What SSA widow / widower benefits are not age based?

My preceding post was about Social Security survivors benefits to a widow or widower based on age, payable once the eligible person is at least age 60.

This leads to the question of what widow or widower Social Security survivors benefits are not based on age. There are two, each with its own requirements.

At any age, Social Security survivor benefits might be payable to a widow or widower if a child of the deceased also receives suvivors benefits on that record. The surviving parent must be taking care of the child and the child must be younger than age 16 or disabled.

Since taking care of the eligible child is the reason for payment of benefits, age of the surviving parent does not change the amount payable to the widow or widower. However, their individual benefits for a year can be reduced by employment earnings due to the annual earnings test, just as for a person receiving Social Security retirement. Amounts paid to the widow(er) can potentially lower amounts payable to eligible children. For these reasons, people otherwise eligible for this type of benefit sometimes choose not to receive it, especially if working full-time.

The other is based on disability, with an age requirement. Called disabled widow(er) benefits, these can be paid if the person is at least age 50, but not age 60, and determined to be disabled within a certain period of time. Exceptions exist but usually the disability must have started within seven years of the spouses death.

Not being discussed today, divorced spouses of a worker who dies can receive the same types of survivors benefits as a widow or widower, provided that the marriage lasted 10 years or more and other requirements are met.

Read the booklet “Survivors Benefits” (SSA publication 05-10084) for general information about Social Security survivors benefits.

 

When do I get credit for my 2013 earnings?

Q: I retired effective January 2014, so my current Social Security payment only reflects earnings through 2012. When will my retirement amount include 2013 wages? What do I need to do to make that happen?  

A: Earnings for 2013 are automatically reviewed for possible increase to your retirement benefits when posted to your work record, approximately by October 2014. You do not need to do anything for this to happen. The automatic review includes employment from wages and self-employment.  

Employers pay estimated taxes to IRS based on wages paid during the year but specific information of how much individual employees earned during a year are only sent to the Social Security Administration with annual W-2’s. Your employer reports earnings to Social Security at about the same time you receive your W-2 form. The employer report is a copy of the W-2.  

Employers of all sizes can register to report W-2 information electronically with Social Security Business Services Online. Incentives exist to encourage electronic W-2 reporting but many still are received by paper, requiring additional handling and processing time.  

W-2 processing for a year is usually completed during the fall of the following year, approximately October. Social Security receives more that 250 million wage reports annually. These are processed by employer report, not by individual employee. If you worked for more than one employer during the year, your total earnings will not be posted to your personal earnings record all at one time. Earnings from each employer will be added to your record when that employer’s report is processed.  

Your 2013 earnings will be automatically reviewed for possible increase to your retirement benefits when posted to your work record. While this review is automatic, it does not mean that benefit amounts will increase a significant amount or even at all. Retirement benefits are based on your best 35 years of employment, with the actual earnings amounts adjusted (indexed) to account for changes in average wages over the years. New earnings would have to replace earnings already used to increase your retirement amount. If 2013 earnings increase benefits, the increase is retroactive to the start of 2014.   

Since Social Security posts W-2 information all during the year, this automatic review might be sooner, especially if the employer reports W-2 data electronically with Social Security Business Services Online, but final reviews are completed when all W-2’s for the preceding year are processed in the fall. 

This review is done automatically every year that new earnings are posted to your work record. You do not need to take any action for this to happen.  See page 9 of “How Work Affects Your Benefits” at http://www.socialsecurity.gov/pubs/EN-05-10069.pdf.

Whether or not receiving monthly benefits, you can check your personal Social Security earnings record by creating your my Social Securityaccount and looking at your SSA Statement. Earnings on the Statement are updated as described above, with earnings for a year posted during the fall of the next.

How many people work while receiving Social Security?

Q: How many people receiving Social Security benefits are also working?

A: The publication Earnings and Employment Data for Workers Covered Under Social Security and Medicare, by State and County, 2011 mentioned earlier this week does not provide information based on whether the worker received Social Security or not, so a specific answer is not readily available. 

Through SSA retirement, survivors and disability programs, plus family benefits in each of those, payments go to people of all ages, many of whom might be working.

 As reported in the Income of the Aged Chartbook, 2012, based on Census Bureau household survey data, in 2012 approximately 28 percent of those aged 65 or older had employment earnings. Not all of those surveyed were receiving Social Security benefits but nearly 90 percent were. 

In the households surveyed, employment greatly varied based on age. Of those in the age 65-69 range, 49.7 percent had earnings. By age 70-74 this dropped to 30.6 percent , then to 19.8 percent for people aged 75-79 and ending at 8.5 percent for those age 80 or older. 

Social Security provides the largest share of aggregate income for units aged 65 or older. Aggregate income for the aged population comes largely from four sources. Social Security accounts for 35.3%, earnings for 33.9%, pensions for 17.1%, and asset income for 10.5%. Only 3.0% comes from other sources.

