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Retired Workers Benefits

Social Security Benefits 2006 Presented by: Bruce W. Schultz Public Affairs Specialist Social Security Administration material presented based on laws in effect October 1, 2006. Retired Workers Benefits. Both members of a couple may qualify as a worker , provided they have enough work credits.

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Retired Workers Benefits

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  1. Social Security Benefits 2006Presented by:Bruce W. SchultzPublic Affairs SpecialistSocial Security Administrationmaterial presented based on laws in effect October 1, 2006

  2. Retired Workers Benefits • Both members of a couple may qualify as a worker , provided they have enough work credits. • Must have 40 Work Credits (10 years), can earn a max. of four credits per year, 1 credit per $970 (2007, 1 credit/$1,000) • May qualify for benefits as a worker and a spouse

  3. Retirement Benefits • Unreduced benefit based on highest 35 years of FICA covered earnings indexed to inflation • Full retirement age increasing from 65 to 67 - see chart on next slide • Early retirement benefits at 62 regardless of full retirement age • Benefits reduced by the number of months you take it early

  4. Full Retirement Age - Worker year of age for unreduced % of reduction birth benefit payment at age 62 Pre-1938 age 65 20% 1938 age 65 and 2 months 20.8% 1939 age 65 and 4 months 21.7% 1940 age 65 and 6 months 22.5% 1941 age 65 and 8 months 23.3% 1942 age 65 and 10 months 24.2% 1943 through 1954 age 66 25% 1955 age 66 and 2 months 25.8% 1956 age 66 and 4 months 26.7% 1957 age 66 and 6 months 27.5% 1958 age 66 and 8 months 28.3% 1959 age 66 and 10 months 29.2% 1960 or later age 67 30%

  5. What You’ll Get at Full Retirement AgeMost Financial Planners estimate you need 60% to 80% of your pre-retirement take home pay to maintain your lifestyle in retirementChart assumes lifetime earnings at specific earnings levels

  6. How pre-age 62 retirement may impact Social Security benefits • Assuming an individual works at maximum wage levels from age 22 (1965) through Age 55 (last work Dec. 1999), at Age 62 (January 2006) their Social Security benefit would be $1,367. • Assuming an individual works at maximum wage levels from age 22 (1964) through Age 62 (last work Dec. 2005), at Age 62 (January 2006) their Social Security benefit would be $1,444. • Result: a $77 loss at age 62 by stopping work at age 55. Reduction is less dramatic for average wage earners.

  7. Dependent Benefits(of Retired or Disabled Worker) • Unmarried children: • under age 18, • age 18 to age 19 if full-time high school student, or • any age if disabled before age 22 (disabled adult child) • Spouse: • any age with eligible child under age 16, or • disabled adult child in care, or • as early as age 62. • Maximum payment, 50% of unreduced rate • These Dependent benefits payable only when benefits payable to the Worker.

  8. Spouse’s Retirement Benefits • Not payable if benefit on own record is higher • Full retirement benefit age, if born: • prior to 1938, Age 65 • 1943 through 1954, Age 66 • after 1959, Age 67 • Reduced benefits at Age 62 regardless of year of birth, BUT Worker must be receiving benefits for spouse to have benefits due (one exception, divorced spouse)

  9. Full Retirement Age - Spouse year of age for unreduced % of reduction birth benefit payment at age 62 Pre-1938 age 65 25% 1938 age 65 and 2 months 25.8% 1939 age 65 and 4 months 26.7% 1940 age 65 and 6 months 27.5% 1941 age 65 and 8 months 28.3% 1942 age 65 and 10 months 29.2% 1943 through 1954 age 66 30% 1955 age 66 and 2 months 30.8% 1956 age 66 and 4 months 31.7% 1957 age 66 and 6 months 32.5% 1958 age 66 and 8 months 33.3% 1959 age 66 and 10 months 34.2% 1960 or later age 67 35%

  10. Spouse’s Benefit Example Example based on a 1943 – 1954 birthday age 66 full retirement age Husband unreduced benefit on own record $1,400 Wife (on own record) unreduced benefit $ 600 50% of husbands unreduced benefit $ 700 Subtract wife's unreduced benefit - $ 600 Difference is maximum payable from husband $ 100 Wife’s total benefit at 62: 75% of $600 (own record) = $ 450 70% of $100 (husbands record) = $ 70 total payable $ 520

  11. Survivors Benefits • Three ways of qualifying your family: • receiving benefits as a Worker at your time of death, or • having earned 40 work credits prior to your death ($970 = one credit), or • earning 6 credits within the 3 year period ending with your death • Benefit computation based on current benefit amount or lifetime earnings, indexed to inflation

  12. Survivors Benefits(Young Family) • Unmarried children of the deceased that are: • under age 18, or • age 18 to 19 if full-time high school student, or • any age if disabled before age 22 (disabled adult child) • Mother/father (young widow/widower): • any age with eligible child under age 16 or • caring for a disabled adult child in care • Maximum payment, 75% of workers unreduced benefit rate subject to a family maximum

  13. Widow and Widower’s Benefits • Unreduced benefits are 100% of Workers monthly benefit amount or based on deceased workers lifetime earnings. • Full Widow/Widower’s benefit age (different than retirement), if born: • prior to 1940, Age 65 • 1945 through 1957, Age 66 • after 1962, Age 67 • Reduced benefits - 71.5% - payable at Age 60 or if disabled Age 50, regardless of full benefit age.

