Category Archives: Retirement

Can a grandchild receive SSA benefits?

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Q: I have custody of my young granddaughter and raising her without assistance from her parents. Can she receive benefits through my record when I start Social Security retirement next year?

A: In very limited situations, a dependent grandchild can receive benefits through a grandparents Social Security record.

Requirements include that the grandchild’s natural or adoptive parents are disabled or deceased at the time the grandparent became entitled to SSA retirement or disability benefits or died, if survivor benefits are involved.

The grandchild must have lived with the grandparent before reaching age 18 and receiving at least one-half support from the grandparent.

If the grandparent has adopted the grandchild, regular rules for child benefits would apply.

 To ask about your specific situation, call the national SSA toll-free number, 1-800-772-1213 (TTY 1-800-325-0778), or contact your local office.

 

Enrolling in Medicare? Go online.

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Three separate questions were received this week about how and when to enroll in Medicare when the person is not yet ready to start Social Security benefits. Even though Social Security full retirement ages (FRA) vary based on year of birth, it is important to remember that the age to begin receiving Medicare has not changed.  It is still 65.

Even if waiting until after age 65 to apply for Social Security retirement benefits, most people start getting Medicare coverage at age 65. While people often think of Medicare at age 65, certain people younger than age 65 can qualify for Medicare, too, including those who have disabilities and those who have permanent kidney failure. As with other insurance coverage, Medicare has deductions and co-pays. It helps with the cost of health care, but does not cover all medical expenses or the cost of most long-term care

People who started receiving Social Security retirement or disability benefits before age 65 do not need to apply for Medicare. They are automatically enrolled in Medicare.

If not already receiving Social Security benefits, you are not automatically enrolled in Medicare. You need to take action to enroll. To begin your Medicare coverage when you first become eligible, apply within three months of reaching age 65, but definitely before the month you turn age 65, to avoid any delays in coverage. 

The process is easy and can be completed either online or through a Social Security office. File your Medicare application online in as little as 10 minutes at www.socialsecurity.gov/medicareonly.

Traditional Medicare includes Part A (Hospital) and Part B (Medical). There is no monthly premium for Medicare hospital insurance (Part A) because you already paid for it by working and paying Medicare tax. However, there is a monthly premium for medical insurance (Part B) and an option of turning it down. The standard 2013 Medicare Part B premium is $104.90 per month. Some people pay a higher premium based on income.  

If not retiring at age 65, and already having employment related health insurance when you become eligible for Medicare, consider whether you need Medicare Medical insurance (Part B). This is important if you are covered under a group health plan, either from your own or your spouse’s current employment. If this applies, you can delay Part B enrollment without penalty. Your employers human resources department and insurance carrier can discuss this with you. For more, see the section Special enrollment period for people covered under an employer group health plan in the publication Medicare.

Related  information for you:

Medicare section of the Social Security website: http://www.socialsecurity.gov/pgm/medicare.htm

Applying online for just Medicare: http://www.socialsecurity.gov/medicareonly/.  See also the publication Apply Online for Medicare-Even if You Are Not
Ready To Retire  

 Social Security retirement planner section: http://www.socialsecurity.gov/retire2/

 Medicare website: www.medicare.gov

Specific Medicare coverage in 2013: http://www.medicare.gov/pubs/pdf/10050.pdf

 

Starting SSA retirement – consider family benefits

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One consideration mentioned this week for starting Social Security when younger than full retirement age was if Social Security benefits through your record are payable to family members. Using benefits to children, today I will provide an example of this. Benefits to children are not the only potential family benefits payable. This is just a general example.

When you qualify for Social Security retirement, your children may also qualify to receive benefits on your record. An eligible child can be your biological child, adopted child or stepchild with other categories possible. To receive benefits, the child must be unmarried and under age 18, be 18-19 years old and a full-time student (no higher than grade 12) or be 18 or older and disabled from a disability that started before age 22. Normally, benefits stop when children reach age 18 unless they are disabled. However, if the child is still a full-time student at a secondary (or elementary) school at age 18, benefits continue until the child graduates or until two months after the child becomes age 19, whichever is first. 

