April is Financial Literacy Month

April is Financial Literacy Month, the perfect time to examine your saving habits and ensure that you are on track for a comfortable retirement. Financial planning can put your mind at ease, but getting started can be overwhelming. 

If you have not begun saving for retirement, now is a good time to start, no matter what your age. Whether retirement is near or seems a lifetime away, now is the time to begin savings so that time and compound interest works to your advantage.

Get a good estimate of 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. 

For those years from retirement, create a my Social Security account and use it to view your Social Security Statement. The Statement contains your earnings from your Social Security record but, more to the point of financial planning, has estimated personal and 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. 

April is Financial Literacy Month. Now is a good time to review your existing plan, or start one.


When self-employed, who gets the credit? / Surviving divorced spouse benefits

When a couple works together in self-employment, who gets the Social Security work credit? Is this important? Based on a recent question, these topics are part of today’s post.

Q: Divorced and unmarried for over a decade, I had been married for over 20 years. We farmed, but when I checked my Social Security Statement work record (www.socialsecurity.gov/myaccount/), no farm self-employment earnings were there even though my ex-husband and I worked together. Only my non-farm wages were shown. Why would this be? Do I get any Social Security credit for that work? My ex-husband has since died.

A: It is likely that all of the self-employment income was posted to your ex-husbands work record rather than split between the two of you. If so, this does not imply that a mistake was made. Assigning self-employment income is done on the tax return and would have been a decision made by you two and your tax preparer at the time.

During the time you farmed, and even now, self-employment earnings were often credited to one person, usually the husband, even when both spouses worked together. Positives and negatives exist to doing this. A positive is that the person credited will have a larger amount for future retirement or other SSA benefit. This can increase benefits to family members if any are eligible on the record. A negative is that the person not credited, such as you, will have a smaller retirement benefit, or perhaps not be insured at all unless also working at another job.

If working together in a self-employment business, this is an important topic for a couple to discuss. Being insured for Social Security is not just about retirement. It involves possible benefits if the person not credited becomes disabled or dies, especially if family benefits to minor or disabled adult children could be involved.

At age 60 you are potentially eligible for surviving divorced spousal benefits on your ex-husbands record. Indirectly this could provide you a Social Security benefit related to your farm work because a survivor benefit would be higher with all the self-employment credited to his record rather than split between the two of you.

Contact Social Security for an estimate on your ex-husbands account. A survivors benefit estimate cannot be obtained online. To obtain one, call the national SSA toll-free number, 1-800-772-1213 / TTY 1-800-325-0778 (7:00am – 7:00pm business days) or your local office. Learn about SSA survivors benefits, including for a surviving divorced spouse at www.socialsecurity.gov/pgm/survivors.htm.


Question about delayed retirement credits

Recently I received a question about delayed retired credits, the topic of my January 8, 2014, post.

Delayed retirement credits (DRC’s) are increases to a Social Security retirement benefit when you delay starting them past full retirement age. DRC increases stop when you reach age 70 even if you continue to delay receiving benefits. There is no additional advantage to putting off Social Security benefits once you reach age 70. 

The question and answer follow:

Q: What is the value of the delayed retirement credits for ages 62-66?

A: Delayed retirement credits do not exist for ages younger than someone’s full retirement age because the person is electing reduced benefits. They are a benefit increase paid when the start of Social Security retirement benefits are delayed past full retirement age, up to age 70.

Social Security retirement benefits started before full retirement age are reduced by the number of months involved. Reduction percentages were discussed last week.

Lots of SSA retirement planning information is on the Social Security website, www.socialsecurity.gov, in the Retirement Benefits section and especially in the Retirement Planner area at http://www.socialsecurity.gov/retire2/.  Different calculators to help your planning are also there.  With the Retirement Estimator, the compute the effect of early or delayed retirement (early or delayed means before or after FRA) calculator is useful for comparing different start month amounts.

Reduction percentages for early retirement

Q: By what percentage would my SSA retirement be reduced if started at age 63?

A: Retirement benefits are reduced by the number of months started before a person’s full retirement age (FRA), also called normal retirement age.  Determined by year of birth, FRA is scheduled to reach age 67 for people born in 1960 or later.  

