FRA and the SSA Amendments of 1983

Regular readers know that your full retirement age (FRA) is based on year of birth and ranges from age 65 for people born in 1937 or earlier, to age 67 for people born in 1960 and later. FRA is age 66 for people born in 1943 – 1954.

Full retirement age is the age at you can first become entitled to full or unreduced retirement benefits. Starting Social Security retirement when younger than FRA results in a reduced benefit amount. Starting retirement when older than FRA results in an increased amount.

While not that often anymore, I continue to meet people who are not aware that FRA varies and they usually ask when this came about. Learning that this change was part of the 1983 Social Security Amendments is a second surprise to them, especially when they realize that these FRA changes are still being phased in.

Why was full retirement age changed in 1983?

In the early 1980’s the Social Security program faced a serious short-term financing crisis. President Reagan appointed a blue-ribbon panel, the National Commission on Social Security Reform, known as the Greenspan Commission, to study the financing issues and make recommendations for legislative changes.

Resulting legislation, Public Law 98-21, the Social Security Amendments of 1983, was signed into law on April 20, 1983, by President Ronald Reagan (signing ceremony photo). It included the changes to full retirement age.

In addition to increasing full retirement age over many years, the 1983 Amendments made numerous other changes in the Social Security and Medicare programs including the taxation of Social Security benefits and the first coverage of Federal employees.

The 1983 Amendments also provided Social Security coverage for all Members of Congress, the President and Vice-President, Federal Judges and other executive-level political appointees of the Federal Government.

There were many other provisions to the legislation. You can read a summary of the 1983 Amendments here.

Today is the 32nd anniversary of the signing of the 1983 Amendments by President Reagan.

 

April is Financial Literacy Month

April is Financial Literacy Month, a time to evaluate efforts to save, invest, and plan for your future. Planning for retirement is an essential long-term goal and a critical step on the road toward financial health. Now is a good time to start planning, no matter what your age so that time and compound interest works to your advantage.

Get a good estimate of your future SSA retirement amount with the Social Security online Retirement Estimator, one part of the SSA retirement planner. The estimator connects to your actual work record to provide a personal estimate. You can change the default estimates for those more in tune with your actual plans.

For those years from retirement, create a my Social Security account and use it to view your Social Security Statement. The Statement shows the earnings on your Social Security record but, more to the point of financial planning, has estimated personal and family benefits should you become disabled or die as well as for retirement. This information helps you arrange other parts of your financial planning.

Social Security personnel cannot assist with financial planning. Select your own helpers for this. Two websites to help you get started are www.mymoney.gov, the official U.S. government website dedicated to teaching Americans the basics of finances, and the Ballpark Estimator at www.choosetosave.org/ballpark, part of the American Savings Education Council program, which includes the Social Security Administration.

These sites, and others like them, are not just about savings for retirement. There are reasons to save for every stage of life.

April is Financial Literacy Month. Now is a good time to review your existing plan, or start one.

Reduction percentages for early retirement

If you start Social Security retirement before your full retirement age (FRA), how much of a monthly reduction will you take?

It depends on far away you are from FRA, at times called normal retirement age on the Social Security website, www.socialsecurity.gov. Starting your retirement when younger than FRA is called early retirement.

Regular readers know that Social Security retirement amounts are partly based on the number of months that you are younger than full retirement age. For example, if starting benefits 19 months before FRA, they are reduced by 19 months.

Based on year of birth, full retirement age ranges from age 65 to 67. It is age 66 for birth years 1943 – 1954. From the FRA chart you can see the amount of monthly retirement payable after reduction for age from age 62 to FRA for any given year of birth.

A recent question made me realize that I have not recently discussed the actual percentage amount of a monthly reduction. For retirement, two different monthly percentages could apply, depending again on the number of months that you are younger than full retirement age.

For early retirement, a benefit is reduced 5/9 of one percent for each month before full retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month.

For example, if the number of reduction months is 60 (the maximum number for retirement at 62 when full (normal) retirement age is 67), then the benefit is reduced by 30 percent. This maximum reduction is calculated as 36 months times 5/9 of 1 percent plus 24 months times 5/12 of 1 percent.

Today’s topic was just about early retirement, when starting benefits before reaching full retirement age. Up to age 70, retirement benefits increase at a monthly rate of 2/3 of 1 percent for delayed retirement, when started after FRA. Called delayed retirement credits, this works out to an eight percent annual increase.

Looking for Social Security retirement information? Go to the SSA Retirement Planner at http://www.socialsecurity.gov/planners/retire/ for information, calculators, and ideas to consider. All of today’s information is there, and much more.

