Are SSA amounts based on where you live?

Q: Do Social Security retirement amounts change based on what state you live in?

A: No. Your retirement amount is based on your personal work history over many years and your age when starting benefits, not on where you live. It will not change if you move to a different state.

Your best 35 years of work are key when your retirement benefit is computed. These best 35 years, often including years immediately before retirement but selected from your full work history, are weighted for inflation and used to compute your Social Security retirement amount as if you were full retirement age (FRA). If you do not have 35 years of work, zeros are added in to reach 35 years.

When your full retirement age amount is known, the specific amount for the month you are starting Social Security is determined by reducing or increasing the FRA amount, depending on if you are younger or older than FRA for the month when benefits start. Go to the SSA Retirement Planner section to estimate your own Social Security retirement amount.

Once receiving Social Security benefits, any cost-of-living increase is computed nationally based on changes in a consumer price index from one year to the next, not where you live.

In a related manner, benefits to you if disabled or survivors benefits to your family if you die are also based on your personal work history and not where you live.

Your Social Security work record is based on employer W-2 reports or your Schedule SE tax return if self-employed. Check it for accuracy by creating a personal my Social Security account at http://www.socialsecurity.gov/myaccount/ and viewing your SSA Statement.

Earnings for 2014 will not show on your record until approximately October 2015. It is very important for your future benefits that your work record be accurate. If it has an error, contact your local office to correct it.

When did SSA retirement at age 62 begin?

Are you thinking of starting Social Security retirement at age 62, or at any time when younger than your full retirement age (FRA)? Did you know that this option was not always available?

Early retirement was not part of the original 1935 Social Security Act. At that time, SSA retirement could not start before age 65. No option for reduced retirement benefits existed.

The ability to start Social Security reduced retirement at age 62 came in later years and at different times for women and men. Signed by President Eisenhower in August 1956, the Social Security Amendments of 1956 provided women the option of starting reduced retirement at age 62. The Social Security Amendments of 1961, signed by President Kennedy on June 30, 1961, extended the option of starting early retirement at age 62 to men.

Whether you are considering retirement at age 62 or later, go to the SSA Retirement Planner website to estimate your Social Security retirement amount.

August 14 is the 80th anniversary of the signing of the historic Social Security Act in 1935 by President Franklin D. Roosevelt. To help commemorate this date and engage the public in this milestone, the Social Security Administration has launched a commemorative 80th anniversary website at www.socialsecurity.gov/80thanniversary/.

Social Security and your other pensions – GPO

Pensions generally do not reduce the amount of your Social Security but a pension based on earnings not covered by Social Security can do so.

The previously mentioned Windfall Elimination Provision (WEP) could affect the amount of your own Social Security retirement if you work for a federal, state or local government agency, a nonprofit organization or in another country and do not pay into Social Security.

What if you do not have enough Social Security covered employment to receive your own retirement benefit but you are eligible for Social Security benefits as a spouse or widow / widower? Then, if you will receive a pension from work not covered by Social Security, the Government Pension (GPO) will likely interest you.

Unlike the WEP, which involves a changed method of computing benefits, the Government Pension Offset (GPO) is a direct reduction of the SSA benefit amount as described on the SSA website, in part shown below. Some GPO exemptions apply. More about these exemptions are on the website.

From the website:

“If you receive a pension from a government job in which you did not pay Social Security taxes, some or all of your Social Security spouse’s, widow’s or widower’s benefit may be offset due to receipt of that pension. This offset is referred to as the Government Pension Offset, or GPO. 

The GPO will reduce the amount of your Social Security spouse’s, widow’s or widower’s benefits by two-thirds of the amount of your government pension. 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).”  

Go here for more about the Government Pension Offset (GPO).

Just like the Windfall Elimination Provision, the Government Pension Offset is not new. Both date back to the Social Security Amendments of 1983, signed into law by President Reagan on April 20, 1983. Designed to resolve short-term funding problems faced at the time, that legislation made significant changes to the Social Security and Medicare programs.

