Spousal benefits – file and suspend

Q: My wife’s Social Security retirement will be much more than mine. If I start my own Social Security retirement before she starts hers, can I apply later as a husband on her record once she retires and applies for benefits?  

A: Yes, a husband or wife can start their own SSA retirement first and then look into spousal benefits when their wife or husband retires.  

Social Security benefits to a husband or wife are based on a comparison of the couples individual full retirement age (FRA) amounts, not their monthly retirement amounts. To learn about benefits to a husband or wife, including to a divorced spouse, go to the Retirement Planner section of the SSA website at www.socialsecurity.gov/retire2/, and then to “how members of your family may qualify for benefits.”  

Age when starting Social Security is important. If younger than full retirement age (FRA) when filing for retirement, a person is considered to also be applying as wife or husband at the same time, assuming both members of the couple will then be receiving benefits. Her or his own retirement amount, reduced for age, is received first. If spousal benefits are payable they, also reduced for age, are added to equal the higher total amount.  

A different opportunity for spousal benefits exists if either husband or wife has reached full retirement age (FRA), especially if that person plans to continue working full-time past FRA. Generally, members of a person’s family can receive benefits on his or her record only when that person does. For an exception, see “If you or your spouse are full retirement age” in the spousal benefit section. If a person is at least FRA, and does not want to start Social Security retirement yet, an exception called “file and suspend” allows payment of spousal benefits on their record while the person delays the start his or her own Social Security retirement. Past FRA, delaying the start of your own retirement benefit lets the amount increase up to age 70 due to delayed retirement credits 

If this “file and suspend” idea is of interest, remember that the annual earnings test ends with the month you reach FRA so another option could be to file for your Social Security retirement while continuing to work. You would not gain delayed retirement credits but you would receive all your retirement and, if eligible as a spouse, your husband or wife would also receive through your record. Each of these ideas has advantages or disadvantages based on your personal situation.

 

Working? Retiring? Options if reaching full retirement age in 2015.

Do you reach your full retirement age (FRA) in 2015? Still working? Thinking about starting Social Security in 2015?

What are some options to consider?  

When to start Social Security benefits is always a popular topic during retirement seminars. In fact, there is no one overall best time that fits everyone. It is an individual decision. 

Last week I posted annual retirement earnings test information for 2015. Noted there, earnings test amounts vary based on whether you are younger than full retirement age (FRA) for the entire calendar year, reach FRA during the year, or are at least FRA. 

Today I am reviewing some options to consider for a person planning to work during 2015 and reaching full retirement age of 66 during 2015. FRA varies with year of birth. It is age 66 for those born from 1943 – 1954. 

If you reach full retirement age in 2015, receive Social Security and are still working, Social Security deducts $1.00 in benefits for every $3.00 you earn above $41,880. Earnings for the retirement test include only your own gross wages and net-income from self-employment. Beginning with the month you reach FRA, earnings no longer reduce your benefits.  

Assume our person, Happy Camper, expects to earn $41,000 in 2015, below the annual earnings test level for a person reaching full retirement age in 2015. Happy reaches FRA in May. 

One option: Since Happy will earn below his retirement test level, he can start Social Security retirement effective with January 2015 and receive benefits for all months of the year even though he continues working. On the plus side, this gets him more monthly benefits. On the negative, this results in a retirement benefit permanently reduced by 4 months with a reduction of 2.22 percent of his full retirement age amount. He gets 97.78 percent of his FRA amount.

Note: To learn percentages for this example, I used the “compute the effect of early or late retirement” calculator, one of the SSA Retirement Planner tools. This calculator uses the terms “normal retirement age” for FRA and “primary insurance amount” for the FRA amount. 

If Happy expects to earn more than the earnings test level of $41,880, this could still be a useful option for him. He would have to compare what he loses due to earnings (the $1.00 for every $3.00 noted above) to what he gains in payable benefits. 

Another option: Since Happy Camper is still working, he could start Social Security effective with May, when he reaches full retirement age. The earnings test ends at FRA so Happy could continue working and receive unreduced Social Security retirement from then on. On the plus side, he does not have any reduction in benefits. On the negative, he gives up the benefits payable in the above option. 

Yet another option:  If Happy Camper plans to work for some months (or longer) past FRA and then retire, he can defer his Social Security until he actually retires. On the plus side, each month of delay gains a small increase from delayed retirement credits. On the negative, Happy again gives up payable benefits.

On a monthly basis, delayed retirement credits increase benefits by 2/3 of 1 percent of the full retirement age amount, or 8 percent annually, up to age 70. Use the previously mentioned “compute the effect of early or late retirement” calculator to compute this.  