Retirement_Planner

Voluntary tax withholding from Social Security benefits

People filing application to start Social Security benefits often ask if taxes are withheld from their monthly payments. They are not. Taxes are not routinely withheld from Social Security benefits.

Especially during this time of year as people pay their Federal income tax, another popular question is whether taxes can voluntarily be withheld from Social Security payments. Yes, you can arrange this.

If desired, you can request voluntary Federal tax withholding from your monthly Social Security benefits. You may find doing this easier than paying quarterly estimated tax payments. See http://www.socialsecurity.gov/planners/taxwithold.htm.

To start voluntary Federal tax withholding you need to complete Internal Revenue Service (IRS) Form W-4V, Voluntary Withholding Request, and return it to your local Social Security office. To change or end an ongoing voluntary withholding, complete another form W-4V.

Withholding is by your selected percentage of monthly benefits, not a flat dollar amount. When completing the W-4V you select the percentage of benefits for tax withholding. Available options are to have 7 percent, 10 percent, 15 percent or 25 percent of your monthly benefit withheld.

The Social Security Administration has no authority to withhold state or local taxes from your benefit. Voluntary withholding is only for Federal taxes.

Social Security employees cannot provide tax advice. If voluntary withholding interests you, discuss it with your tax preparer or call IRS at 1-800-829-3676 (TTY 1-800-829-4059). To start voluntary tax withholding, complete and provide IRS Form W-4V to your local Social Security office.

Average Social Security and SSI amounts in February 2015

For February 2015, following are three easily understood tables providing Social Security and Supplemental Security Income (SSI) information. These tables are online here.

Supplemental Security Income (SSI) is a separate, low-income program for the aged over 65, disabled or blind children, and disabled or blind adults that is administered by the Social Security Administration. Since SSI is completely different from Social Security, a person meeting the individual rules for each could become eligible for both programs. Income from Social Security reduces SSI amounts.

Learn more about Social Security and SSI at www.socialsecurity.gov.

Table 1 shows the number of people, in thousands, receiving Social Security and Supplemental Security Income (SSI) divided by Social Security only, SSI only, and people receiving both.

The “notes” in table 1 explain the difference in total Social Security beneficiaries shown between table 1 and table 2.

2015-02 table 1

Table 2 shows Social Security benefit information for February 2015, separated by number of beneficiaries receiving specific types of benefits and the average dollar amount of those benefits. The number of beneficiaries is again shown in the thousands, with total benefits shown in the millions and average amounts in dollars.

Social Security was never intended to provide full retirement income and this table emphasizes that fact. In February 2015, the average SSA retirement benefit, for the retiree only and excluding any family benefits, was $1,331.44.

2015-02 table 2

Table 3 shows Supplemental Security Income (SSI) benefit information for February 2015, separated by number of recipients receiving specific types of benefits and the average dollar amount of those benefits.  As above, the number of recipients are shown in the thousands, total benefits shown in the millions and average amounts in dollars.

In February 2015, the average SSI amount was $539.61. The 2015 maximum payable to an eligible individual is $733 per month. This maximum is reduced by other income, including Social Security benefits.

2015-02 table 3

These tables are online here.

Changing a child’s representative payee

Q: My ex-wife receives Social Security disability benefits for herself plus benefits for our daughter, for whom she has custody. Within the next few months, I will have custody and our daughter will live with me full-time.

Will Social Security start sending benefits for her to me or will they continue going to my ex-wife? Will the amount change when she is living with me?

A: A person receiving benefits on behalf of someone else is their representative payee. As a general guideline, the parent with legal custody is the preferred payee compared to a parent without custody but exceptions exist based on individual situations.

Changing the representative payee for your daughter, or anyone, is not automatic. You will need to request a change by completing an application to be the new payee for your daughter. This is not an online application so contact your Social Security office to do this. Expect to prove that you have custody and that your daughter is living with you.

A worker’s, in this case your ex-wife, own Social Security amount is based on his or her earnings history over many years. Benefits to a child or other family member do not change how much the worker receives for himself or herself.

Assuming you become your daughter’s representative payee, with her benefits sent in your care, the individual Social Security benefit of your ex-wife will not change although she would no longer receive the amount for your daughter.

The Social Security benefit amount for a child is based on the earnings record of the worker and will be the same wherever the child is living.

Representative payees are responsible for using Social Security benefits on behalf of the eligible person. As representative payee, you will have to report how funds for your daughter are used. Other responsibilities include reporting if your daughter is no longer living with you. Details are in the Guide for Representative Payees.

Retirement amount not limited by marriage

Q: Is there a total amount of Social Security benefits payable to a couple?

A: No, although this is a popular myth.

There is no marriage penalty, limit or other reduction when each member of a couple is eligible for their own Social Security retirement. Amounts to each member of the couple are based on their personal work records and ages when starting retirement. Amounts received by husband or wife do not affect what the other receives. Each independently starts Social Security when best for them.