Starting your Social Security retirement when younger than full retirement age (FRA) permanently reduces the monthly amount paid to you. Amounts paid to others on your record will not reduce your own amount. Your personal amount is the same whether benefits on your record are paid just to you or to you and family members.

If you receive SSA retirement, an eligible child can receive up to a maximum 50 percent of your full retirement age (FRA) amount per month, not 50 percent of your reduced monthly benefit.

Based on career earnings and full retirement age amount, there is a maximum amount of family benefits payable through a person’s work record. Obtain an estimate of this amount on your Social Security Statement after creating a my Social Security account. If your earnings have been very low, it is possible that no family benefits are payable. More usual is that this maximum is reached once you and approximately two children are receiving benefits. Maximums vary based on individual work records but, once reached, additional eligible family members proportionally reduce the amount that other family members receive. All eligible children receive the same monthly amount.

For this example, say that your full retirement age (FRA) is 66 (birth years 1943-1954), your amount at FRA is $1,000 per month, and you have an eligible child. If starting Social Security at FRA, your monthly amount would be $1,000. This would be less or more if starting benefits when younger or older.  However, child’s benefits are based on the FRA amount, not the amount you are actually receiving. In this example, a child could receive up to $500 per month on your record.

Starting SSA retirement at FRA, your amount would be $1,000 and the child would receive $500 for a total of $1,500 per month. If you start reduced retirement at age 62, your amount is reduced to $750 per month but the child’s amount remains at $500 for a total of $1,250 per month.

Estimate your FRA amount with the online Retirement Estimator.

Depending on your plans and other income, perhaps child or other family benefits make early retirement worthwhile for you. Perhaps not.

Eligibility rules for your children are the same for Social Security retirement, survivors or disability benefits but amounts differ. If you receive SSA retirement or disability benefits, an eligible child can receive up to 50 percent of your full retirement age (FRA) amount per month. If you are deceased, an eligible child can receive up to 75 percent of your FRA amount per month. Other family members receiving benefits through your record can reduce these amounts.

Deciding when to start SSA retirement

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Last week I wrote that there is no one best time for you to start Social Security retirement related benefits. It is a very individual decision, based on your own personal family and financial circumstances. You can retire without starting Social Security retirement. You can start Social Security without fully retiring.

In no particular order, here are a few of many questions for you to consider before deciding when to start your Social Security, or before retiring at all.  Use the SSA retirement planner tools at http://www.socialsecurity.gov/retire2/.  

1. What are your retirement plans? Stay home or travel extensively? Can you afford to retire earlier or should you wait and continue building your savings? Social Security retirement benefits are permanently reduced if started when you are younger than full retirement age (FRA). If delayed they continue growing each month until age 70. Do you want a smaller, reduced, amount or do you want to wait for a larger amount?

2. What is your other income? Social Security was never intended to be your primary retirement income. You will need other income. If you have average earnings, under current law your Social Security retirement benefits will replace about 40 percent of your pre-retirement earnings. The percentage is lower for people in the upper income brackets and higher for people with low incomes. Social Security benefits are the foundation for a secure retirement but you will need other income such as savings, pensions or investments. Financial advisors have told me that people need about 70-80 percent of pre-retirement earnings to comfortably maintain a pre-retirement standard of living. Depending on overall income, part of your Social Security might be subject to income tax. 

 3. Are Social Security benefits through your record payable to family members?  If so, perhaps starting sooner, with a permanent age reduced amount, is a good idea for you so that family members can receive also. Starting retirement at a younger age will reduce your benefits, but amounts paid to others on your record will not reduce your own amount.

4. How long are you going to live? Retirement could last many years. On average, a man reaching age 65 today can expect to live until age 84 and a woman until age 86. About one out of every four 65-year-olds today will live past age 90 and one out of ten will live past age 95. Are members of your family generally long-lived and healthy or not?  How is your own health? Your answers might lead you to start retirement either sooner or later.

5. Do you expect die before your spouse? Will she or he be eligible for a survivors (widow/widower) benefit on your work record? Delaying your retirement benefits could provide a higher survivors benefit to your surviving spouse, if one is payable. Survivors benefits might be payable even if spousal benefits are not. 

