America Saves Week 2015

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

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

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

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

Estimate your future SSA retirement amount with the Social Security online Retirement Estimator, one part of the SSA Retirement Planner. The Estimator connects to your actual work record to provide a personal estimate. You can change the default estimates for those more in tune with your actual plans.

Create a my Social Security account and view your Social Security Statement. Along with your Social Security earnings record, the Statement provides estimated retirement amounts plus family benefits should you become disabled or die. This information helps you arrange other parts of your financial planning.

Social Security personnel cannot assist with financial planning. Select your own helpers for this. Two websites to help you get started are www.mymoney.gov, the official U.S. government website dedicated to teaching Americans the basics of finances, and the Ballpark Estimator at www.choosetosave.org/ballpark, part of the American Savings Education Council program, which includes the Social Security Administration.

These sites, and others like them, are not just about savings for retirement. There are reasons to save for every stage of life.

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

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

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

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

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

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

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

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

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

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

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

 

You do not need to start SSA retirement when you retire

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

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

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

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

Social Security trust funds

Discussion about the future of Social Security and the trust funds are often part of my classes. While I cannot predict the legislative future, the Social Security website, www.socialsecurity.gov, has an entire section devoted to the trust funds located in the Solvency section or directly here. 

Two separate trust funds exist, with each started to address different parts of Social Security near the time they were enacted. They are the Old Age and Survivors Insurance (OASI) Trust Fund established in 1937, and the Disability (DI) Trust Fund established in 1957.  

Payroll tax paid by employees, employers and the self-employed are divided between these two trust funds. Since 2000, employees and employers each pay a combined Social Security and Medicare tax rate of 7.65 percent, with the self-employed paying both portions, of which 6.20 percent helps fund Social Security. Of this 6.20 percent, 5.3 percent goes to the Old Age and Survivors Insurance (OASI) Trust Fund and .90 percent to the Disability (DI) Trust Fund. Historical Social Security tax rates are here. In 2015, the maximum amount of taxable earnings for Social Security is $118,500. There is no maximum for Medicare. 

Both trust funds are managed by the Department of the Treasury. Since they are for different purposes, the two funds are managed separately. You can read about transactions, holdings and interest rates of each fund on the Trust Fund data webpages. 

Just available online, the newest Social Security bulletin, Social Security Bulletin, Vol. 75 No. 1, contains an interesting article about the trust funds. 

This online article, “Social Security Trust Fund Cash Flows and Reserves,” by David Pattison, shares a lot of trust fund information, especially in relationship to the overall federal budget. Mr. Pattison is an economist in a research component of the Social Security Administration. 

I found much of the article interesting. You might too. Consider reading at least the following sections:    

       Introduction

        Are the Trust Fund Reserves Assets? Is Interest on Trust Fund Reserves Income?

       Level-Tax Financing and the Trust Fund Reserve Buildup

       Conclusion

Social Security launches new fraud facts webpage

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

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

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

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

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

Special payments after retirement

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

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

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

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

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

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

Update – replacement 1099 for 2014

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

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

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

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

SSA Statements – in the mail or online

Last September the Social Security Administration announced the resumption of mailed Social Security Statements. The first ones went to people of specified ages having a December birthday.

Most people will not receive a mailed Statement every year. You will receive yours when reaching ages 25, 30, 35, 40, 45, 50, 55, and 60 if not receiving Social Security benefits and if not registered for a my Social Security account.

The Statement will arrive in the mail about 3 months before your birthday. After age 60, people will receive a Statement every year. The agency expects to send nearly 48 million Statements each year. 

The Statement is a great family financial planning tool at all ages up to retirement, especially for people with young families and years away from retirement. Social Security is more than retirement. The Statement includes estimates for disability and survivors benefits also. My post of October 20, 2014, discussed using the Statement to estimate family benefits and to check your work record for accuracy.

Information on the Statement is so important that it is far better to see yours more often than every five years. And you can. Online. Whenever you want.

Do so by creating your personal my Social Security account at www.socialsecurity.gov/myaccount/. View your own Statement online at least once a year or as often as you want. Doing this will help you plan for your Someday retirement and for your Today.

 

Is there still a Social Security funeral benefit?

Q: Does Social Security still pay a funeral benefit? A friend said that none was payable when his grandmother recently died.

A: You are referring to the Lump Sum Death Benefit (LSDP) and, yes, it still exists when specific requirements are met.  

The Lump Sum Death Benefit (LSDP) is a one-time payment of $255 to help offset funeral costs. While this is a small amount towards a funeral today, the payment dates back many years to when that amount covered a more significant portion of costs. 

The benefit is payable only on the record of someone with insured status, meaning she or he had enough work for benefits to be payable on their record. Even then, the LSDP is payable to a limited group. 

When the deceased had enough work, the LSDP can first be paid to the surviving spouse if they were living in the same household at time of death, although exceptions exist.

If no spouse survives, the LSDP can be paid to a child if he or she was eligible for benefits based on the work record of the deceased for the month of death. 

Lump Sum Death Benefit (LSDP) examples:

  1. The deceased was receiving her or his own SSA retirement and lived with their husband or wife. The surviving spouse can receive the Lump Sum Death Benefit (LSDP).
  2. The deceased was eligible for Social Security as a spouse or widow / widower but not eligible based on their own work record.  A LSDP is not payable.
  3. The deceased received their own SSA retirement, has no surviving spouse but did have an adult disabled child receiving through her or his record. The surviving child can receive the LSDP because they were already receiving benefits from the parent’s record.
  4. The deceased received their own SSA retirement, has no surviving spouse but has grown children, none of whom receives Social Security child benefits. A LSDP is not payable.  

The LSDP is separate from ongoing Social Security survivor benefits 

Always contact Social Security when there is a death in the family. The SSA representative can discuss potential benefits, whether for now or the future, be sure that ongoing benefits are properly ended and answer questions.

When will 1099’s for 2014 be mailed?

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

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

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

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

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

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