Tag Archives: money

Medicare Medical (Part B) premium varies with income

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Medicare Medical (Part B) coverage helps pay for doctors’ services and outpatient care along with other services.  

Most people incorrectly think that the costs of providing Medicare Part B coverage are covered by the monthly Part B premium. 

Since its start, the Medicare Part B premium has been highly subsidized. The standard Part B premium paid by most people covers only about 25 percent of actual coverage cost, with the government paying the remaining 75 percent. In 2013, the standard Medicare Part B premium is $104.90 per month. 

Since 2007, a small percentage of higher income beneficiaries have paid a higher monthly Part B premium. This affects less than 5 percent of people with Medicare. Most people do not pay a higher premium. Higher Medicare Part B premiums start for individuals having a modified adjusted gross income (MAGI) above $85,000 or couples above $170,000. 

Using an income-based sliding scale based on the amount of modified adjusted gross income reported to the IRS, these premiums could equal 35, 50, 65 or 80 percent of the total premium cost. Increased monthly premiums can be appealed. In addition, if you pay an increased premium and your income has gone down because of the following reasons, an increased premium can be reviewed without an appeal. These reasons are:

  • You married, divorced, or became widowed;
  • You or your spouse stopped working or reduced your work hours;
  • You or your spouse lost income-producing property due to a disaster or other event beyond your control;
  • You or your spouse experienced a scheduled cessation, termination, or reorganization of an employer’s pension plan; or
  • You or your spouse received a settlement from an employer or former employer because of the employer’s closure, bankruptcy, or reorganization.

If any of the above applies, you will be asked for documentation verifying the event and the reduction in your income.

Higher-income beneficiaries with Medicare prescription drug coverage (Part D) also pay higher premiums.  

 More information is in the booklet “Medicare Premiums: Rules for Higher-Income Beneficiaries, online at www.socialsecurity.gov/pubs/10536.html.

General  Medicare information is at http://www.socialsecurity.gov/pgm/medicare.htm and at the official Medicare website, http://www.medicare.gov/.

 

When plans change – work after retirement and your Social Security

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What if you retire, start collecting Social Security retirement, and then your plans change with a return to work? Using the following question, this is today’s topic.

Q: I started Social Security retirement at age 62, received benefits for over a year, then returned to work with high enough earnings to stop my SSA benefits due to the annual earnings test. I am ready to stop working again and restart my retirement. Will my Social Security amount be higher now because I am older? I am age 65 with a full retirement age of 66.

A: You have two issues here. One will eventually result in a higher retirement amount and the other might do so. Your monthly amount was reduced when you began Social Security retirement at age 62 because you were younger than full retirement age (FRA). While retirement amounts increase with cost-of-living adjustments and other changes, just getting older is not cause for increase and does not increase benefits already started. Considering just age, your retirement benefits will initially resume as they were when you first started them.

However, when a person electing reduced benefits reaches full retirement age (FRA), Social Security automatically reviews their record to see if there are months for which they had a reduction but did not actually receive a payment. If so, you get credit for those months, thus increasing your amount. This fits your situation since you had months without benefit payment due to your return to work. This automatic review takes place when you reach FRA. Effective then, benefits will increase by the number of months that your return to work prevented payment.

 A related issue is that new earnings can potentially increase benefits. Social Security retirement is computed using your best 35 earnings years. If new earnings are higher than a previous year used, they could increase your retirement amount. Also automatic, this earnings review takes place each year and can increase benefits whether you are younger or older than full retirement age.

See Social Security publication “How Work Affects Your Benefits” for more information.

When retirement plans change, sometimes a person can withdraw his or her Social Security application and then re-apply at a future date. Doing this requires repayment of all benefits received by you and any family members through the application. However, if you change your mind 12 months or more after becoming entitled to retirement benefits, you cannot withdraw your application. Withdrawing the retirement application was not an option for this person because he or she had already received Social Security for over a year before returning to work.

Did You Know?  Recorded in April 2013, a 28-minute webinar titled How Social Security Can Help You Plan for Retirement is now on the SSA website. Topics include your retirement amount, full retirement age, family benefits, retirement considerations and more. To watch, go to www.socialsecurity.gov and then to the new Social Media Hub at lower right.

You can own a home and receive SSI

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Q:  Can a person who owns a house and car receive Supplemental Security Income?

A:  Yes, depending on the details.

Supplemental Security Income (SSI) is a low-income program for people at least age 65, and disabled or blind adults or children. Resource limits exist for SSI, with resources defined as items you own or can convert to cash including bank accounts, property and vehicles. There are income limits also. SSI is a very different program from Social Security, although people apply for it at Social Security.