The Income of the Aged Chartbook, 2012, is on the SSA website at www.ssa.gov/policy/docs/chartbooks/income_aged/2012/index.html

If you work and receive Social Security benefits, other than because of your own disability, the annual retirement test applies if you are younger than full retirement age (FRA). FRA is different for retirement compared to survivors benefits.

 If receiving SSA benefits due to your own disability, report the work to Social Security and ask how it might affect your benefits. Disability work incentives exist to help you return to work.

National and State Earnings & Employment Data, 2011

Usually my posts are directly related to Social Security benefits. This one is a bit different and, I think, will especially interest readers involved with local employment data.

In addition to helping fund current Social Security benefits, your earnings are used to compute your future retirement amount.

This month the SSA’s Office of Retirement and Disability Policy released the following on its website:

Earnings and Employment Data for Workers Covered Under Social Security and Medicare, by State and County, 2011
This annual statistical report presents employment and earnings data by sex and age for people in employment covered under Social Security and Medicare. The tables include data on workers in the 50 states, District of Columbia, Puerto Rico, U.S. Virgin Islands, American Samoa, and Guam.

For nation and state, to the individual county level, this publication contains tables showing employment by wages or self-employment, by age groups and by sex. 

Data is arranged by the number of people with Social Security (OASDI) taxable earnings and by the number of people with Medicare Part A (Health Insurance) taxable earnings

For example, several of the tables available are:

Table 1. Number of persons with Social Security (OASDI) taxable earnings, amount taxable, and contributions, by state or other area, sex, and type of earnings, 2011

Table 2. Number of persons with Social Security (OASDI) taxable earnings, by state or other area, sex, and age, 2011

Table 3. Number of persons with Social Security (OASDI) taxable earnings, amount taxable, and contributions, by county, sex, and type of earnings, 2011.

 From the publication:  

  •  In 2011, 158.6 million workers had earnings taxable under the Social Security program. About 140.9 million had only wages, 10.4 million had only self-employment income, and 7.3 million had both.
  • Social Security taxable earnings totaled $5.487 trillion, which includes earnings up to the taxable maximum of $106,800.
  • Social Security taxes totaled about 680 billion.

 The direct link to this publication is http://www.ssa.gov/policy/docs/statcomps/eedata_sc/2011/index.html.

Changing your mind after retirement

Q: Can a person stop Social Security retirement benefits if they retire early but then change their mind and go back to work full-time?

A: Unexpected changes may occur after starting Social Security retirement. Stopping payment of retirement benefits can be done, with each option having positive and negative points to consider.

You can totally withdraw an application if within 12 months of starting benefits, which includes repaying all SSA benefits you and anyone else received through the application.

Later, a new application would be required to restart benefits and your retirement amount would be computed based on it. However, you might miss out on benefits if earning less than anticipated or due to changes in annual retirement earnings limits from year to year. Retirement test information for 2014 is in the Social Security retirement planner at www.socialsecurity.gov/retire2/. The earnings test includes only your personal gross wages or net income from self-employment.

Another option if returning to full-time work, especially if you have received benefits for over a year, is to update your estimated earnings amount for the calendar year.

Based on your updated earnings estimate and the annual retirement test, some or none SSA retirement might be payable to you for the year once your earnings are considered. Upon retiring or reducing work again, a new application would not be required to start benefits. To restart benefits you would need to reduce your estimated earnings amount.

However, if restarting benefits when still younger than full retirement age (FRA), amounts would resume at the original reduced amount. Amounts are recalculated effective with FRA to increase benefits for months that you worked and did not receive a retirement benefit.

Earnings test limits end when you reach full retirement age but you can still suspend the receipt of benefits past that age.

Whether or not you receive SSA benefits during the year, new earnings potentially could increase your retirement amount. Benefit amounts are automatically reviewed when new earnings are posted to your work record.

 

What are the sources of retirement income?

Overall, what are the sources of retirement income?

The recently released Social Security publication, Income of the Aged Chartbook, 2012, provides this information in charts and tables that are easy to understand. Charts focus on the receipt and shares of income from Social Security, pensions, assets, earnings, and public assistance, effectively illustrating the Social Security program’s pivotal role in the economic security of the aged.

From the Income Sources portion of report:

 “Social Security is the most common source of income for units aged 65 or older. Nearly 9 out of 10 aged units receive Social Security benefits. Asset income is the next most common source of income, received by more than half of the aged. Two-fifths receive retirement benefits other than Social Security, and more than one-quarter have earnings. Public assistance and veterans’ benefits are each received by less than 5%. Noncash benefits, including SNAP benefits and housing and energy assistance, are received by almost 12%.”

 “Social Security provides at least half of total income for a majority of beneficiary aged units. In 2012, 86.8% of married couples and 85.6% of nonmarried persons aged 65 or older received Social Security benefits. Social Security was the major source of income (providing at least 50% of total income) for 52.3% of aged beneficiary couples and 73.8% of aged nonmarried beneficiaries. It was 90% or more of income for 21.6% of aged beneficiary couples and 46.8% of aged nonmarried beneficiaries. Total income excludes withdrawals from savings and lump-sum payments from IRAs or 401(k)s; it also excludes in-kind support, such as SNAP benefits and housing and energy assistance.”