The retirement earnings test applies to the full calendar year with a special, one time, monthly earnings test available. The monthly test can apply when a person retires during the year, after already earning over applicable retirement earnings test amounts. It was not considered in the above options since Happy continued working through at least FRA. 

These examples are only to discuss some options involving the earnings test. For simplicity, factors such as the potential for family benefits through Happy Camper’s record were not added in. Social Security benefits are just one thing to consider in your retirement planning. For examples, Happy Camper’s taxable income varies with these options and his life expectancy could influence his decision.

What is best for you?

Annual retirement earnings test amounts for 2015

Q: In 2015, how much can I earn before my Social Security retirement is reduced? 

A: The annual retirement earnings test concerns how your own employment earnings in a year affect your Social Security in that year. The earnings test includes only your personal gross wages or net self-employment for the full calendar year. Your other income or income of a spouse is not applicable.

Three annual earnings levels exist, all based on your full retirement age (FRA). FRA depends on your year of birth. Learn yours here. 

Earnings test amounts for 2015 have changed from 2014. They are: 

  • If under full retirement age (FRA) for the entire calendar year, $1 in benefits will be deducted for each $2 earned above the 2015 limit of $15,720.
  • If you reach FRA in 2015, $1 in benefits will be deducted from each $3 earned above the 2015 limit of $41,880, but only for earnings before the month you reach FRA.
  • No earnings limit exists starting with the month you reach full retirement age.  

Are you starting Social Security retirement in 2015? People retiring mid-year may have already earned over the annual limit for their age. To allow the start of SSA retirement regardless of expected calendar year earnings, there is a special one-time rule based on monthly earnings. This applies for one year, usually the first year of retirement, and lets people receive Social Security for months that they are retired.  

For example, a person retiring in 2015, at least age 62 but younger than full retirement age the entire year, can receive retirement for months that gross wages do not exceed $1,310 even though calendar year earnings will be above retirement test amounts. Similar rules apply for self-employment.   

Consider the retirement earnings test before beginning Social Security. If your plans include working part-time, will those earnings reduce benefits for the year? Can you limit your earnings to stay below earnings test levels? Is retiring with part-time work your best option or should you continue working full time, without SSA benefits, for the immediate future? Keep in mind that Social Security retirement is permanently reduced if started when younger than FRA. 

Learn about the earnings test, including the special, one-time, monthly test, at www.socialsecurity.gov/retire2/whileworking.htm. Examples of how the earnings test is applied are there. 

Reminder: Do you receive Social Security now? Do you expect to earn over your applicable earnings test amount in 2015? If so, provide your estimated earnings amount to SSA early in the year so that benefits can be adjusted in advance to avoid incorrect payment. You can change estimates as needed.

The earnings test does not apply to people receiving SSA benefits due to their own disability. If receiving due to disability, contact Social Security before working.

 

Reporting possible Social Security fraud

Q: Someone I know receives Social Security disability and is working part-time. How can this be looked at without me providing my name? 

A: Social Security takes potential fraud very seriously. I will write about that in a moment but first will say a few words about this question of working and disability benefits. 

It is a wrong, but popular, assumption that people receiving disability benefits cannot have a job. 

In addition to non-medical requirements, Social Security disability or Supplemental Security Income (SSI) disability have a strict, work based, definition of disability and relatively few people found eligible eventually return to work at levels high enough to end benefits. Despite this, people receiving disability related benefits are encouraged by the Social Security Administration to return to work and many do on a limited basis. If you receive disability benefits and start to work, contact Social Security to report the work and learn the specific details you need to know. 

Rules are different for Social Security and SSI disability but both programs have multiple work incentives to help people return to work. Beneficiaries are required to report work activity. Social Security disability reporting requirements are here; SSI requirements here. 

Returning to the reporting fraud question, you are encouraged to do so through the Social Security Office of the Inspector General (OIG). The direct website of OIG is http://oig.ssa.gov/.  The OIG site is 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. Several of these are:

1. Making false statements on claims: When people apply for Social Security Benefits, they state that all information they provide on the forms are true and correct to the best of their knowledge. If a person reports something they know is not true, it may be a crime

2. Concealing facts or events which affect eligibility for benefits: It may be considered fraud if a person makes a false statement on an application or does not tell SSA of certain facts that may affect benefits.

3. Misuse of benefits by a representative payee: When a person receiving benefits cannot handle their own financial affairs, Social Security appoints a relative, friend, or another individual or organization to handle their Social Security matters. This person or organization is called a Representative Payee and it may be a crime if a payee misuses these benefits.

4. Buying or selling counterfeit or legitimate Social Security cards.

This is not a complete list. 