Not everything you own counts as a resource. If you live in it, your home including the land it is on, generally is not counted toward resource levels. If you own the home but do not live in it, both home and land will probably count as resources. One vehicle usually does not count as a resource either. 

Maximum SSI monthly amounts in 2013 are $710 for an eligible individual and $1,066 for an eligible couple, reduced by other income including Social Security benefits. Resource maximums are $2,000 for an individual and $3,000 for a couple. Subject to the SSI income limits, people can receive both SSI and Social Security benefits because they are two different programs. 

As with a home or vehicle, other resources might not count towards SSI resource levels. Most household goods, some insurance and some burial funds usually are not included.

Not all income counts for SSI either. For example, portions of wage and self-employment income, pensions, and State or local assistance based on need are not counted. 

SSI information is at http://www.socialsecurity.gov/pgm/ssi.htm and in SSA publication 05-11000, Supplemental Security Income.

To apply for SSI or ask questions, contact Social Security. Call the national toll-free number, 1-800-772-1213 (TTY 1-800-325-0778) or contact your local SSA office.

Benefits to a wife or husband (spousal benefits)

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An overheard office conversation reminded me that I have not written about spousal benefits in a while. A man wanted to know why his wife could not receive Social Security benefits through his record. Key to his thinking was that her own Social Security retirement amount was less than one-half of his, a very popular misconception.  

Like many misconceptions, there is a historical basis for this. In the early days of Social Security often only the husband was employed, with the wife busy but unemployed at home. In addition, no one could begin monthly retirements before full retirement age because early retirement (age reduced) benefits did not exist yet. Now, both wife and husband are often employed and reduced retirement benefits can begin as young as age 62, with full retirement ages ranging from 65 to 67 under existing law.

Social Security benefits are gender neutral. Both men and women can receive spousal (wife/husband) benefits and each must be alive for spousal benefits to apply. Survivors benefits to a widow or widower are computed differently and might be payable even if a spousal benefit was not. 

Returning to spousal benefits, the one-half idea has some validity but it refers to a comparison of the wife and husband’s individual full retirement age (FRA) amounts, not the monthly amount that either is actually receiving.   

The most that a spouse with lower career earnings could receive through the record of her or his higher earning spouse is one-half of the higher earners full retirement age amount. This is a maximum and reduced by their own Social Security retirement and by age, if younger than FRA. 

To learn if spousal benefits are possible, compare one-half the higher full retirement age (FRA) amount to the lower FRA amount.    

For example, leaving aside the actual monthly benefit amount, say we have a couple where one person has a FRA amount of $2,000 and the other has a FRA amount of $900. 

Half of the higher $2,000 FRA amount is $1,000. Since the other person’s smaller $900 FRA amount is less than this $1,000 (one-half of the higher) amount, a spousal benefit is possible. If the smaller FRA amount were $1,000 or more, and therefore not less than half of the higher, spousal benefits would not be paid.

Note that this only shows IF a spousal benefit is possible, not how much. How much a spousal benefit is depends on the person’s own Social Security retirement amount and their age. In this example, the MOST a spousal benefit could be is $100 per month, derived by subtracting the lower FRA amount of $900 from one-half the higher ($1,000) FRA amount. Potentially reduced for age, the net spousal amount is added to his or her own monthly retirement amount. 

Using the same full retirement age amounts, but with age reduced benefits involved, you can see how the one-half of benefit misconception, rather than the FRA comparison, can lead you astray.

Using the same couple, one person has a full retirement age (FRA) amount of $2,000 and the other has a FRA amount of $900.

However, now the person with the $2,000 FRA amount started retirement at age 62 (with age 66 FRA), giving him or her a benefit reduction of about 25 percent, resulting in a monthly amount of about $1,500.

The person with the FRA amount of $900 waited until full retirement age before starting Social Security. Since he or she waited until FRA, there is no age reduction and the full FRA monthly amount of $900 is received.  

Comparing the actual benefit amounts of $1,500 and $900, one-half of the higher is $1,500 divided by 2 = $750. Given that the overall smaller benefit amount of $900 is more than one-half the higher $1,500, you would wrongly conclude that spousal benefits are not payable. 

The Social Security website, www.socialsecurity.gov, has information to help plan your retirement planning.

Use the Retirement Estimator to estimates your personal full retirement age amount. Learn your full retirement age and obtain approximate monthly reduction percentages at http://www.socialsecurity.gov/retire2/agereduction.htm.

ID questions when creating your “my Social Security” account

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Q: Some of the security questions when I created a my Social Security account took me by surprise. While I expected the often seen birthdate type of question, my Social Security questions involved more details than I expected Social Security to have about me. Where do the questions come from?