Note: the report defines a unit as “The unit of analysis here, with the exception of the measures of poverty and family income of persons, is the aged unit, which is a married couple living together or a person who does not live with a spouse.”

From the Aggregate Income portion of the report:

“Social Security provides the largest share of aggregate income for units aged 65 or older. Aggregate income for the aged population comes largely from four sources. Social Security accounts for 35.3%, earnings for 33.9%, pensions for 17.1%, and asset income for 10.5%. Only 3.0% comes from other sources.”

The Income of the Aged Chartbook, 2012 is at http://www.ssa.gov/policy/docs/chartbooks/income_aged/2012/index.html.

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.

Special payments after retirement

Q: I retired in 2013 but expect income in 2014 from work done before I retired. Will this lower my 2014 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 2013 and started receiving Social Security retirement as of January 2014. 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 2014 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.

Do you need to update your 2014 earnings estimate?

A question received in the office relates directly to my January 28 post about annual earnings reports and earnings estimates.

The caller, age 64, said that a letter from Social Security stated she would not receive her Social Security retirement benefit for January and part of February due to her estimated 2014 gross wages of about $20,000.

Where, she asked, did that information come from? She retired in 2013 and only expected minimal part-time earnings in 2014.

The estimated earnings amount came directly from her 2013 retirement application. The application asks for a current year and following year estimate from wages and self-employment.

At age 64, she will be younger than her full retirement age (FRA) for all of 2014. Since her estimated earnings for 2014 was above the 2014 annual earnings test amount for her age, Social Security adjusted her benefits payable during 2014 to account for the excess and then resumed monthly payment.

All she needed to do was report her actual earnings for 2013 and provide an accurate estimate of her 2014 gross wages. This was easily completed and, with her new estimate below earnings test limits, benefits could be paid for all months of 2014.

If you received SSA retirement or survivors benefits and were younger than full retirement age (FRA) for at least part of last year, report your 2013 employment earnings if your estimated or actual earnings were more than 2013 earnings test amounts for your age. Amounts for 2013 are in the January 28 post. At the same time, be sure your estimated 2014 earnings are correct based on your current work plans.

Before potentially reducing SSA benefits for 2014 a person younger than their full retirement age (FRA) the entire year could earn $15,480. A person reaching FRA during 2014 could earn $41,400 before reducing their retirement benefits. There is no earnings limit starting with the month you reach full retirement age. Examples of how the annual earnings test is applied are here.

 A special rule exists for people who retire during the year after already earning over annual limits. This one-time rule lets Social Security pay retirement benefits for any whole month that you are considered retired, even when having high earnings prior to retirement.

You can change your 2014 earnings estimate as needed during the year by calling the SSA national toll-free phone number 1-800-772-1213 / TTY 1-800-325-0778 or contacting your local office. Earnings for the annual earnings test include only your own gross wages from employment and net-income from self-employment.

The earnings test does not apply if you receive benefits because you have a disability. In this case, report starting or ending work to Social Security at the time. The earnings test does apply to family members receiving benefits through someone receiving Social Security disability.

Do you need to report your 2013 employment earnings?

Q: I receive Social Security while working part-time. Last year I worked fewer hours and earned less than originally planned. Do I need to tell Social Security that my earnings were less than expected?

A: Perhaps, depending in part on your age and amount of earnings. If you received SSA retirement or survivors benefits and were younger than full retirement age (FRA) for at least part of last year, report your 2013 employment earnings if your estimated or actual earnings were more than 2013 earnings test amounts for your age.  

Before potentially reducing SSA benefits for 2013, a person younger than their full retirement age (FRA) the entire year could earn $15,120. A person reaching FRA during 2013 could earn $40,080 before reducing their retirement benefits. There is no earnings limit starting with the month you reach full retirement age.

A special rule exists for people who retired during the year after already earning over annual limits. This one-time rule lets Social Security pay retirement benefits for any whole month that you are considered retired, even when having high earnings prior to retirement.

Earnings for the annual earnings test include only your own gross wages from employment and net-income from self-employment.

Your estimated earnings amount was used to pay benefits during the year. 

If your 2013 estimate was high, perhaps you are due more from Social Security. If your estimate was low, perhaps you need to return funds.  If needed, report your actual 2013 earnings when you receive your W-2 form or compute your self-employment income. Report by calling the SSA national toll-free number, 1-800-772-1213 (TTY 1-800-325-0778) or your local office.

Are you working in 2014 while receiving Social Security retirement or survivors benefits?Earnings test amounts for 2014 are at http://www.socialsecurity.gov/retire2/whileworking.htm. Examples of how the annual earnings test is applied are there.

Provide an estimated earnings amount to Social Security you are receiving SSA retirement or survivors benefits and expect to earn more than the 2014 amounts for your age. Estimates can be changed during the year as needed.

The earnings test does not apply if you receive benefits because you have a disability. In this case, report starting or ending work to Social Security at the time.