To report a suspected fraud, follow the instructions here. You can do this online or in other ways. Note what information will be requested. You can remain anonymous, but that might limit an OIG investigation.

Social Security Announces 1.7 Percent Benefit Increase for 2015

Monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 64 million Americans will increase 1.7 percent in 2015, the Social Security Administration announced today. 

The 1.7 percent cost-of-living adjustment (COLA) will begin with benefits that more than 58 million Social Security beneficiaries receive in January 2015. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2014. The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics. 

Some other changes that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $118,500 from $117,000. Of the estimated 168 million workers who will pay Social Security taxes in 2015, about 10 million will pay higher taxes because of the increase in the taxable maximum.  

Information about Medicare changes for 2015 is available at www.medicare.gov 

The Social Security Act provides for how the COLA is calculated. To read more, please visit www.socialsecurity.gov/cola 

A fact sheet showing the effect of COLA related automatic changes for 2015 is here.

Fast Facts about Social Security

Did you know that 65% of aged beneficiaries received at least half of their income from Social Security in 2012 or that 55% of adult Social Security beneficiaries in 2013 were women?

Fast Facts & Figures About Social Security, 2014 is available online. This annual chartbook highlights data on the most important aspects of the Social Security and Supplemental Security Income programs—the people they serve and the benefits they provide.

From the Preface: 

Fast Facts & Figures answers the most frequently asked questions about the programs administered by the Social Security Administration (SSA). It highlights basic program data for the Social Security (retirement, survivors, and disability) and Supplemental Security Income programs.

The tables and charts illustrate the range of program beneficiaries, from the country’s oldest to its youngest citizens. In all, about 63.2 million people receive some type of benefit or assistance.  

I thought the sections about beneficiary age and sex interesting. Perhaps you will too.

Receiving Social Security? Keep your earnings estimate current.

Q: I work part-time while receiving Social Security retirement and will earn less this year than originally estimated. Should I change my estimate with Social Security?

A: Yes, if you expect to earn over annual earnings test amounts, update your 2014 earnings estimate with Social Security now if your original estimate has changed. You can update your estimated earnings anytime during the year.

Your annual gross wage or net self-employment earnings can reduce Social Security benefits for the year until you reach full retirement age (FRA). Earnings test amounts for 2014 are at www.ssa.gov/retire2/whileworking.htm and in How Work Affects Your Benefits (SSA publication 05-10069). Pensions, investment and other non-employment income are not included for earnings test purposes. Earnings test amounts for 2015 are not yet available.

If you have not yet reached full retirement age, keeping your estimated calendar year earnings current with Social Security is important, especially if your original estimate was below the earnings test amount and you will actually earn over it.

If you expect to earn more than originally planned, with earnings to be over the 2014 earnings test amount for your age, updating your estimate now can prevent or reduce the chance of your being incorrectly paid and needing to refund money to Social Security.

If your current estimate is lower than originally expected, updating it now can release any withheld benefits to you faster. Revise your earnings estimate up or down as needed during the year. Report your actual earnings at the end of the year if you earn over the annual limit for your age.

People receiving Social Security because they have a disability do not have an earnings test and should contact Social Security to learn about available incentives if returning to work. 

Immediately is the best time to report changes to Social Security, including changes to your address, earnings or marital status.  Read “What You Need To Know When You Get Retirement or Survivors Benefits” (SSA publication 05-10077).

Change your estimate or report other changes by calling Social Security nationally at 1-800-772-1213 (TTY-1-800-325-0778) from 7:00am – 7:00pm, or contact your local office.

 

 

 

Mid-year retirement and the annual earnings test

Q: I have been working all year and will retire soon. Does Social Security start counting my wages with the day I start retirement or from the beginning of the year? Can I start Social Security retirement now or must I wait until 2015 due to my earnings? 

A: If you are at least age 62 and meet all requirements, start Social Security retirement when you want, whether this year after you retire, in 2015, or some other time.  

Your question refers to the annual retirement earnings test. Earnings for the retirement test include your calendar year gross wages and net income from self-employment. Other income is not included for the earnings test. 

People retire all during the year. Since those retiring mid-year might have already earned over earnings test levels for the year, there is a special one-time rule, usually used during the first year of retirement, that lets people receive Social Security retirement benefits based on monthly earnings. Using this one-time exception, you should be able to start SSA retirement when you retire despite your total earnings for this year.

Based on this one-time rule, a person retiring in 2014, at least age 62 but younger than full retirement age the entire year, can receive Social Security retirement for months that gross wages do not exceed $1,290 even though overall calendar year earnings are far above retirement test amounts. Slightly different rules apply for self-employment.   

Earnings test amounts for 2015 are not yet known, but 2014 information is here 

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.