Social Security retirement benefits can be started anytime during the year if you are at least age 62.  There is no need to wait for your birthday.  As a percentage, retirement benefits are reduced 5/9 of one percent for each month before FRA, up to 36 months.  If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month.  

For example, if the number of reduction months is 60, the maximum number for retirement at 62 when FRA is 67, then the benefit is reduced by 30 percent.  This maximum reduction is calculated as 36 months times 5/9 of 1 percent plus 24 months times 5/12 of 1 percent. 

Total percentages of reduction vary with full retirement age because the numbers of reduction months are different from full retirement age to age 62.  

For comparison, FRA is age 66 for people born between 1943 and 1954.  For them, starting benefits at age 62 will provide 75 percent (25 percent reduction) of the full retirement age amount because an additional 48 months are involved.

However, FRA is age 66 and 6 months for people born in 1957. For them, starting benefits at age 62 will provide 72.5 percent (27.5 percent reduction) of the full retirement age amount because an additional 54 months are involved.

Monthly retirement percentages are readily available on the Social Security website.  Go to “find your retirement age” in the retirement planner section at www.socialsecurity.gov/retire2/. Click on your year of birth for monthly percentages. 

Note that Social Security survivor benefits, when based on age, are also reduced by the number of months before full retirement age involved but FRA for survivors benefits is different from FRA for retirement.


What are delayed retirement credits?

Q: What are delayed retirement credits?

A:  You can start Social Security retirement as young as age 62 or wait to a later age. Full retirement age (FRA), sometimes called normal retirement age, is the Social Security Administration term for how old a person must be to receive retirement without age-based reductions. Delayed retirement credits (DRC’s) are increases to a retirement benefit when you delay starting retirement benefits past full retirement age.

DRC increases stop when you reach age 70 even if you continue to delay receiving benefits. There is no additional advantage to putting off Social Security benefits once you reach age 70. 

As with reduced benefits for early retirement, the amount of a delayed retirement credit increase depends on the number of DRC’s involved. The monthly DRC increase for people born in 1943 or later is 2/3 of 1 percent per month for a yearly increase of about 8.0 percent. 

There is no “best age” to start receiving Social Security retirement. It is a very individual decision. Overall, if you live to the average life expectancy for your age, you will receive about the same amount in lifetime Social Security benefits whether you start at age 62, full retirement age, age 70 or any age in between. However, monthly amounts can differ substantially based on your retirement age. You can get lower monthly payments for a longer period of time or higher monthly payments over a shorter period of time. Every choice has advantages and disadvantages but people are more likely to start Social Security retirement when younger. 

Retirement benefits started prior to FRA are referred to as “early” while those started past FRA are “late or delayed.” Part of the Social Security online Retirement Planner; use the “compute the effect of early or delayed retirement” calculator to estimate DRC amounts. Before doing this, estimate your benefit at full retirement age with the Retirement Estimator.


Average Social Security monthly amounts

Q: How much is the average Social Security benefit amount? 

A: The answer varies widely depending on the type of Social Security benefit.

Benefits are payable through the three Social Security component programs of Old-Age (Retirement), Survivors and Disability. Within each, a variety of benefits exist. Retirement and disability benefits could be payable to the worker based on his or her own Social Security number record as well as to eligible family members such as spouses or children. Survivor benefits are to eligible family members.

Nationally in November 2013, about 57,917,000 people received a monthly retirement, survivors or disability related benefit. Considering all of these people, the average monthly Social Security amount paid, combining all the different Social Security benefits, was $1,164.18.

For Social Security retirement benefits, the average worker, based on his or her individual work record, received $1,273 that month.

It is usual for SSA retirement benefits to be started when the person is younger than their full retirement age. For comparison, in calendar year 2013, the highest Social Security retirement amount for a person retiring exactly at full retirement age, and earning at least the maximum SSA taxable earnings for all 35 years used in computing benefits, was $2,533 per month. Maximum retirement information for 2014 is in the post of December 26, 2013.

When to start your SSA retirement is a personal decision. There is not one overall “best age” to do so. A few things to consider when making your decision are here.

