Correcting your work record

Q: I work part-time as an employee for a business and receive a W-2 for those wages plus I have separate self-employment earnings that I pay taxes on when filing my taxes each year. Only the W-2 wages appear on my most recent Social Security Statement. Since I have been paying self-employment taxes, shouldn’t they be on my Social Security number earnings history as well? How do I fix this?

A: Most people who pay into Social Security work for an employer. Their employer deducts Social Security taxes from their paycheck, matches that contribution, sends taxes to the Internal Revenue Service (IRS), and reports wages to Social Security. If registered for SSA Business Services, employers can verify employee Social Security numbers online and report W-2 wage information electronically.

Self-employed people must report their earnings and pay their taxes directly to IRS. If self-employed, you report your earnings for Social Security when you file your federal income tax return. If your net earnings are $400 or more in a year, you must report your earnings on Schedule SE, in addition to the other tax forms you must file.

All employment earnings for a year are usually posted to your personal work record near the end of October of the following year so your total 2014 employment earnings should be posted to your record approximately the end of October 2015. This applies whether or not a person receives monthly Social Security benefits. When already receiving benefits, new earnings are automatically reviewed to see if they will increase the amount.

If earlier years are not correctly posted, your local Social Security office can help correct your record. Evidence generally needed includes proof of the earnings, such as a W-2 and 1099. For self-employment, tax return information including tax form Schedule SE and proof of tax payment is also needed.

If you received your Social Security Statement by mail, know that you can get a copy of it anytime at your convenience by creating a personal, pin and password protected, my Social Security account. More about doing this is at http://www.socialsecurity.gov/myaccount/.

Are Social Security numbers issued consecutively?

Q: Are Social Security numbers issued consecutively?

A: No. Social Security numbers (SSN’s) have been issued randomly since June 2011 to help protect number integrity and to extend longevity of the nine-digit SSN nationwide.

A Social Security number has three parts. Before numbers were issued randomly in 2011, the first three digits, called the Area Number, reflected the State where the card was issued and later the zip code of the SSN application address. In general, SSN’s issued on the east coast had the lowest numbers and became higher moving along to the west coast.

Remember that the Social Security number process was designed in 1936, long before computers. SSN applications of that period were stored in files organized by region and alphabetically. Having the Area Number reflect a geographic area was an internal bookkeeping device to organize manual SSN records.

The middle two digits of the SSN are the Group Number. Although not used consecutively, before the change to random issuance, a Group number could be used to determine when the SSN was issued. This ability was a tool to help employers determine if a SSN was real. Today employers can verify a SSN immediately online through Social Security Business Services.

The final four digits are the Serial Number. Before the change to random issuance, they were issued consecutively within each Group series but had no specific meaning.

For SSN’s issued since the random process started in 2011, there is no geographical significance to the first three digits, the Area Number, because they are no longer associated with any specific area of the country. This means more SSN’s are available across the country since any Area Number can be issued anywhere.

The middle two digits, the Group Number, no longer can be used to determine when the Social Security number was issued. Change to both Area and Group Numbers protect individuals by making it harder to figure out a SSN.

More about the random issuance of Social Security numbers is here.

Here is a 1930’s photo of filing cabinets used to store Social Security records:

SSN card files-1930's

Survivor benefits go to official widow or widower

Q: After the children were grown, my husband and I separated but remained married even though he was living with another woman for the last decade. He died recently. Can I receive Social Security benefits as his widow even though we have been apart for years?

A: If monthly Social Security survivor benefits are payable, they would be paid to you as the legal widow.

Since you were not living together, usually a one-time payment of $255 originally intended to help offset funeral costs would not be paid to you or the other woman.

Survivor benefits based on your age can begin as early as age 60. For younger widow or widowers with a severe disability, survivor benefits can begin as young as age 50. They are also payable at any age if eligible children are involved. More information is here.

Have you worked enough to be eligible for Social Security retirement on your own work record? If so, you have options to consider. For example, you can start the smaller benefit first at a reduced for age amount and switch to the larger one when you are older and past age reductions for the benefit involved. Discuss your options with a SSA representative.

When eligible for two different types of Social Security benefit, such as your own retirement and as a widow or widower, you receive up to the larger amount, not all of one plus all of the other.

Always contact Social Security about possible benefits when there is a death in the family. You cannot report a death or apply for survivors benefits online. Call the Social Security national toll-free number, 1-800-772-1213 (TTY 1-800-325-0778) from 7:00am – 7:00pm local time or contact your local SSA office.

 

 

What is a typical Social Security disability amount?

Q: What is a typical Social Security disability amount?

A: As of May 2015, the average monthly Social Security disability amount to a disabled worker was $1,165. This does not include benefits paid to eligible family members.

Also as of May, the average monthly amount paid to the eligible spouse of a disabled worker was $316 and the average amount to an eligible child was $350.

These and other amounts are in Table 2 shown here.

Rather than using a national average, a more accurate and personal estimate is on your Social Security Statement. In the “Your Estimated Benefits” section is “If you become disabled right now, your payment would be about $XXX a month.”

This estimate is based on your actual work record, which is included on the Statement so that you can check it for accuracy.

Obtain your personal Statement online at any time by creating your personal, pin and password controlled, my Social Security account.

The Statement is also mailed on a limited basis. In September 2014, the Social Security Administration began mailing Statements to workers attaining ages 25, 30, 35, 40, 45, 50, 55, and 60 and over, who are not receiving Social Security benefits and do not yet have a my Social Security account. Statements are mailed three months prior to your birthday.

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.

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

Medicare claim number

Q: I have Medicare through my own Social Security retirement and my Medicare number is based on my Social Security number (SSN). If I eventually receive benefits through my husband’s Social Security record, will my Medicare claim number change to show his SSN?

A: No. Even if you start to receive Social Security through his record, your Medicare claim number will remain based on your own SSN.

If your Medicare coverage was only through his record, then your Medicare claim number would be based on his Social Security number.

On April 16, 2015, President Obama signed into law H.R. 2, the Medicare Access and CHIP Reauthorization Act of 2015, which became Public Law 114-10. Pertinent to this question, a section of this legislation directs the Secretary of Health and Human Services, the agency responsible for Medicare, to establish procedures to ensure that a Social Security number is not displayed on the Medicare card. I have no other information about this topic.

General Medicare information is on the Social Security website at www.socialsecurity.gov/medicare/.

Details about Medicare coverage is on the Medicare website, www.medicare.gov.

 

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/.

 

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.