since 2010, and remains higher than non-interest income throughout the remainder of the 75‑year projection period. Social Security’s theoretical combined trust funds increase with the help of interest income through 2019 and allow full payment of scheduled benefits on a timely basis until the trust fund asset reserves become depleted in 2033. At that time, projected continuing income to the combined trust funds equals about 77 percent of program cost. By 2088, continuing income equals about 72 percent of program cost. 

The Trustees project that the OASI Trust Fund and the DI Trust Fund will have sufficient reserves to pay full benefits on time until 2034 and 2016, respectively. Legislative action is needed as soon as possible to prevent depletion of the DI Trust Fund reserves in 2016, at which time continuing income to the DI Trust Fund would be sufficient to pay 81 percent of DI benefits. Lawmakers may consider responding to the impending DI Trust Fund reserve depletion as they did in 1994, solely by reallocating the payroll tax rate between OASI and DI. Such a response might serve to delay DI reforms and much needed corrections for OASDI as a whole. However, enactment of a more permanent solution could include a tax reallocation in the short-run. …

The Trustees recommend that lawmakers address the projected trust fund shortfalls in a timely way in order to phase in necessary changes gradually and give workers and beneficiaries time to adjust to them. Implementing changes soon would allow more generations to share in the needed revenue increases or reductions in scheduled benefits. Social Security will play a critical role in the lives of 59 million beneficiaries and 165 million covered workers and their families in 2014. With informed discussion, creative thinking, and timely legislative action, Social Security can continue to protect future generations.

 

Social Security Twitter Chat today at 1:30 p.m. EDT

As part of National my Social SecurityWeek, the Social Security Administration is hosting its first Twitter Chat, titled #mySocialSecurity: Planning for Your Financial Future today August 21, 2014 from 1:30 p.m. to 2:30 p.m. EDT

Joining will be the U.S. Department of the Treasury and the Federal Trade Commission.

During the Twitter Chat, you can ask questions relating to the topic using the hashtag #mySocialSecurity.

This week the Social Security Administration hopes to educate the public about the benefits of having a my Social Security account.

Individuals can use their my Social Security accounts to access their Social Security Statements to check their earnings and get estimates of future Social Security benefits.

People already receiving Social Security benefits can get benefit verification letters, change their address and phone number, and start or change their direct deposit information.

Participate in the my Social Security Twitter Chat today, Thursday August 21, 2014, 1:30 p.m. – 2:30 p.m. EDT.

Visit www.socialsecurity.gov/myaccount and create your my Social Security account today.

National my Social Security Week

If you receive Social Security benefits or have Medicare, you can use a mySocial Security online account to:

1. Get your benefit verification letter;

2. Check your benefit and payment information and your earnings record;

3. Change your address and phone number; and

4.Start or change direct deposit of your benefit payment.

 If you do not receive benefits, you can use a mySocial Security online account to:

A) Get yourSocial Security Statement to review:

          1) Estimates of your future retirement, disability, and survivors benefits;

          2) Your earnings once a year to verify the amounts we posted are correct and see the estimated Social Security and Medicare taxes you’ve paid.

B) Get a benefit verification letter stating that:

          1) You never received Social Security benefits, Supplemental Security Income (SSI) or Medicare; or

          2) You received benefits in the past, but do not currently receive them or

          3) You applied for benefits but haven’t received an answer yet.

Get your free personal online my Social Security account today! http://www.socialsecurity.gov/myaccount/

 

Planning for Someday with the SSA retirement planner

Planning for retirement, including learning the basics of Social Security, should begin well before you actually retire.  

Based on the questions I receive, advance planning is not always done. 

Lots of SSA retirement planning information is on the Social Security website, www.socialsecurity.gov, in the Retirement Benefits section and especially in the Retirement Planner area at http://www.socialsecurity.gov/retire2/.  

 Here is a partial list of Retirement Planner topics:

     Finding your retirement age (full retirement age – FRA)

     Estimating your retirement benefits and other calculators

     Working after retirement

     Discover your retirement options

     Benefits for family members

     Needed documents

     Online retirement application

     Applying just for Medicare

 Someday you will want to retire. Start planning today to make someday possible.

