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.

Divorced spouse benefits

Q: My ex-husband always earned much more than I did and I anticipated receiving Social Security through his record when he retired.

His retirement plans changed after our divorce and now he expects to continue working for several more years, or at least until he is much older than 62.

Can I receive Social Security as a divorced spouse from his Social Security record before he retires?

A: Yes, this is possible assuming all requirements are met. General requirements to receive Social Security benefits as a divorced spouse are here and include that:

  • the marriage lasted 10 years or longer
  • you are unmarried
  • you are age 62 or older and
  • you are not eligible for a higher Social Security through your own work than you would through the record of your ex-spouse.

When receiving benefits through an ex-spouses record, that person is usually receiving benefits too but an exception exists which could let you receive benefits  before your former husband starts Social Security.

If your ex-spouse has not applied for retirement benefits, but can qualify for them, you potentially could receive benefits through his record if you have been divorced for at least two years. To qualify for benefits means that your ex-spouse has enough work and has reached age 62.

You would be known as an “independently entitled divorced spouse” for SSA benefit purposes if you receive benefits this way.

 

Medicare for spouse, without monthly benefits

Q: I receive Social Security and will be eligible for Medicare in 2017. My wife will be 65 at that time. She has not been employed long enough to receive her own Social Security retirement and does not want to start receiving as a spouse through my record until she is age 66.

Will my wife be able to get Medicare in 2017 on my work record at age 65 even if she has not applied for monthly Social Security benefits?

A: If a person is receiving Social Security benefits, his or her spouse can file for Medicare through their record at age 65 without filing for monthly cash benefits. Medicare Part A (Hospital) does not have a monthly premium. Medicare Part B (Medical) has a monthly premium.

At the Social Security website, www.socialsecurity.gov, is the following:

“If you are within three months of age 65 or older and not ready to start your monthly cash benefits yet, you can use our online retirement application to sign up just for Medicare and apply for your retirement or spouses benefits later.” 

Information about benefits to a spouse is here. Age based benefits to a spouse can be started as early as age 62, at a reduced amount, so she does not need to wait until age 66 to begin monthly Social Security benefits. The choice is hers.

Note that future legislation can change existing rules.

 

Does Social Security contact people at age 65 to enroll them in Medicare?

Q: Does Social Security contact people at age 65 to enroll them in Medicare?

A: Some people are automatically contacted at age 65 but not everyone is.

If you are already receiving monthly Social Security benefits, you are sent Medicare enrollment information several months before reaching age 65.

It is important to note that enrollment material is not sent by the Social Security Administration. This material is mailed by the Centers for Medicare and Medicaid Services (CMS), part of the Department of Health and Human Services, the agency that is responsible for Medicare. Do not throw it away as junk mail.

In summary, the CMS Medicare mailing includes your Medicare card and tells you that enrollment in both Part A (Hospital) and Part B (Medical) of Medicare will take place at age 65 without any further action needed. If you do not want both Part A and Part B, you must contact Social Security.

Automatic enrollment in Medicare does not occur when you are not already receiving monthly Social Security benefits at age 65. Then you must take action yourself to enroll in Medicare, either by completing the online application or by contacting Social Security. Do this about three months before reaching age 65. You can sign up for Medicare without starting Social Security benefits.

Most people want Medicare Part A coverage at age 65, which does not have a monthly premium. If you have medical insurance through your own current employment, or the current employment of your spouse, then you might not want Part B at age 65. Medicare Part B does have a monthly premium.

Medicare Part A and Part B coverage is the same for everyone across the nation. General Medicare information and the online application are on the SSA website at www.socialsecurity.gov/medicare/. Detailed Medicare information is at www.medicare.gov.

Enrollment in Medicare Part D (Prescription Drug Coverage) is through private insurance companies, not through CMS or Social Security. Different policies are available and you shop for the one that best suits you.

 

Social Security disability work incentives

Q: I receive Social Security disability and want to return to work. What will this do to my benefits?

A: For specific information about your own benefits, contact Social Security and speak with a representative.

In general, special rules called work incentives make it possible for people with disabilities receiving Social Security or Supplemental Security Income (SSI) to work and still receive monthly payments and Medicare or Medicaid.

Remember that Social Security, including disability (SSDI), and SSI are different programs, with different work incentives for returning to work.

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

For Social Security disability, a main work incentive is the trial work period (TWP).

The trial work period allows you to test your ability to work for at least 9 months. During a trial work period, you receive full disability benefit regardless of how much you earn as long as your work activity has been reported and you continue to have a disabling impairment. The 9 months does not need to be consecutive and your trial work period will last until you accumulate 9 months within a rolling 60-month period. Certain other rules apply. In 2015, gross monthly earnings of $780 or more will usually count as a month toward the TWP.

After a trail work period is completed, your work activity will be reviewed to see if you earnings are considered substantial gainful activity (SGA) . Exceptions apply but, in general, in 2015 monthly gross earnings of at least $1,090 are considered SGA for a person who is not blind and $1,820 for a person who is blind. Ongoing ability to work at a substantial gainful activity level can result in benefits being stopped.

If this occurs, you have an extended period of disability (EPE).

This means that if your disability benefits stop after successfully completing the trial work period and ongoing work at the substantial gainful activity (SGA) level, your Social Security disability benefits can be automatically reinstated without a new application for any months in which your earnings drop below the SGA level.

This reinstatement period lasts for 36 consecutive months following the end of the trial work period. You must continue to have a disabling medical impairment in addition to having earnings below the SGA level for that month.

Continuation of Medicare.

Of major importance, even if cash benefits end, for most beneficiaries existing Medicare coverage continues through the EPE and beyond.

