Young people get Social Security

Regular readers know that Social Security benefits people of all ages. Highlighting information for children under the age of 18, at the end of 2013 about 3.2 million children under the age of 18 were receiving an average monthly benefit of $534 because one or both of their parents are disabled, retired or deceased.

When a parent becomes disabled or dies, Social Security benefits help to stabilize the family’s financial future. In fact:

About 325,690 minor children of retired workers were receiving an average monthly benefit of $615.

About 1.2 million minor children of deceased workers were receiving an average monthly survivor benefit of $806.

About 1.7 million minor children of disabled workers were receiving an average monthly benefit of $328.

 More about Social Security protection for young people is at http://www.socialsecurity.gov/youngpeople/

 

 

April is Financial Literacy Month

April is Financial Literacy Month, the perfect time to examine your saving habits and ensure that you are on track for a comfortable retirement. Financial planning can put your mind at ease, but getting started can be overwhelming. 

If you have not begun saving for retirement, now is a good time to start, no matter what your age. Whether retirement is near or seems a lifetime away, now is the time to begin savings 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 contains your earnings from your Social Security record but, more to the point of financial planning, has estimated personal and 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. 

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

 

Annual retirement test background

How much can I earn and still receive Social Security” has always been a popular topic for questions. The retirement earnings test, also called the annual earnings test, describes how your own employment earnings from gross wages or net self-employment income can reduce Social Security payments to you during the year.

Details about the retirement test for 2014 are in the Social Security retirement planner section and are only indirectly today’s topic.

Today, retirement test restrictions end with the month a person reaches full retirement age (FRA). Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings. This is a relatively recent change, only taking place in 2000. The retirement test still applies to beneficiaries not yet FRA.

The final version of the Social Security Act of 1935 contained retirement test language, stating that “Whenever the Board finds that any qualified individual has received wages with respect to regular employment after he attained the age of sixty-five, the old-age benefit payable to such individual shall be reduced, for each calendar month in any part of which such regular employment occurred, by an amount equal to one month’s benefit.” Recall that at this time, age 65 was the Social Security retirement age since reduced benefits did not yet exist.

Starting with the 1950 Amendments, the retirement earnings test ended at age 75. From that point on, it was established that the retirement test need not always apply. 

Over years, additional changes were made to the retirement test ending age as well as allowing partial payment depending on how much one earned. Until the 1960 Amendments, earnings over exempt amounts stopped benefits completely with the full benefit withheld when limits were exceeded.

When I started with Social Security, the retirement test applied until age 72. Several years later it eventually went to age 70 as part of the 1977 Amendments. You can read the legislative history of the retirement earnings test here.

So, when did the retirement earnings test end for people at full retirement age?

In his 1999 State of the Union Address, President Bill Clinton stated that the Social Security retirement test should be eliminated. Legislation to do this received unanimous support in both houses of Congress and, on April 7, 2000, “The Senior Citizens’ Freedom to Work Act of 2000″ was signed into law, eliminating the retirement earnings test for beneficiaries at or above full retirement age (FRA) (also called normal retirement age). It still applies to beneficiaries not yet FRA. Remarks of President Clinton during the signing statement are here. In those remarks, President Clinton also introduced the Social Security online retirement planner.

Retirees are used to it now, but ending the annual retirement test at FRA was a historic change in the Social Security retirement program. As noted earlier, from the beginning of Social Security in 1935, retirement benefits had been conditional on the requirement that the beneficiary be substantially retired. For those who have reached full retirement age, “The Senior Citizens’ Freedom to Work Act of 2000″ effectively repealed this requirement.

Retirement test information for 2014 is here.

Are SSI amounts the same all across the country?

Q: Are SSI amounts the same all across the country?

A: Supplemental Security Income (SSI) is very different from Social Security even though both programs are administered by the Social Security Administration.

Signed into law by President Nixon in 1972 (Public Law 92-603), SSI is need based and can provide payments to people with limited income or financial resources. SSI payments can be for people age 65 or older, plus disabled or blind children and adults.

As a Federal income supplement program funded by general tax revenues, not Social Security taxes, the basic maximum amounts are the same all across the country. Effective January 2014, the maximum monthly Federal benefit rates are $721 for an individual and $1,082 for a couple. Other income can reduce these amounts.

Individual States can choose to supplement the national amounts by adding to the Federal amount. If done, any additional amounts are based on State rules related the person’s income, living arrangements or other factors. There is wide variance across the country for this. Some States do not pay any supplemental amount, some do with funds included in the Federal payment, and some administer their own supplement arrangement.