GPO

 

More about the WEP

Today continues the Windfall Elimination Provision (WEP) topic started this week.

To recap, pensions generally do not reduce your Social Security retirement. The Windfall Elimination Provision (WEP) is an exception to this general rule. In very limited cases, mainly involving people who have had government employment, your pension can result in a lowered Social Security retirement amount based on your own work record.

The WEP could involve you if you work for a federal, state or local government agency, a nonprofit organization or in another country and do not pay into Social Security. A pension based on earnings not covered by Social Security can affect the amount of your own Social Security retirement.

Key here is that the employment was not covered by Social Security. Most pensions are based on employment that is covered by Social Security. If you pay Social Security tax on your wages or self-employment, you are in covered employment.

For government employment, note that any level of government from federal to local can be involved. Here are some examples:

  1. Federal employment: people who began working for the Federal government in 1984 or later are covered by Social Security. Before then, Federal employees were covered by the old Civil Service Retirement System (CSRS) and did pay into Social Security. The Windfall Elimination Provision (WEP) affects CSRS retirees.
  2. State employment: sometimes a specific type of state employee, such as law enforcement, is not covered by Social Security. If so, the WEP can apply.
  3. Local government: do you work for a city government? City government employees are usually covered by Social Security. If not, the WEP can apply.
  4. School Districts: school districts are local government entities. Many, but not all, school district employees are covered by Social Security. As with the other examples, if not covered, then the WEP can apply.

When applicable, the Windfall Elimination Provision affects the amount of your own Social Security retirement. This means that, in addition to the work not covered by Social Security, you also had enough other employment in work covered by Social Security to be eligible for your own SSA retirement. Depending on the amount of annual earnings, a person needs at least 10 years of work to be insured for a retirement benefit.

So, if you are not eligible for Social Security retirement on your own work record the Windfall Elimination Provision would not apply. However, the Government Pension Offset (GPO), my next topic, might.

WEPa

 

Social Security and your other pensions – WEP

His question was “Will his military retirement will reduce his Social Security retirement?” It will not as explained below but the question brings up a topic that I have not mentioned for a while, the Windfall Elimination Provision (WEP).

As a general rule, pensions are not considered in the amount of your Social Security benefit. Pensions are not counted towards annual earnings test amounts and they do not reduce your SSA retirement amount.

The Windfall Elimination Provision (WEP) is an exception to this general rule. In very limited cases, mainly involving people who have had government employment, their pension can result in a lowered Social Security retirement amount based on your own work record.

In summary, the WEP could be important to you if you work for a federal, state or local government agency, a nonprofit organization or in another country and do not pay into Social Security. A pension based on earnings not covered by Social Security can affect the amount of your own Social Security retirement.

Key here is that the employment was not covered by Social Security. Most pensions are based on employment that is covered by Social Security. If you pay Social Security tax on your wages or self-employment, then you are in covered employment.

Military service has been covered employment for Social Security for many years so a military retirement pension does not reduce Social Security retirement.

The WEP is not a direct reduction of your own Social Security retirement. It is a change in the formula used to compute a retirement amount that results in a lower retirement benefit. As a result, estimates of your SSA retirement amount on your Statement or from the online Retirement Estimator will not be accurate. Instead, use the WEP Calculator for your retirement estimate. The WEP Calculator is in the Retirement Planner portion of the Social Security website, www.socialsecurity.gov.

The Windfall Elimination Provision is not new. It dates back to the Social Security Amendments of 1983, signed into law by President Reagan on April 20, 1983. Designed to resolve short-term funding problems faced at the time, that legislation made significant changes to the Social Security and Medicare programs.

I will write more about the Windfall Elimination Provision later this week. Additional WEP information is here.

WEP

From wife to widow

Q: My dad died this month at age 89 and is survived by his wife, my stepmother. She is in her 80’s and her Social Security amount is less than his. What does she need to do to get his Social Security benefits?

A: Before getting to this question, two points must be emphasized.