A: This question was asked during one of my retirement seminars. Before answering it, I think it is important to mention that the Social Security Administration has less personal information then many people think. If not receiving monthly benefits, the bulk of personal information held by Social Security about you is from your Social Security number (SSN) application as updated, and your work history. If receiving benefits, the agency has information that you provided and needed to pay those benefits, including your address and direct deposit bank account information. 

Maintaining the security of your personal information on Social Security records is very important to the agency, which brings us back to the  question.  

Anyone at least age 18 and having an email address can create their own online my Social Security account. To create an account, you must provide some personal information about yourself and give us answers to some questions that only you are likely to know. Next, you create a username and password that you will use to access your online account. This process protects you and keeps your personal Social Security information private.

Some of the personal information requested is your name, Social Security number and birthdate. For other questions, an external authentication service provider, Experian, helps Social Security verify your identity by using information from your Experian credit report. This can result in what is known as a “soft inquiry” on your Experian credit report but does not affect credit scores and is not reported to lenders. It does provide the ability to protect your personal information by asking questions that only you should be able to answer.   

Please note that you cannot create a my Social Security account online if you have a security freeze, fraud alert, or both on your Experian credit report. You first must ask Experian to remove the freeze or alert. 

A link to my Social Security is on the homepage of www.socialsecurity.gov or you can go directly to http://www.socialsecurity.gov/myaccount/.  Linked from that page are details explaining how your identity is verified and protected. 

 

New Social Security retirement planning webinar on website

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Planning for your retirement is important. Adding to the Retirement Planner information, a brand new Social Security webinar has been added to the Social Security website, www.socialsecurity.gov.

Just recorded, this approximately 28-minute video touches upon many questions that I am routinely asked. 

The How Social Security Can Help You Plan for Retirement webinar topics include:

     How much will your retirement benefit be

     Full retirement age

     Benefits for family members

     Looking ahead – planning for retirement

     When to retire

     Life expectancy calculator

To watch this webinar, go to the Social Security homepage, www.socialsecurity.gov and then to the Social Media Hub in the lower right corner. Clicking on the persons image at right or on “more social media” brings you to the new retirement planning, and other, webinars. 

Pensions and Social Security, Part 3 – GPO

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For the relatively few people involved, today completes the series about pensions that might affect Social Security benefits. 

The general rule is that your company pension will not affect your Social Security benefits because most employment is covered by Social Security.  

The usual exception to this are pensions from government employment not covered by Social Security. A government pension from work covered by Social Security will not affect SSA benefits.

Not covered by Social Security means you did not pay Social Security payroll tax on those earnings, you did not earn coverage for SSA benefits and those earnings do not appear on your SSA work record. Any government level can be involved, not just Federal or state. Local government employment, including school districts, may or may not be covered by Social Security. 

Last week I discussed the Windfall Elimination Provision (WEP), when the person receives Social Security retirement on his or her own record through other work, separate from the non-covered government employment.

Today’s topic is the Government Pension Offset (GPO), involved when the Social Security benefits are through someone else’s record rather than your own work. The GPO affects SSA benefits as a spouse, widow or widower and is a direct offset by the government pension against Social Security benefits.

The Government Pension Offset reduces the amount of your Social Security spouse’s, widow’s or widower’s benefits by two-thirds of the amount of your government pension. The GPO can offset the total Social Security benefit.

Estimating the GPO amount is not hard. Do the math yourself or use the online GPO calculator. For example, if you receive a monthly civil service pension of $600, two-thirds of that, or $400, must be used to offset your Social Security spouse’s, widow’s or widower’s benefits. If you are eligible for a $500 spouse’s benefit, you will receive $100 per month from Social Security ($500 – $400 = $100).

Exemptions exist to the Government Pension Offset (GPO). More about the GPO is in SSA publication 05-10007, Government Pension Offset.

 Other factors that may affect Social Security benefits are part of the SSA online retirement planner at www.socialsecurity.gov.

 

 

 

Pensions and Social Security, Part 2 – WEP

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Continuing the topic of how a pension might affect Social Security benefits, the general rule is that your company pension will not affect your Social Security benefits because most employment is covered by Social Security.

So what pensions can affect Social Security? The main pension involved is from government employment, not covered by Social Security. Key is that this government employment was not covered by Social Security, meaning you did not pay Social Security payroll tax on those earnings, you did not earn coverage for SSA benefits and those earnings do not appear on your SSA work record.

Relatively few people are in this situation, but it is important to those that are. Any government level can be involved, not just Federal or state. Local government employment, including school districts, may or may not be covered by Social Security. 