Basic Supplemental Security Income information is at http://www.socialsecurity.gov/pgm/ssi.htm.

Not all income or resources count towards the SSI limits. To learn more or apply, contact Social Security by calling the national number, 1-800-772-1213 / TTY 1-800-325-0778, or your local office. 

February 2014 statistical snapshot

The monthly statistical snapshot for February 2014 for Social Security and Supplemental Security Income (SSI) is available. Monthly snapshots provide a quick view about benefits paid during the month.

Here you can learn national totals, by beneficiary count and percentage, of the different benefits paid and average amounts of each type of benefit.

For example, during February 2014, retirement related benefits accounted for 70.6 percent of all Social Security benefits paid, including benefits to retired workers, spouses of retired workers and children of retired workers. Each of these categories is shown separately with its own percentage of the total and other information.

In February 2014, across the nation 58,201 thousand people of all ages received a Social Security payment. Noted above, most of this was retirement related. Survivor benefits accounted for 10.6 percent and disability benefits, including family members, accounted for 18.9 percent.

A detailed February benefit picture for the separate Supplemental Security Income (SSI) program is linked at the bottom of the snapshot page.

 You can subscribe to receive an email alert when these monthly updates are released. To do so, follow the “Subscribe to Updates” link

When self-employed, who gets the credit? / Surviving divorced spouse benefits

When a couple works together in self-employment, who gets the Social Security work credit? Is this important? Based on a recent question, these topics are part of today’s post.

Q: Divorced and unmarried for over a decade, I had been married for over 20 years. We farmed, but when I checked my Social Security Statement work record (www.socialsecurity.gov/myaccount/), no farm self-employment earnings were there even though my ex-husband and I worked together. Only my non-farm wages were shown. Why would this be? Do I get any Social Security credit for that work? My ex-husband has since died.

A: It is likely that all of the self-employment income was posted to your ex-husbands work record rather than split between the two of you. If so, this does not imply that a mistake was made. Assigning self-employment income is done on the tax return and would have been a decision made by you two and your tax preparer at the time.

During the time you farmed, and even now, self-employment earnings were often credited to one person, usually the husband, even when both spouses worked together. Positives and negatives exist to doing this. A positive is that the person credited will have a larger amount for future retirement or other SSA benefit. This can increase benefits to family members if any are eligible on the record. A negative is that the person not credited, such as you, will have a smaller retirement benefit, or perhaps not be insured at all unless also working at another job.

If working together in a self-employment business, this is an important topic for a couple to discuss. Being insured for Social Security is not just about retirement. It involves possible benefits if the person not credited becomes disabled or dies, especially if family benefits to minor or disabled adult children could be involved.

At age 60 you are potentially eligible for surviving divorced spousal benefits on your ex-husbands record. Indirectly this could provide you a Social Security benefit related to your farm work because a survivor benefit would be higher with all the self-employment credited to his record rather than split between the two of you.

Contact Social Security for an estimate on your ex-husbands account. A survivors benefit estimate cannot be obtained online. To obtain one, call the national SSA toll-free number, 1-800-772-1213 / TTY 1-800-325-0778 (7:00am – 7:00pm business days) or your local office. Learn about SSA survivors benefits, including for a surviving divorced spouse at www.socialsecurity.gov/pgm/survivors.htm.

 

Question about delayed retirement credits

Recently I received a question about delayed retired credits, the topic of my January 8, 2014, post.

Delayed retirement credits (DRC’s) are increases to a Social Security retirement benefit when you delay starting them past full retirement age. DRC increases stop when you reach age 70 even if you continue to delay receiving benefits. There is no additional advantage to putting off Social Security benefits once you reach age 70. 

The question and answer follow:

Q: What is the value of the delayed retirement credits for ages 62-66?

A: Delayed retirement credits do not exist for ages younger than someone’s full retirement age because the person is electing reduced benefits. They are a benefit increase paid when the start of Social Security retirement benefits are delayed past full retirement age, up to age 70.

Social Security retirement benefits started before full retirement age are reduced by the number of months involved. Reduction percentages were discussed last week.

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/.  Different calculators to help your planning are also there.  With the Retirement Estimator, the compute the effect of early or delayed retirement (early or delayed means before or after FRA) calculator is useful for comparing different start month amounts.

Reduction percentages for early retirement

Q: By what percentage would my SSA retirement be reduced if started at age 63?

A: Retirement benefits are reduced by the number of months started before a person’s full retirement age (FRA), also called normal retirement age.  Determined by year of birth, FRA is scheduled to reach age 67 for people born in 1960 or later.  