Go to the SSA Retirement Planner at www.socialsecurity.gov/planners/retire/ to estimate your personal benefit amount at different retirement ages.

Note that the above refers to when each member of the couple receives their own, individual, retirement. There can be a financial benefit to a married couple if both receive Social Security through one person’s work record instead of separately.

For example, this could be if one member of a couple had low career earnings and was eligible for spousal benefits as husband or wife instead of their own personal retirement. In this case, the amount of spousal benefits is limited because they are based on the earnings of the person with the higher career earnings and not their own work record.

More about spousal and other family benefits is at the SSA Retirement Planner in the “Already near retirement age” section or go directly here.

Social Security testimony before Congress

As reported in the February edition of the Social Security newsletter, Acting Commissioner of Social Security Carolyn W. Colvin testified twice before Congress during February.

On February 11, she testified about the financial status of the Social Security Disability Insurance Trust Fund before the Senate Budget Committee.

Ms. Colvin asked for the Senate’s support for the President’s Budget request, which will reallocate .9 percent of payroll tax revenue from the Old-Age and Survivors trust fund to the Disability Insurance (DI) trust fund for 5 years. This action will keep the DI trust fund adequately financed and able to pay full benefits until 2033.

On February 26, she testified before the U.S. House Labor, Health and Human Services, Education, and Related Agencies Appropriations Sub-Committee.

The topic of the hearing was “The Vital Responsibility of Serving the Nation’s Aging and Disabled Communities.” Ms. Colvin stressed that SSA continues to meet the many challenges facing the agency, such as our hearings backlog and hiring administrative law judges. We also continue to strengthen our disability program through activities such as our continuing disability reviews and Supplemental Security Income redeterminations. These activities save billions of program dollars and protect the integrity of our programs.

Direct links to her testimony are here, within the Social Security Office of Legislative and Congressional Affairs website section. In addition to links to testimony by Social Security officials, the section has more about legislation of the 114th Congress with provisions affecting Social Security.

Earnings test not just for retirement benefits

Q: Do the Social Security earnings limits apply just to retirement? Do they apply if receiving widow’s benefits?

A: Yes, earnings limits apply for survivor benefits. The annual earnings test applies individually to everyone younger than their full retirement age (FRA) unless that person receives benefits due to their own disability. People of all ages receive Social Security and the earnings test applies to many of them.

For examples, if both members of a couple receive Social Security retirement, the earnings test applies separately to each until full retirement age. The earnings test also applies to a child, not disabled, receiving benefits through a parents record whether the parent is retired, disabled or deceased.

The earnings test does not apply to people receiving benefits because of their own disability but it does apply to non-disabled family members, including spouse and children, receiving benefits through the disabled person’s record.

Many young people receive Social Security benefits. Earnings test amounts are the same whether SSA retirement, survivors or disability is involved. Different amounts can be earned during the calendar year before benefits are reduced based on if the person is under full retirement age (FRA) the entire year, reaches FRA during the year, or is already FRA. The earnings test ends when you reach FRA.

Based on year of birth, full retirement age ranges from 65 to 67. Retirement FRA is 66 for people born in 1943 – 1954. Note that FRA’s for survivors benefits are different from retirement FRA’s.

Earnings test details are here.

Separate earning rules and work incentives apply if you receive Social Security due to your own disability. Contact Social Security before returning to work. General information is here.

Social Security Outperforms America’s Top Websites

Today’s post is mostly from the February 2015 edition of the Social Security newsletter. Read the full newsletter here.

Social Security has done it again! Social Security’s websites scored higher in customer satisfaction than those of some of the leading private sector companies in America, according to the ForeSee E-government Satisfaction Index. The Index also reported that of the 100 top-ranked federal sites, 5 of the top 6 belong to SSA.

The study analyzed 220,000 survey responses collected from users across 100 federal government websites. Social Security’s Extra Help with Medicare Prescription Drug Plan Costs, Retirement Estimator, Business Services Online, my Social Security, and online retirement application websites were all top-ranked. These websites outperformed those of private-sector customer service icons, including Amazon, L. L. Bean, and Apple.

Social Security’s websites outperform so many others because they are easy to navigate, and the information is easy to find. In addition, we employ acceptance testing, focus groups, and surveys to develop online applications and Web pages that will meet the expectations of users.

Check out all the great Social Security online services, including online applications, by visiting www.socialsecurity.gov/onlineservices.

All the above website locations are available through www.socialsecurity.gov. Specific sites named above follow:  

Extra Help with Medicare Prescription Drug Plan Costs

Retirement Estimator

Business Services Online (BSO)

my Social Security