First, always contact Social Security when there is a death in the family. Call the national SSA toll-free number at 1-800-772-1213 (TTY 1-800-325-0778) or your local office. If additional benefits are payable, action can begin to start them and, if not, other information can be given.

Second, when eligible for SSA benefits on two records, such as your own retirement and as a widow or widower, you receive the higher benefit amount and not all of one plus all the other.

Since her Social Security amount is less than his, it is probable that her amount will increase to about what his had been.

If she now receives Social Security benefits as a spouse on her husband’s record, changing to a widow’s benefit will take place automatically once his death is reported to Social Security. This is because information about her is already part of his record, including evidence of marriage.

If not yet receiving benefits as a spouse, and therefore not yet connected to his record, she will need to complete an application for survivors benefits as his widow. This is easy to do and can be completed during a telephone or personal interview however she prefers. Evidence of their marriage and his death will be requested. All documents are returned to her.

In addition to increased ongoing benefits, she will probably be eligible for a one-time Social Security benefit of $255 to help towards funeral costs. This is arranged with the monthly survivors benefits.

Your dad would not be eligible to Social Security for the month of his death. Benefits for a month are paid in the following month. If received, these are usually returned to Treasury by the bank. However, she will be eligible for the widow’s benefit for the month of death.

More about Social Security survivors benefits is at http://www.socialsecurity.gov/survivors/.

 

Anniversary of Social Security payment date change

Payment Schedule 2015Today is the anniversary of the change to having several different Social Security payment dates throughout the month. All Social Security payments were issued on the third of the month until 1997. On June 11, 1997, the first Social Security benefits were issued based on birthdate.

Since payment date is always a popular topic, I have a link to the Social Security 2015 payment date schedule in the blogroll section of this post.

With several exceptions, since 1997 Social Security payment dates depend on the number holder’s (NH) date of birth. You are the NH if receiving Social Security on your own work record. If receiving based on the work of someone else, that person is the NH.

Therefore, if you receive Social Security retirement or disability through your own work, the payment date is based on your birth date. A child or spouse receiving benefits on your record will also have a payment date based on your birth date.

A couple can receive Social Security payment on different days if each person is receiving his or her own retirement benefit.

Social Security benefits are paid in the following month. This means the benefit for May is received in June.

 

Working and Supplemental Security Income (SSI)

On April 23, I posted about returning to work when receiving Social Security disability. Special rules called work incentives make it possible for people with disabilities, whether receiving Social Security or Supplemental Security Income (SSI), to work and still receive monthly payments and Medicare or Medicaid.

Returning to the topic, today I will mention one of the work incentives when receiving Supplemental Security Income (SSI).

Since SSI is very different from Social Security, the work incentives are different too. SSI involves cash assistance payments to aged, blind and disabled people (including children under age 18) who have limited income and resources. The Federal government pays for SSI from general tax revenues, not Social Security money.

If receiving both Social Security and SSI, you need to follow the separate rules for each program. To discuss your own benefits, speak to a Social Security representative.

Always report a return to work. This is very important. Also report related changes including stopping the work. 

A very basic Supplemental Security Income (SSI) work incentive is the exclusion of some employment income when figuring out the amount of a monthly SSI payment.

When working, the first $65 of earnings received in a month do not count, plus one-half of the remaining earnings. This means that less than one-half of your earnings are counted against your SSI payment amount.

For an example of how this works, use gross wages of $165 received in a month. Not counting the first $65 dollars leaves $100 remaining. Then, not counting an additional one-half of this $100 remaining amount leaves only $50 to reduce the overall SSI amount. In this example of the earned income exclusion work incentive, of the received $165 wages in the month, $115 is not used to lower benefits.

People receiving Supplemental Security Income (SSI) usually report their earnings on a monthly basis to keep benefit amounts accurate.  Discuss how to do this when reporting a return to work.

Referring to the post of April 23, when a person receiving SSI returns to work, the Social Security trial work period (TWP) or concept of substantial gainful activity (SGA) do not apply. To restate, if you receive both Social Security and SSI, you need to follow the separate rules for each program.