For survivor benefits, the average monthly benefit amount for November 2013 was $1,066. Average amounts varied widely within the different types of survivors benefits. 

For disability benefits, the average worker, based on his or her individual work record, received $1,129 that month.   

More November 2013 average amounts for other SSA benefits are here.

Estimate your own retirement amount with the SSA Retirement Planner tools, especially the Retirement Estimator. Create your my Social Security account and see your online Social Security Statement for individual and family estimates for SSA retirement, surviviors and disability benefits.


ID theft and your SSN

Posting about identity theft is not the most cheerful way of closing out the year but I have received questions on the topic, answered below, due to the recent theft of personal information from a major retailer.

The Federal Trade Commission (FTC) website (www.ftc.gov) has a lot of information related to identify theft including about the recent retailer data theft. See the FTC consumber information section at http://www.consumer.ftc.gov/.  

Q: Will the Social Security Administration know if someone is misusing my Social Security number (SSN)? 

A: Eventually, perhaps. You will likely know long before Social Security does. Although other agencies and organizations use SSN’s, within Social Security the primary use of the SSN is to associate wages or self-employment earnings with a person’s individual record so that Social Security retirement, survivors and disabilty amounts are properly computed.

Individual earnings information is received from employers, or the self-employed, once a year when W-2 data is reported or with self-employment tax returns. This is posted to individual records on a flow basis all during the year and, for paper W-2s, usually completed in the fall of the following year. For example, calendar year 2012 earnings were almost all posted by the fall of 2013. Posting is faster for W-2 information electronically transmitted to Social Security using the free Business Services Online tools. Posting of wages just updates a record. It does not automatically identify if those wages are actually yours or if someone has stolen your identity and using your Social Security number.

Social Security recommends that you review your personal earnings record at least annually. Do this by creating a my Social Security account at http://www.socialsecurity.gov/myaccount/ and then looking at the earnings on your Social Security Statement. If those earnings are wrong, provide the accurate information to Social Security and corrections can be made. 

The Statement also provides estimated benefit amounts for yourself and family members. See a sample at http://www.socialsecurity.gov/myaccount/SSA-7005-OL.pdf. Read the How We Verify and Protect Your Identy section when creating your my Social Security account.

Q: Can I get a new Social Security number (SSN) due to ID theft?

A: Not impossible, but definitely rare. This action is usually only for very severe and ongoing problems. Obtaining a new number will not solve all misuse problems and might actually create new ones since your work, credit, tax, banking information and more are referenced under the orginal number. A person receiving a new SSN cannot use the old number anymore.  


Computing retirement: what is the maximum 2014 SSA retirement amount?

For the last several years, I have published the maximum Social Security retirement amount payable to a person retiring during the coming year. The topic generates a lot of interest so today I am providing the maximum Social Security retirement monthly amount payable to a person retiring at full retirement age (FRA) in 2014. Full retirement age is 66 for people born in 1943 – 1954.

The maximum monthly Social Security retirement amount changes each year. The 2014 maximum is more than the 2013 maximum, but will be less than the 2015 amount. Several reasons are responsible for this with a major one being that different years of earnings become available to include in the retirement calculation. 

With each new calendar year, a year of potentially higher earnings becomes available for use in computing retirement benefits. Not only might actual earnings be higher but, depending on the maximum taxable earnings base for that year, more of the earnings could be credited for use in the Social Security computation.

An early step in determining a retirement amount is to compute the person’s amount at full retirement age, without reductions or additions. To do this, Social Security uses the person’s best 35 years of earnings, weighted for inflation.

To compute the benefit at the person’s actual retirement date, Social Security adjusts the full retirement age amount by the number of months that the person is away from FRA. The amount is reduced if the person is younger than FRA, or increased if older than full retirement age.

If starting Social Security retirement in 2014 exactly at full retirement age, and if the person earned at least the maximum SSA taxable earnings (the taxable base) in each of the 35 years used in the calculation, then the highest 2014 Social Security retirement amount is $2,642 per month.

For comparison, the highest 2013 Social Security retirement amount was $2,533 per month.

