When are you age 62 for Social Security?

Q: I was told that if you retire at 62, you have to be 62 plus one month of age before you are eligible to collect Social Security retirement. Is this true?

A: This is along the correct path but wanders a bit from full accuracy. A more accurate way of stating this is that a person must be at least age 62 through the entire month to receive benefits for that month.

A person reaching age 62 during a month is not usually at least age 62 for the entire month so benefits can first be received starting for the next month. This applies only in the actual month a person reaches age 62. For all following months they are at least age 62 all month.

However, based on actual day of birth in a month, Social Security retirement might be payable for the month a person reaches age 62. A person born on the first of the month is considered age 62 for that entire month and could start benefits effective with the month they reach age 62.

For example, a person born on February 20 is not age 62 for the full month until March. A person born on February 1 is considered age 62 for the entire month and can receive a benefit for February.

Why is this? Legal precedent holds that people attain their age on the day before their birthday. Therefore, a person born on the first of a month is considered age 62 for the entire month.

On a related topic, Social Security benefits for a month are paid in the following month. For example, payment for March is received in April.

The Social Security Retirement Planner, www.socialsecurity.gov/retire2/, has lots of information and calculators to help you plan your benefits. Today’s topic is on the “Find Your Retirement Age” page.

Retirement_Planner

 

America Saves Week 2015

America Saves Week, February 23 – 28, 2015, reminds us all to focus on the importance of saving and investing for the future. The Social Security Administration is one of many public and private organizations participating in America Saves Week.

Steps toward achieving financial goals include saving, investing and planning throughout an entire career.

What is the status of your savings? According to the America Saves Week website, www.americasavesweek.org/, you should assess your savings annually to make sure you are saving for all the right things and it provides several questions to help you do this.

Someday you will want to retire. Prepare for it. Now is the perfect time to examine your saving habits. Are you on track for a comfortable retirement?

Estimate 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.

Create a my Social Security account and view your Social Security Statement. Along with your Social Security earnings record, the Statement provides estimated retirement amounts plus family benefits should you become disabled or die. 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.

To help your planning, here is a Test Your Savings Knowledge question from the American Saves Week website:

Q: About how much more do families with a savings plan save than those without such a plan?

A: According to one study, if family incomes are the same, those families with a plan save about twice as much as those who do not have one.

Should I file for early retirement to get benefits for my child?

Q: I am near age 62 and have a daughter, age 16. If I start Social Security retirement, can she receive benefits? Is doing this a good idea?

A: If you start Social Security retirement, at age 16 your daughter should be eligible to receive benefits through your record. Information about benefits to children is at www.socialsecurity.gov/pubs/EN-05-10085.pdf.

Deciding whether starting your retirement benefits at age 62 in order for her to be eligible is completely up to you. Are you ready to retire? Does this fit your overall retirement planning?

On the plus side, payment to a child or any other family member does not reduce your own amount. Your amount, based on earnings history and age when starting benefits, is the same whether or not other family members receive through your record. In this situation, your retirement plus a separate benefit for her would be payable. On the negative, starting your Social Security retirement at age 62 or anytime younger than full retirement age (FRA), for you age 66, gives you a permanently reduced benefit amount.

Estimate your own retirement amounts at the Retirement Planner section (www.socialsecurity.gov/retire2/) of the Social Security website. For the following example, assume that your full retirement age amount is $2,000 per month. Starting your benefits when first eligible at 62 reduces this to 75 percent giving you a monthly amount of $1,500. Future cost-of-living increases will increase this but the 25 percent reduction is permanent.

As the only eligible child, your daughter’s benefit amount is one-half of your full retirement amount, not one-half of your actual benefit amount, so she is eligible for $1,000 per month until age 18, perhaps longer if she is still in high school at age 18.

Ideally, you will be enjoying your retirement for many years. Based on your long-term financial plans, is it wise to choose a permanent twenty-five percent reduction in your SSA retirement in order to have your daughter receive benefits for a year or so? If considered as part of your individual retirement financial planning, either starting now or waiting could be good. The choice is yours.

 

You do not need to start SSA retirement when you retire

Q: Do you get full Social Security benefits if you retire early but do not actually start SSA retirement benefits for several years until reaching full retirement age (FRA)? I was born in 1965 so my retirement FRA will be 67, but I have no intention of working that long and plan on not needing those Social Security benefits right away.

A: The amount of your Social Security retirement is partly based on when you start those benefits, not when you stop working. You can retire without starting Social Security. Each month of delay in the start of Social Security retirement, up to age 70, provides a higher amount.  

There is no one best time to start Social Security retirement. Decide when to do so as part of your overall retirement planning. The Social Security Retirement Planner section has lots of information and calculators to help you. 

Much can change in both your life and Social Security legislation by the time you are age 67. Keep informed of future program changes.

Social Security launches new fraud facts webpage

The Social Security Administration has launched a new web page to highlight the agency’s many efforts in fighting fraud and protecting every worker’s investment in the Social Security program. See it at www.socialsecurity.gov/antifraudfacts. 

Visitors to this site get a behind-the-scenes glimpse into the hard work done every day to fight fraud, waste, and abuse in Social Security and Supplemental Security Income (SSI) programs.  

The website includes information on the tools used to fight fraud, spotlights some of highly successful anti-fraud efforts, and provides materials you can use to help spread the word that Social Security has zero tolerance for fraud. 