Only one SSI work incentive was mentioned today. Many other work incentives can apply. To discuss your own benefits, speak to a Social Security representative.

Work_Incentive

Will retirement at age 58 lower future Social Security amounts?

Q: If I retire at age 58, will the loss of earnings hurt my Social Security retirement at age 62?

A: An early retirement will probably reduce the amount of your future Social Security because a person’s highest earning years are usually near retirement.

Your Social Security retirement monthly amount is based on your best 35 years of employment, weighted for inflation, and your age, in months, compared to your full retirement age (FRA).

If your earnings record is blank for several years, those years will not be available to replace years of lower earnings when your retirement amount is computed. You can estimate the effect of lower or higher future earnings, or retirement at different ages, with the Retirement Estimator at www.socialsecurity.gov/estimator/.

One of the Social Security retirement planning tools in the Retirement Planner section at www.socialsecurity.gov/retire2/, the Estimator connects to your actual Social Security earnings record to provide personal retirement estimates at age 62, at your full retirement age (FRA), and at age 70. As a security measure, you are asked for personal information before being able to use the Estimator.

Just as on your Statement estimate, the initial Retirement Estimator reply assumes your most recent wages or self-employment earnings will continue into the future. Unlike the Statement, with the Estimator you can change the default reply to obtain estimates at different ages or with different future earnings amounts.

Comparing multiple estimates for any given age based on the initial earnings level and then with lower or higher earnings provides an approximate result of different earnings on your future SSA retirement amount. With separate requests, you can estimate benefits based on either lower or higher earnings. Future earnings of more than one amount cannot be used in one estimate.

The Retirement Estimator provides good estimates at different ages, such as 62, but not for specific months. For estimates in specific months, other online tools are available in the Retirement Planner section. If your interest is only for months before your full retirement age (FRA), use the chart for your FRA. To consider months either before or after your FRA, use the “Compute the effect of early or delayed retirement” calculator. FRA ranges between age 65 and 67 based on year of birth but is 66 for birth years 1943-1954.

RetirementEstimator

When to report work for the annual earnings test

Q: I retired last year, started Social Security, and expect to work part-time this year on a fill-in basis. If I reach the retirement earning limit amount for the year, is it my responsibility to notify Social Security? Are benefits reduced for work immediately or resolved at years’ end. I am 63.

A: Yes, it is your responsibility to contact Social Security. Report your estimated earnings for the calendar year as soon as you think your earnings will exceed the annual limit for your age. You can provide updated estimates during the year as needed for changes up or down.

Providing an estimated earnings amount to Social Security is needed when you expect to earn more than your earnings limit amount during the calendar year. For example, at age 63 in 2015, you are under full retirement age (FRA) for the entire year and must provide an estimate if expected gross wage earnings will exceed $15,720. An estimate is not needed when annual earnings are expected to below the earnings limit.

Adjustments based on your estimated earnings will take place as soon as possible in order to avoid having you incorrectly paid. The usual suggestion to people expecting to earn over the annual limit for their age is to provide an estimate as accurate as possible, but to the high side.

Later, when you receive your W-2 form at the end of the year, report your actual earnings for the year directly to Social Security. Based on your actual earnings, final adjustments are made to either send you benefits due or to withhold those incorrectly paid.

A list of your various Social Security reporting responsibilities is in the booklet, What You Need to Know When You Get Retirement Or Survivors Benefits, available online. Work activity is a topic discussed over several pages of the booklet and an excerpt from page 17 includes:

“Your earnings estimate and your benefits

We adjusted your benefits this year based on the earnings you told us you expected to receive this year.

If other family members get benefits on your record, your earnings may affect the total family benefits. But, if you get benefits as a family member, your earnings affect only your benefits.”   

“Revising your earnings estimate

When you work, you should save your pay stubs. If during the year, you see your earnings will be different from what you estimated, you should call us to revise the estimate. This will help us pay you the correct amount of Social Security benefits.”  

More about working while receiving Social Security retirement or survivors benefits is here.