Knowing the highest 2014 Social Security retirement amount is interesting. Estimating your own retirement amount is more useful. Do so with the calculators included in the SSA Retirement Planner. The Retirement Estimator will be especially useful.

The Retirement Estimator provides an estimate from your actual Social Security earnings record. Estimates are automatically provided for you at age 62, your full retirement age, and age 70. You can use the Estimator to obtain other estimates for different ages or annual earnings amounts.

Other SSA online calculators are available for you too. To estimate by the number of months that you are away from FRA when starting retirement benefits, use the “Compute the effect of early or delayedretirement” calculator. This calculator uses the terms primary insurance amount, which is the same as amount at full retirement age, and normal retirement age, which is the same as FRA.  

Want to see your earnings as recorded on your Social Security record? Create a personal my Social Security account and view your online Social Security Statement. The Statement provides a list of your lifetime earnings, plus family estimates for SSA retirement, survivors and disability benefits.

Ready to file for your Social Security retirement? Go online.

Will a health savings account change my SSA retirement?

Q: I am considering use of a heath savings account plan at work. Using one would reduce my taxes but have a secondary result of lowering my earnings for Social Security. Can this reduce my future Social Security retirement amount?

A: It potentially could, depending on the amount of money involved and for how long a time. An individual answer partly depends on the persons work record over many years. Social Security retirement amounts are based on your best 35 years of work earnings and your age, in months compared to full retirement age, when starting benefits. If your current earnings are included in those best 35 years, future benefit amounts might be smaller.

The Social Security website has a Retirement Estimator calculator that could help you reach an individual answer. Part of the SSA Retirement Planner section, the Estimator connects to a person’s actual SSA work record to provide a personal estimate. You can use the Retirement Estimator if already enrolled in Medicare, but not if now applying for or receiving SSA benefits.  

Initial estimates provided are for age 62, at full retirement age, and at age 70. These assume that a person will continue earning the amount of wages or self-employment earnings most recently posted to his or her record. For different estimates, you can change either the amount of future earnings used or the age when starting benefits.   

Comparing Retirement Estimator results for the same age based on the initial earnings level and then with lower or higher earnings provides approximate results of different earnings on your future Social Security retirement amount.

Actual Social Security retirement amounts consider how many months you are away from full retirement age, either younger or older, when starting benefits. The Retirement Estimator provides estimates for years such as 62, 63, 64 and older, not months. For specific months and additional information, other calculators are available in the Retirement Planner section. 



When to start Social Security – a new short video

A new, short video by the Denver Region of the Social Security Administration is now at http://www.socialsecurity.gov/denver/

The third video in a series, When to Start Receiving Retirement Benefits, focuses on filing for retirement benefits at various ages. It also highlights how to create a my Social Security account to get your Statement and how, if you are receiving benefits, you will be able to make changes to your account and get a benefit verification letter instantly.

As noted in this approximately seven-minute video, Social Security representatives are often asked what the best age to start receiving retirement benefits is. The answer is there really is no one best age for everyone. You can start your Social Security retirement benefits as early as age 62 or as late as age 70. Your monthly benefit amount will be different depending on the age you start receiving it.

Watching this video will give you some ideas. The Social Security Retirement Planner has much more information and calculators to help in your planning. From the SSA homepage, www.socialsecurity.gov, go to the “Benefits” tab and then go to the Retirement section.

Creating a my Social Security account can help your overall financial planning, not just for retirement. Available there, your personal Social Security Statement contains several estimates and a record of your earnings history as shown on Social Security records. Social Security is more than retirement and these estimates are for more than just retirement planning. They provide current disability estimates for you and your family as well as suvivors estimates for your children and other family members.

Watch the When to Start Receiving Retirement Benefits video directly from the Social Security website at www.socialsecurity.gov/denver.

Another short video available there, Medicare Enrollment Periods at Age 65, covers the four parts of Medicare, when to enroll in Medicare, when coverage begins, and how to apply. More Medicare information and an online application are at www.socialsecurity.gov. From the homepage, go to the “Benefits” tab and then go to the Medicare section.

Watch When to Start Receiving Retirement Benefits, available on your schedule, 24 hours a day, 7 days a week.