Most persons with disabilities who work will continue to receive at least 93 consecutive months of Hospital Insurance (Part A); Supplemental Medical Insurance (Part B), if enrolled; and Prescription Drug coverage (Part D), if enrolled, after the 9-month Trial Work Period (TWP).

You do not pay a premium for Part A. Although cash benefits may cease due to work, you have the assurance of continued health insurance. (93 months is 7 years and 9 months.)

This is not a complete list of work incentives for Social Security disability insurance (SSDI). There are different work incentives for Supplemental Security Income (SSI). More general information is here.

Again, for details about your own benefits, speak to a Social Security representative.

Work_Incentive

Changing a child’s representative payee

Q: My ex-wife receives Social Security disability benefits for herself plus benefits for our daughter, for whom she has custody. Within the next few months, I will have custody and our daughter will live with me full-time.

Will Social Security start sending benefits for her to me or will they continue going to my ex-wife? Will the amount change when she is living with me?

A: A person receiving benefits on behalf of someone else is their representative payee. As a general guideline, the parent with legal custody is the preferred payee compared to a parent without custody but exceptions exist based on individual situations.

Changing the representative payee for your daughter, or anyone, is not automatic. You will need to request a change by completing an application to be the new payee for your daughter. This is not an online application so contact your Social Security office to do this. Expect to prove that you have custody and that your daughter is living with you.

A worker’s, in this case your ex-wife, own Social Security amount is based on his or her earnings history over many years. Benefits to a child or other family member do not change how much the worker receives for himself or herself.

Assuming you become your daughter’s representative payee, with her benefits sent in your care, the individual Social Security benefit of your ex-wife will not change although she would no longer receive the amount for your daughter.

The Social Security benefit amount for a child is based on the earnings record of the worker and will be the same wherever the child is living.

Representative payees are responsible for using Social Security benefits on behalf of the eligible person. As representative payee, you will have to report how funds for your daughter are used. Other responsibilities include reporting if your daughter is no longer living with you. Details are in the Guide for Representative Payees.

Retirement amount not limited by marriage

Q: Is there a total amount of Social Security benefits payable to a couple?

A: No, although this is a popular myth.

There is no marriage penalty, limit or other reduction when each member of a couple is eligible for their own Social Security retirement. Amounts to each member of the couple are based on their personal work records and ages when starting retirement. Amounts received by husband or wife do not affect what the other receives. Each independently starts Social Security when best for them.

Go to the SSA Retirement Planner at www.socialsecurity.gov/planners/retire/ to estimate your personal benefit amount at different retirement ages.

Note that the above refers to when each member of the couple receives their own, individual, retirement. There can be a financial benefit to a married couple if both receive Social Security through one person’s work record instead of separately.

For example, this could be if one member of a couple had low career earnings and was eligible for spousal benefits as husband or wife instead of their own personal retirement. In this case, the amount of spousal benefits is limited because they are based on the earnings of the person with the higher career earnings and not their own work record.

More about spousal and other family benefits is at the SSA Retirement Planner in the “Already near retirement age” section or go directly here.

Earnings test not just for retirement benefits

Q: Do the Social Security earnings limits apply just to retirement? Do they apply if receiving widow’s benefits?

A: Yes, earnings limits apply for survivor benefits. The annual earnings test applies individually to everyone younger than their full retirement age (FRA) unless that person receives benefits due to their own disability. People of all ages receive Social Security and the earnings test applies to many of them.

For examples, if both members of a couple receive Social Security retirement, the earnings test applies separately to each until full retirement age. The earnings test also applies to a child, not disabled, receiving benefits through a parents record whether the parent is retired, disabled or deceased.

The earnings test does not apply to people receiving benefits because of their own disability but it does apply to non-disabled family members, including spouse and children, receiving benefits through the disabled person’s record.

Many young people receive Social Security benefits. Earnings test amounts are the same whether SSA retirement, survivors or disability is involved. Different amounts can be earned during the calendar year before benefits are reduced based on if the person is under full retirement age (FRA) the entire year, reaches FRA during the year, or is already FRA. The earnings test ends when you reach FRA.

Based on year of birth, full retirement age ranges from 65 to 67. Retirement FRA is 66 for people born in 1943 – 1954. Note that FRA’s for survivors benefits are different from retirement FRA’s.

Earnings test details are here.

Separate earning rules and work incentives apply if you receive Social Security due to your own disability. Contact Social Security before returning to work. General information is here.

When are you age 62 for Social Security?

Q: I was told that if you retire at 62, you have to be 62 plus one month of age before you are eligible to collect Social Security retirement. Is this true?

A: This is along the correct path but wanders a bit from full accuracy. A more accurate way of stating this is that a person must be at least age 62 through the entire month to receive benefits for that month.

A person reaching age 62 during a month is not usually at least age 62 for the entire month so benefits can first be received starting for the next month. This applies only in the actual month a person reaches age 62. For all following months they are at least age 62 all month.

However, based on actual day of birth in a month, Social Security retirement might be payable for the month a person reaches age 62. A person born on the first of the month is considered age 62 for that entire month and could start benefits effective with the month they reach age 62.

For example, a person born on February 20 is not age 62 for the full month until March. A person born on February 1 is considered age 62 for the entire month and can receive a benefit for February.

Why is this? Legal precedent holds that people attain their age on the day before their birthday. Therefore, a person born on the first of a month is considered age 62 for the entire month.

On a related topic, Social Security benefits for a month are paid in the following month. For example, payment for March is received in April.

The Social Security Retirement Planner, www.socialsecurity.gov/retire2/, has lots of information and calculators to help you plan your benefits. Today’s topic is on the “Find Your Retirement Age” page.

Retirement_Planner

 

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.