6. Are you eligible for both Social Security retirement and survivors benefits? How much is each? The timing of which benefit to start first can matter. Survivor benefits based on age can begin as early as age 60; your own retirement not before age 62. Starting the survivor benefit first could let your retirement amount grow, up to age 70. Starting retirement first could let the survivors amount grow, up to your survivor full retirement age. Learn your options. Full retirement age (FRA) is different for retirement and survivor benefits.

 7. Will you continue working? Consider the effect of continued employment on your Social Security benefits. You might be able to work and receive all your SSA retirement or expected earnings might prevent payment of at least a portion of your benefits. Once reaching full retirement age (FRA), Social Security benefits are not limited by earnings. Ongoing employment might increase future benefits. 

8. Remember Medicare. Are you approaching age 65? You can enroll in Medicare without receiving Social Security monthly benefits. If not yet receiving Social Security, you must take action to enroll in Medicare.  Enroll in Medicare Hospital Insurance (Part A) about three months before reaching age 65. You can apply online. You may not need Medicare Medical Insurance (Part B) at age 65 if your medical insurance is under a group plan based on your, or your spouse’s, current employment.  Research your needs in advance. General Medicare general information is in “Medicare” SSA publication 05-10043. Coverage details are at www.medicare.gov. .  

9. What does your spouse or partner want?  Perhaps the most important question here. Discuss it together.

When to start receiving Social Security retirement benefits (see SSA publication 05-10147) is an individual decision. You decide what is right for you. Use the SSA retirement planner tools at http://www.socialsecurity.gov/retire2/.   

Starting SSA retirement – now or later?

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Q: I had expected to retire and start my Social Security next year at age 64 but I’ve been reading articles urging people to wait until reaching at least their SSA full retirement age, for me age 66, before starting benefits. What is best?

 A: One aspect of this question shows how Social Security has influenced retirement thinking. Prior to the Social Security Act legislation of 1935, few people were able to retire. According to the history section of the SSA website, only about five percent of the elderly received a retirement pension in 1932. People generally worked as long as they physically could do so. The concept of retirement, whether at 62 or a different age, is thanks in part to Social Security.

There is no one answer for when you should start Social Security retirement related benefits. This is a very individual decision, based on your own personal family and financial circumstances. 

If you live to the average life expectancy for your age, you will receive about the same amount in lifetime Social Security retirement benefits no matter whether you start receiving benefits at age 62, full retirement age, age 70 or any age in between. However, monthly benefit amounts can differ substantially based on when you start. Basically, you can get lower monthly payments for a longer period of time or higher monthly payments over a shorter period of time. Consider more than just the amount in your planning.

I have also seen articles suggesting that people delay starting SSA retirement benefits in order to receive a higher monthly amount. Benefit amounts change monthly in relation to your full retirement age (FRA).  Using your FRA of 66, which includes birth years of 1943-1954, if you start receiving retirement Social Security retirement at age 62, you receive 75 percent of your full retirement age amount because you will be getting benefits for an additional 48 months before FRA. Waiting until age 65, you get 93.3 percent of your FRA amount because you will be getting benefits for an additional 12 months. For an age 66 FRA, monthly percentages for age 62 – 66 are here. If delaying benefits past FRA, up to age 70 monthly increases equal 8 percent annually. Some articles encouraging waiting that I’ve seen mention that this is a larger rate of return than many investments currently offer.

There is no one answer for when you should start Social Security retirement related benefits. Next time I will discuss some topics for your consideration.

Sources of Social Security income

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Last week’s 2013 Social Security Board of Trustees report press release stated, “Income including interest to the combined OASDI Trust Funds amounted to $840 billion in 2012. ($590 billion in net contributions, $27 billion from taxation of benefits, $109 billion in interest, and $114 billion in reimbursements from the General Fund of the Treasury—almost exclusively resulting from the 2012 payroll tax legislation).”

Usually there are three main income streams into Social Security: payroll taxes, income from the Federal income taxes that some people pay on their Social Security benefits, and interest earned on government bonds held by the Social Security trust funds.