Mid-year retirement and the annual earnings test

Q: I have been working all year and will retire soon. Does Social Security start counting my wages with the day I start retirement or from the beginning of the year? Can I start Social Security retirement now or must I wait until 2015 due to my earnings? 

A: If you are at least age 62 and meet all requirements, start Social Security retirement when you want, whether this year after you retire, in 2015, or some other time.  

Your question refers to the annual retirement earnings test. Earnings for the retirement test include your calendar year gross wages and net income from self-employment. Other income is not included for the earnings test. 

People retire all during the year. Since those retiring mid-year might have already earned over earnings test levels for the year, there is a special one-time rule, usually used during the first year of retirement, that lets people receive Social Security retirement benefits based on monthly earnings. Using this one-time exception, you should be able to start SSA retirement when you retire despite your total earnings for this year.

Based on this one-time rule, a person retiring in 2014, at least age 62 but younger than full retirement age the entire year, can receive Social Security retirement for months that gross wages do not exceed $1,290 even though overall calendar year earnings are far above retirement test amounts. Slightly different rules apply for self-employment.   

Earnings test amounts for 2015 are not yet known, but 2014 information is here 

What is your Someday?

The newest Social Security Update became available today and includes a section, partially reprinted here, about a time that everyone seems to look forward to – Someday – and how you can help plan for yours.

From the Update newsletter: 

For many people, Someday is an elusive day on the far-off horizon—always seeming close enough to see, but too distant to touch. Perhaps Someday you plan to go skydiving. Or enter a hot dog-eating contest. Maybe Someday you plan to ride a mechanical bull. Or travel around the world. Or visit all of America’s national parks.

Someday, you will want to retire. If you are mid-career, Someday, you will need to start planning for retirement. Even if you are just now starting your career, Someday you’re going to want to see what your future Social Security benefits will be and check your earnings for accuracy. Someday has arrived. Open a my Social Security account at www.socialsecurity.gov/myaccount, and you’ll see what we mean. 

Millions of people have opened a my Social Security account, and our Someday campaign will help millions more learn about my Social Security and sign up for their free online account. Someone opens a new account just about every six seconds. 

Watch our new Public Service Announcement at www.socialsecurity.gov/myaccount.

 

Anniversary of Medicare legislation

On July 30, 1965, President Lyndon B. Johnson signed H.R. 6675 to provide health insurance for the elderly. It was signed in Independence, Missouri, in the presence of Harry S. Truman who opened the fight for such legislation in a message to Congress in 1945.

The Social Security website history section contains information about the development of Medicare. Much of this information is from there

“Lack of adequate protection for the aged against the cost of health care was the major gap in the protection of the social insurance system in 1963. Meeting this need of the aged was given top priority by President Lyndon B. Johnson’s Administration, and a year and a half after he took office this objective was achieved when a new program, “Medicare,” was established by the 1965 amendments to the social security program. 

The special economic problem which stimulated the development of Medicare is that health costs increase greatly in old age when, at the same time, income almost always declines. The cost of adequate private health insurance, if paid for in old age, is more than most older persons can afford. Prior to Medicare, only a little over one-half of those aged 65 and over had some type of hospital insurance; few among the insured group had insurance covering any part of their surgical and out-of-hospital physicians’ costs. Also, there were numerous instances where private insurance companies were terminating health policies for aged persons in the high risk category.”

Most of the new Medicare program became effective July 1, 1966. It included two related health insurance plans for persons aged 65 and over. These were a hospital insurance plan (Part A) providing protection against the costs of hospital and related care, and a supplementary medical insurance plan (Part B) covering payments for physicians’ services and other medical and health services to cover certain areas not covered by the hospital insurance plan.

General information about Medicare as it is today, go to http://www.socialsecurity.gov/medicare/

Detailed Medicare coverage information is at http://www.medicare.gov/

Here is a Medicare poster from 1965:

 

 

 

Social Security disability, retirement or both?

Q: My brother is 64 years old but in poor health even though he still works full-time. His doctors are telling him to retire. The doctors say he should qualify for disability. What would be the best for him? Social Security or disability? 

A: Just to be clear, retirement, survivors and disability benefits are all Social Security, just different parts. 