Since their government employment was not covered by Social Security, for those involved any eligibility to a Social Security monthly benefit would have been earned either from other work that the person had on their own or through someone else’s record, such as through a spouse. The government pension not covered by Social Security affects benefits differently depending on this.

Called the Windfall Elimination Provision (WEP), today’s topic is when the SSA benefit is from the person’s own work. SSA benefits through someone else’s record will be covered later.

Enacted in the Social Security Amendments of 1983, the Windfall Elimination Provision provides a different formula for calculating SSA amounts. While not a direct offset or reduction of the government pension against the persons own Social Security benefit, the formula used results in a lower Social Security ­amount than otherwise would be received.

Why is this? Social Security benefits replace a percentage of a worker’s pre-retirement earnings. By design, lower-paid workers get a larger percentage of pre-retirement earnings than higher paid workers. Work not covered by Social Security does not appear on the person’s SSA record. This incorrectly makes the person’s average earnings appear lower, leading to a larger percentage of pre-retirement earnings paid. The Windfall Elimination Provision formula adjusts for this. 

The WEP formula takes into account how many years of work you have under Social Security covered employment. Overall, the reduction in the Social Security benefit cannot be more than one-half of the amount of the pension from work not covered by Social Security taxes.

The Windfall Elimination Provision does not affect most people. More about it is in SSA publication 05-10045 – Windfall Elimination Provision.

Use the special WEP Online Calculator if the WEP involves you. The usual website calculators, including the Retirement Estimator and your Social Security Statement, will not provide an accurate estimate when the WEP is a factor.

 

 

Pensions and Social Security, Part 1

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Last week I taught several Social Security pre-retirement sessions, always a source of questions. Questions about pensions and Social Security were asked at each session, providing today’s topic. 

The general rule, with one main exception, is that your company pension will not affect your Social Security benefits. 

Pension payments, annuities, and the interest or dividends from your savings and investments are not earnings for Social Security purposes. Only earned income, your gross wages or net income from self-employment, is covered by Social Security. You may have to pay income tax on pensions, annuities, interest or dividends, but you do not pay Social Security taxes. Those types of income are not on your Social Security record.

So what pensions can affect Social Security? The main pension involved is from government employment that was not covered by Social Security. Key here is that this government employment was not covered by Social Security, meaning you did not pay Social Security payroll tax on those earnings, you did not earn coverage for SSA benefits and those earnings do not appear on your SSA work record.  

Government employment can be from any level, not only Federal or state levels. For example, local government employment, including school districts, may or may not be covered by Social Security.

If your government employment is covered by both a pension plan and Social Security, you pay Social Security and Medicare taxes just as you would for any other SSA covered job. You earn coverage for the SSA retirement, survivors and disability programs and your earnings will be on your SSA record. This pension will not affect your Social Security benefit.

Federal employment provides an example of when a government pension might affect Social Security benefits, and when it will not. Noted above, key is whether the employment was covered by Social Security.

Until 1984, Federal government employment was covered under the Civil Service Retirement System (CSRS) and not by Social Security. Since this employment was not covered by Social Security, employees did not pay Social Security tax on earnings, did not earn SSA coverage and those earnings are not on their SSA work records. A CSRS pension will generally affect a Social Security benefit, if the person becomes eligible for one. Since CSRS covered work did not provide Social Security coverage, eligibility for a Social Security benefit would be from other work that the person had on their own or through someone else’s record. More about this will be in future posts.

A second Federal retirement system, the Federal Employees Retirement System (FERS), started in 1984. People who began working for the Federal government in 1984 or later are covered by FERS instead of the Civil Service Retirement System (CSRS). Work under FERS is covered by Social Security. Employees pay SSA taxes, earn SSA coverage and their earnings are shown on their Social Security work record. A FERS pension does not affect a Social Security benefit.

The Retirement Planner section of the Social Security website, www.socialsecurity.gov, has information and calculators to help in your retirement planning. Concerning today’s topic, see “Learn how certain types of earnings and pensions can affect your benefits.”

 

 

 

 

 

American Sign Language now on SSA website

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The Social Security website, www.socialsecurity.gov, now has an informational video in American Sign Language. 

Through the Multilanguage Gateway, information in many different languages is available. American Sign Language was added a few days ago.Reach the Multilanguage Gateway at top right of the Social Security homepage. Click on the “Other Languages” link. In that area, you can also change the entire website into Spanish, increase website text size for easier reading and learn about other Social Security website accessibility tools.

The American Sign Language (ASL) section has a thirteen-minute video titled “Social Security, SSI, and Medicare: What you absolutely need to know about these vital programs in American Sign Language.” 

Click on the Multilanguage Gateway American Sign Language link to view this video. Not fluent in ASL? The video is also spoken aloud and transcribed.