Why were General Funds a large part of 2012 income to Social Security?

Economic stimulus legislation (H.R. 4853, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010) provided for a temporary reduction in the Social Security payroll tax rate in 2011 and 2012 and reduced payroll tax revenues to the Social Security funds by an estimated $222 billion in total.

That same legislation provided for transfers from the General Fund to the trust funds in order to “replicate to the extent possible” payments that would have occurred if the payroll tax reduction had not been enacted. Those General Fund reimbursements amounted to about 15 percent of the program’s non-interest income in 2011 and 2012. The temporary payroll tax reduction expired at the end of 2012.

2013 annual report of Social Security Board of Trustees

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Last Friday, May 31, the Social Security Board of Trustees released its annual report on the long-term financial status of the Social Security Trust Funds. The complete press release about it follows. 

You can read the actual 2013 Trustees report at http://www.socialsecurity.gov/OACT/TR/2013/.   A summary is also available there.

Social Security Board of Trustees: No Change in Projected Year of Trust Fund Reserve Depletion

The Social Security Board of Trustees today released its annual report on the long-term financial status of the Social Security Trust Funds. The combined assets of the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds are projected to become depleted in 2033, unchanged from last year, with 77 percent of benefits still payable at that time. The DI Trust Fund will become depleted in 2016, also unchanged from last year’s estimate, with 80 percent of benefits still payable.

 In the 2013 Annual Report to Congress, the Trustees announced:

 • The combined trust fund reserves are still growing and will continue to do so through 2020. Beginning with 2021, the cost of the program is projected to exceed income.

 • The projected point at which the combined trust fund reserves will become depleted, if Congress does not act before then, comes in 2033 – the same as projected last year. At that time, there will be sufficient income coming in to pay 77 percent of scheduled benefits.

 • The projected actuarial deficit over the 75-year long-range period is 2.72 percent of taxable payroll — 0.05 percentage point larger than in last year’s report.

 “The Social Security Trust Funds’ projected depletion dates have not changed, and three-fourths of benefits would still be payable after depletion. But the fact remains that Congress needs to act to ensure the long-term solvency of this vital program,” said Carolyn W. Colvin, Acting Commissioner of Social Security. “The projected year for Disability Insurance Trust Fund depletion remains 2016, and legislative action is needed as soon as possible to address this financial imbalance.”

Other highlights of the Trustees Report include:

 • Income including interest to the combined OASDI Trust Funds amounted to $840 billion in 2012. ($590 billion in net contributions, $27 billion from taxation of benefits, $109 billion in interest, and $114 billion in reimbursements from the General Fund of the Treasury—almost exclusively resulting from the 2012 payroll tax legislation)

 • Total expenditures from the combined OASDI Trust Funds amounted to $786 billion in 2012.

• Non-interest income fell below program costs in 2010 for the first time since 1983. Program costs are projected to exceed non-interest income throughout the remainder of the 75-year period.

• The asset reserves of the combined OASDI Trust Funds increased by $54 billion in 2012 to a total of $2.73 trillion.

• During 2012, an estimated 161 million people had earnings covered by Social Security and paid payroll taxes.

 • Social Security paid benefits of $775 billion in calendar year 2012. There were about 57 million beneficiaries at the end of the calendar year.

 • The cost of $6.3 billion to administer the program in 2012 was a very low 0.8 percent of total expenditures.

 • The combined Trust Fund asset reserves earned interest at an effective annual rate of 4.1 percent in 2012.

The Board of Trustees is comprised of six members. Four serve by virtue of their positions with the federal government: Jacob J. Lew, Secretary of the Treasury and Managing Trustee; Carolyn W. Colvin, Acting Commissioner of Social Security; Kathleen Sebelius, Secretary of Health and Human Services; and Seth D. Harris, Acting Secretary of Labor. The two public trustees are Charles P. Blahous, III and Robert D. Reischauer.

The 2013 Trustees Report is posted at www.socialsecurity.gov/OACT/TR/2013/.

Are taxes withheld from Social Security benefits?