One of several links from this new fraud facts webpage is to the Social Security Office of Inspector General (OIG) webpage. The direct OIG link is http://oig.ssa.gov/ and it can also be easily reached through the “contact us” links on the Social Security homepage, www.socialsecurity.gov. From the “contact us” page, click on “Report Fraud, Waste or Abuse.” 

The OIG website has lots of information including some situations, with examples, that may be considered as fraud, waste or abuse against the Social Security administration. You can report possible fraud situations there and read about some recent investigations.

Special payments after retirement

Q: I retired in 2014 but expect income in 2015 from work done before I retired. Will this lower my 2015 Social Security benefits?

A: For people younger than full retirement age, the Social Security annual earnings test, also called the retirement test, concerns how much can be earned from wages or self-employment in a calendar year without reducing benefits during that year.

Termed a special payment, money received for work done before retirement is not normally included for the earnings test. Income received after retirement is a special payment if the last thing done to earn it was completed before stopping work. Examples could include accumulated vacation or sick pay, bonuses and sales commissions. If self-employed, net income received after the first year you retire is a special payment if you performed the services to earn the payment before becoming entitled to receive Social Security. 

For example, say a person retired at the end of 2014 and started receiving Social Security retirement as of January 2015. In January, the person receives payment from the former employer for unused vacation time. Since this vacation pay was earned before retirement, it is considered a special payment and not counted towards the 2015 annual earnings limit. 

Two local occupations often receiving special payments for SSA retirement purposes are insurance salespeople and farmers. Insurance commissions for policies sold before retirement but received after the year of retirement are usually special payments. If a farmer fully harvested and stored a crop before or in the month of entitlement to SSA benefits, and then carried it over for sale in the next year, the income will not affect benefits for the year of sale. Keep documentation related to this. 

As always, this is general information.  To learn more, read the SSA publication, Special Payments After Retirement, at www.socialsecurity.gov/pubs/10063.html or contact Social Security.  Annual earnings test information is at www.socialsecurity.gov/retire2/whileworking.htm.

Update – replacement 1099 for 2014

Replacement 1099’s for 2014 are now available online. The way to get one is different from past years. 

When a 1099 replacement was previously requested online, it was mailed to the person’s address as shown on Social Security records. Receipt would take about 10 business days. 

Now, replacement 1099’s are available as a new service for people with a my Social Security account. Through your my Social Security account, the 1099 is available for downloading as a pdf for immediate printing or saving as a file. There is also be an option to have it mailed as in past years. 

Create your personal my Social Security account at www.socialsecurity.gov/myaccount/.

Benefits from first spouse if no longer married to second

Q: I am married for the second time and receive my own Social Security retirement. My first husband and I were married for 18 years and he earned lots more money than I did. If I was single again, could I draw Social Security from my first husband? 

A: The answer to this question could go in several directions depending on the amount of the person’s own retirement, other benefits received, if the marriages ended by death or divorce, and other items. Without more information, this question cannot be answered.  

The Social Security website, www.socialsecurity.gov, is great for general information, retirement planning and online services, including online applications, but when you have a detailed question such as this one, speak to a SSA representative to discuss your options. Having the Social Security number of all parties involved would be useful. Call the SSA national toll-free number at 1-800-772-1213 (TTY 1-800-325-0778) (7:00am – 7:00pm) or your local office 

Based on age, a widow or widower can start receiving Social Security survivors benefits as early as age 60. Remarriage before age 60 prevents payment. Remarriage after age 60 (for age based benefits) will not affect eligibility to survivors benefits. If twice widowed, benefits might be payable through the work record of either deceased spouse or the person’s own retirement work record. 

Survivor benefits might also be payable to the divorced spouse of a deceased worker if the marriage had lasted 10 years or more. 

More about Social Security survivors benefits is here. 

The original question did not specify that the first husband had died. If the couple had divorced, benefits to her through his work record might be payable since they were married at least 10 years, if she was not married. Information about benefits for divorced spouses is here. 

If the second marriage continues, there is the potential for spousal benefits.

When will 1099’s for 2014 be mailed?

The new year always brings questions about taxation of Social Security benefits and receipt of 1099’s.

Earlier this week, I wrote about when people might have to pay federal income taxes on their Social Security benefits. No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules. 

The SSA-1099 for Tax Year 2014 will be mailed by January 31, 2015.  

Referring to my post of January 5, these are sent to your mailing address as shown on Social Security records so I hope yours is correct. 

You can request a replacement SSA-1099 for Tax Year 2014 on or after February 1, 2015. 

If you need a replacement SSA-1099 for Tax Year 2013 or earlier, see instructions here.

Do I pay income tax on my Social Security benefits?

Q: Do I pay income tax on my Social Security benefits? 

A: Perhaps. Here is information from the Social Security website, www.socialsecurity.gov. Including links to IRS information, more details are at www.socialsecurity.gov/planners/taxes.htm 

Some people have to pay federal income taxes on their Social Security benefits. This usually happens only if you have other substantial income (such as wages, self-employment, interest, dividends and other taxable income that must be reported on your tax return) in addition to your benefits. 

No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules. 

If you file a federal tax return as an “individual” and your combined income is

·  between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.

·  more than $34,000, up to 85 percent of your benefits may be taxable. 

If you file a joint return, and you and your spouse have a combined income that is

·  between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits

·  more than $44,000, up to 85 percent of your benefits may be taxable. 

If you are married and file a separate tax return, you probably will pay taxes on your benefits.