Social Security disability information is here. Your brother should especially look at the Disability Planner section. 

Since the disability definition for Social Security purposes is based on ability to work, not just health, it is unlikely that a disability application by your brother would be approved as long as he continues working full-time, assuming no employer subsidy or special considerations that allow him to work. 

In general, if working in 2014 and having earnings that average more than $1,070 a month, a person cannot be considered disabled. Usually disability clients file for benefits after they stop working or have greatly reduced work activity. With that, the decision to file or not is his.  

Only your brother can decide what is best for him. He can file an application for Social Security disability or retirement. Disability benefits are not reduced for age. Retirement benefits are reduced for age if started when the person is younger than full retirement age (FRA).

Since your brother is at least the minimum SSA retirement age of 62, another available option is for him to file for both disability and retirement (reduced for age) benefits at the same time. 

If he does this, retirement benefits could be received while the disability application is pending. If disability is not approved, his retirement benefits continue at the reduced rate. If the disability application is approved, the benefit amount is reviewed and increased although not to 100 percent. Final amounts would be based on the number of months that he received a reduced retirement.

You can estimate your reduced retirement amount

It has been many years since age 65 was routinely full retirement age (FRA). Except for people born in 1937 or earlier, FRA is an older age, resulting in a reduced retirement amount for benefits started at age 65. The legislative change to FRA was included in the Social Security Amendments of 1983, signed into law by President Reagan. 

Despite this change taking place years ago, I routinely receive questions from people who do not seem to be aware of it. Very recently, several questions arrived from a person reaching age 65 in March of 2015, when he planned to retire. He wanted to start his Social Security retirement at that time but was concerned about avoiding a reduced retirement amount. 

As noted above, since he will be age 65 in 2015, starting his SSA retirement that March results in a reduced benefit because he will still be younger that his full retirement age (FRA) of 66. The way to avoid a reduced Social Security retirement benefit is by waiting to start until FRA. 

Once at least age 62, you can start your SSA retirement with any month you chose. Any reduction or increase depends on the number of months that you are before or past your full retirement age (FRA). Reductions are permanent but any cost of living adjustments are received. 

Information and calculators are at the SSA Retirement Planner. Use the Retirement Estimator to obtain your approximate full retirement age (FRA) amount based on your own work record.

In the Retirement Planner, use the “Find your retirement age” chart to find your own full retirement age (FRA). More than just providing a FRA, this chart also shows the month-by-month percentage of reduction from age 62 to FRA. Each full retirement age has slightly different reduction percentages because the number of months from age 62 to the FRA will be different from the other FRA’s.

Full retirement age is 66 for people born between1943-1954. For them, starting SSA retirement before age 66 means a reduced amount, with different reductions for each month. Below are two images from the FRA page for these years of birth. The first shows what the FRA is and the second is an example of the monthly reduction rates for FRA at age 66. Neither is a full image.

Using these charts to estimate the retirement amount for any month is easy. For example, use a birthdate of March 7, 1950, and an FRA amount of $1,500. Starting SSA retirement effective March 2016 at age 66 provides an unreduced $1,500 monthly amount. Using this, here are results of several 2015 retirement months.

Depending on expected 2015 earnings and the 2015 SSA retirement earnings limits, which are not yet known, this person might decide to start Social Security retirement effective with January 2015, even with an actual retirement date in March. That is 14 months early, providing a monthly benefit reduced to about 92.2 percent of the FRA amount, or about $1,383.  

Benefits started effective March 2015, are 12 months early. Starting then results in a monthly retirement about 93.3 percent of the FRA, equal to about $1,399 per month,  while benefits started with April are 11 months early and reduced to about 93.9 percent or $1,408. Start benefits when best for you, whether before, at or after FRA.  

Also part of the Retirement Planner, the “Compute the effect of early or delayed retirement” calculator provides the same basic reduced benefit information while also including benefit amount increases information for retirement started when you are older than full retirement age. Early or delayed refers to before or after your full retirement age. This calculator uses the term “primary insurance amount” which means the same thing as your full retirement age (FRA) amount. As above, use the Retirement Estimator to estimate your personal FRA amount based on your own work record.