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An interesting question about taxation of Social Security benefits was asked last week during a retirement seminar. The person knew that his overall income after retirement would be high enough for a portion of his Social Security retirement to be taxable and asked if those taxes would be withheld from his monthly retirement benefits.

They would not be unless he requested it.Taxes are not routinely withheld from Social Security benefits. 

Based on overall income, about one-third of people receiving Social Security have to pay federal income taxes on a portion of those benefits. Of these people, some pay tax on up to 50 percent of benefits and some on up to 85 percent of 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. With income 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. With income more than $44,000, up to 85 percent of your benefits may be taxable. If married and filing a separate tax return, you probably will pay taxes on your benefits. See http://www.socialsecurity.gov/planners/taxes.htm. SSA personnel cannot provide tax advice.

 Although taxes are not routinely withheld from Social Security benefits, you can request voluntary Federal tax withholding from them.To do this, complete Internal Revenue Service (IRS) form W-4V (Voluntary Withholding Request) (http://www.irs.gov/pub/irs-pdf/fw4v.pdf ) and return it to your local Social Security office. When completing the W-4V you select a percentage of benefits for tax withholding, not a flat dollar amount. Options are to have 7 percent, 10 percent, 15 percent or 25 percent of your monthly benefit withheld. Voluntary withholding is only for Federal taxes, not state or local taxes.

Updated – How many people receive Social Security in your state?

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Updated to December 2012, the newest release of Social Security Congressional Statistics just became available online at http://www.ssa.gov/policy/docs/factsheets/cong_stats/2012/index.html.  

These annual fact sheets present data on the Social Security and Supplemental Security Income programs, including the number of people receiving benefits and the amount of total monthly payments made in the United States, in each state, and in each congressional district within the state. Information is also provided for the District of Columbia, American Samoa, Guam, the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands.

For all locations, information is available in html, pdf and Excel formats.

North Dakota information is at http://www.ssa.gov/policy/docs/factsheets/cong_stats/2012/nd.pdf

Minnesota information is at http://www.ssa.gov/policy/docs/factsheets/cong_stats/2012/mn.pdf

South Dakota information is at http://www.ssa.gov/policy/docs/factsheets/cong_stats/2012/sd.pdf.

Current through December 2011, Social Security beneficiary information by state and individual county is at http://www.ssa.gov/policy/docs/statcomps/oasdi_sc/index.html. Note that OASDI stands for the three Social Security programs, Old-Age, Survivors, and Disability Insurance.

Also through December 2011, Supplemental Security Income (SSI) recipient information by state and county is at http://www.ssa.gov/policy/docs/statcomps/ssi_sc/2011/index.html.

Estimate change in current earnings on future SSA retirement

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Q: I have an offer to help build a new company and, if I accept it, for at least several years my earnings will be much lower than now. Can I estimate how lower earnings will reduce my future Social Security retirement?

A: Yes. Estimate the effect of lower and higher future earnings with the Retirement Estimator at http://www.socialsecurity.gov/estimator/. The Retirement Estimator, one of the Social Security online retirement planning tools at http://www.socialsecurity.gov/retire2/, connects to your actual Social Security earnings record to provide personal retirement estimates at age 62, at your full retirement age, and at age 70.

The initial Retirement Estimator reply assumes that your most recent wages or self-employment earnings continue at the same amount into the future, but you can change this to obtain estimates at different ages and different future earnings amounts. Comparing your estimates for the same age based on the initial earnings level and then with lower or higher earnings provides an approximate result of different earnings on your future Social Security retirement amount. Using separate estimates, you can estimate future benefits based on either lower or higher earnings. Future earnings of more than one amount cannot be used in one estimate.

You can use the Retirement Estimator if you are enrolled in Medicare, but not if you are now applying for or receiving SSA benefits.   

Social Security retirement is based on your best 35 years of employment and your age, in months, compared to your full retirement age. You can get estimates at different ages with the Retirement Estimator. For specific months, other online tools are available in the retirement planner section, http://www.socialsecurity.gov/retire2/.  

The Retirement Estimator reply does not show personal information or your earnings record. To see your earnings record, establish a my Social Security account at http://www.socialsecurity.gov/myaccount/ and view your Social Security Statement.