Social Security retirement benefits can be started anytime during the year if you are at least age 62.  There is no need to wait for your birthday.  As a percentage, retirement benefits are reduced 5/9 of one percent for each month before FRA, 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 FRA 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. 

Total percentages of reduction vary with full retirement age because the numbers of reduction months are different from full retirement age to age 62.  

For comparison, FRA is age 66 for people born between 1943 and 1954.  For them, starting benefits at age 62 will provide 75 percent (25 percent reduction) of the full retirement age amount because an additional 48 months are involved.

However, FRA is age 66 and 6 months for people born in 1957. For them, starting benefits at age 62 will provide 72.5 percent (27.5 percent reduction) of the full retirement age amount because an additional 54 months are involved.

Monthly retirement percentages are readily available on the Social Security website.  Go to “find your retirement age” in the retirement planner section at www.socialsecurity.gov/retire2/. Click on your year of birth for monthly percentages. 

Note that Social Security survivor benefits, when based on age, are also reduced by the number of months before full retirement age involved but FRA for survivors benefits is different from FRA for retirement.

 

Annual Statistical Supplement, 2013, now available

The Social Security Annual Statistical Supplement, 2013 is now available. 

The Supplement includes more than 240 statistical tables providing comprehensive data on programs administered by the Social Security Administration. These are Social Security (Old-Age, Survivors, and Disability Insurance (OASDI) ) programs and the separate Supplemental Security Income (SSI) program.  

Information includes beneficiary counts, benefit amounts, trust fund status, program summaries and legislative histories to help you understand these programs.

In addition to Social Security administered programs, information is presented about the major health care programs, Medicare and Medicaid, and other social insurance pro­grams, including workers’ compensation, unemployment insurance, temporary disability insurance, Black Lung benefits and veterans’ benefits.

With so much information available, it is likely that some part of the Supplement will interest you.

Table of contents: http://www.ssa.gov/policy/docs/statcomps/supplement/2013/index.html

Highlights: http://www.ssa.gov/policy/docs/statcomps/supplement/2013/highlights.html

Many information snippets are here, including about unemployment, workers’ compensation veterans’ benefits are.  For example:

  • About 56.8 million persons received Social Security benefits for December 2012, an increase of 1,353,705 (2.4 percent) since December 2011. Seventy percent were retired workers and their spouses and children, 11 percent were survivors of deceased workers, and 19 percent were disabled workers and their spouses and children.
  • OASDI benefit awards in calendar year 2012 totaled 5,654,668, including 2,735,007 to retired workers, 511,524 to their spouses and children, and 885,060 to survivors of insured workers. Benefits were awarded to 960,206 disabled workers and to 562,871 of their spouses and children.

Trust fund section: http://www.ssa.gov/policy/docs/statcomps/supplement/2013/4a.html

Current beneficiary information: http://www.ssa.gov/policy/docs/statcomps/supplement/2013/5a.html

Beneficiaries by state: http://www.ssa.gov/policy/docs/statcomps/supplement/2013/5j.html

Information about people working and paying into Social Security: http://www.ssa.gov/policy/docs/statcomps/supplement/2013/4b.html

Veterans’ benefits: http://www.ssa.gov/policy/docs/statcomps/supplement/2013/veterans.html and http://www.ssa.gov/policy/docs/statcomps/supplement/2013/9f.html

Do not ignore letters from Social Security

The Social Security Administration sends people letters about their benefits for many reasons. Some of these letters confirm that action was taken to change something, such as your address.

Read these letters. They are important. Especially if the letter is confirming a change made to where your Social Security payment is sent, for example, to a different bank. The letter is sent as protection for you.

For example, if you contacted Social Security to change where you payment goes, such as to a different bank account, the letter is confirmation that action was taken and tells you the effective date of change.

What if you received a letter like this but did not make any change? Do not ignore the letter. It might mean that thieves are trying to hack into your Social Security record in order to have your benefits sent to an account they control. There have been instances of this across the country.   

Contact Social Security immediately if you receive a letter about a change in your bank direct deposit that you did not authorize. If phones are busy, be patient. Call the national Social Security toll-free number, 1-800-772-1213 / TTY 1-800-325-0778 (hours of 7:00am – 7:00pm, local time) or contact your local office. SSA national and local representatives use the same computer system to help you.

Protect yourself. Social Security does not send email asking for personal information nor do representative’s cold call for information. When you contact us, information is needed so that your questions can be answered. The difference is that you made the call, it was not unexpected.

Do not ignore letters from Social Security about your benefits, especially one about a change that you did not authorize.