  14. Benefits for the Divorced • Not payable if benefit higher on own record • Can be payable even if Worker not retired (Worker must meet all requirements to payment except earnings limit, at least age 62) • Requirements: • married to worker for 10 years, and • meet minimum age requirement • 62 for divorced spouse, • 60 for surviving divorced spouse • and • be finally divorced, and • not currently married • Payment same as married spouse, widow, or widower

  15. Earnings Limits • Only gross wages and/or net profit from self-employment count in earnings limits. • Monthly earnings limits apply in first year of retirement only. • No earnings limit at you full retirement age (currently 65, increasing to 67).

  16. Earnings Limits-for 2006Under Full Retirement Age (65 plus 6 months – 1940, 65 plus 8 months – 1941) • calendar year limit is $12,480($1,040/month), ($12,960 for 2007) • for every $2 over yearly limit, lose $1 from benefits (does NOT apply to monthly limit) • Monthly limit for most self-employed • 45 hours in service to business.

  17. Earnings Limits if attaining Full Retirement Age in 2006(65 plus 6 months – 1940, 65 plus 8 months – 1941) • no limit for months at or over your full retirement age • limit is $33,240 ($2,770/month) for months before you attain your full retirement age, $34,440 for 2005 • for every $3 over yearly limit, lose $1 from benefits (does NOT apply to monthly limit)

  18. Social Security Disability • Two programs • Social Security Disability Insurance (SSDI) • Work history prior to onset required • Supplemental Security Income (SSI) • Payments based on need • Decision split • Non-medical factors at local SSA office • Medical decision in Madison at State Disability Determination Bureau

  19. Disability Definition • Used by SSDI and SSI • Disability is the inability to engage in any substantial gainful activity (SGA) by reason of any medically determinable physical and/or mental impairment(s) which has lasted or is expected to last at least 12 months or will result in death. • SGA = $860 per month ($900 for 2007) and/or 80 hours per month in self employment

  20. Disability Benefits continued • Not payable at or after your full retirement age (65 increasing to 67) • Advantage of Disability over Retirement • higher benefit, no reduction for age • Medicare after 24 months of disability benefits • Disadvantage of Disability over Retirement • no disability benefits paid during the first 6 full months (could receive reduced retirement if age 62+) • processing of application currently averages 84 days • Dependents benefits same as Retired Worker

  21. Appeal Process • Applies if claim is denied or if disagreement with any part of the decision. • 60 day time limit from date decision letter is received at each appeal step. • Three administrative appeal steps: • reconsideration, • hearing, • appeals council review. • Final step: Federal court action.

  22. Appeal Levels Federal Courts

  23. Application Process • Apply by phone: 1-800-772-1213, or via internet at www.ssa.gov or www.socialsecurity.gov • Apply two months in advance or in the fall before the year you reach your full retirement age. • Documents needed: • birth record (Birth Certificate or Church record recorded before age 5) • W-2 and/or tax return, • bank account number for direct deposit, • DD214 (military service), • marriage record (survivors) , • medical treatment sources (disability)

  24. Payment Delivery Day • No partial month benefits (for age 62 must be born 1st or 2nd day of the month) • Benefits paid the month following the month they are due. (June’s payment issued in July) • If drawing after May 31, 1997: pay date based on day of workers birth: 1st through 10th - 2nd Wednesday 11th through 20th - 3rd Wednesday 21st through 31st - 4th Wednesday • If drawing benefits before June 1, 1997 or eligible to SSI, paid on 3rd day of the month.

  25. Taxation of Social Security Benefits • Applies if combined income over $25,000 for individual, $32,000 for couple filing jointly. • Combined Income = • adjusted gross income, plus • 1/2 of your Social Security benefits, plus • any non-taxable interest income • SSA 1099 issued in January with worksheet • Questions directed to IRS: 1-800-829-1040 • Good explanation in IRS pub. 915

  26. Questions on Benefits before we move to Medicare?

  27. Medicare Eligibility • Medicare is administered by the Centers for Medicare and Medicaid Services (CMS) • People Age 65 (not increasing) • People under 65 with 24 months of Social Security disability benefit entitlement • People (incl. children) with End-Stage Renal Disease (Kidney failure)

  28. Medicare has several parts • PART A Also known as the “Hospital Part” Premium free, if eligible for monthly benefits If not eligible for benefit premium is $393/month ($410 for 2007). Effects about 1% of population

  29. 2006 Medicare Deductible Rates Part A, Hospital Insurance • First 60 days of confinement, $952 • $999 for 2007 • 61st day through 90th day, $238 per day • $248 per day for 2007 • 90th day through 150th day, $476 per day • $496 per day for 2007 • First 20 days in covered skilled care, $0 • 21st day through 100th day, $129 per day • $124 per day for 2007 • Benefits renew after 60 days of non-confinement.

  30. Optional Medicare, Part B • Medicare “Medical” Insurance, also known as Part B, is optional standard 2006 Part B premium, $88.50 (= 25% of program cost) (2007 cost for 96% of population, $93.50) • Initial enrollment period 3 months before 65th birth month to 3 months after. • Premium penalty if not enrolled timely. Exception to penalty, continued “Active Employment” with group coverage.

  31. Individuals/couples with taxable incomes of: Below $80,000 ind. Or 160,000 couple $80,000 - $100,000 ind. $160,000 - $200,000 couple $100,000 - $150,000 ind. $200,000 - $300,000 couple $150,000 - $200,000 ind. $300,000 - $400,000 If over $300,000/$400,000 Will pay a 2007 Part B premium of: $93.50 per eligible $105.80 per eligible $124.40 per eligible $142.90 per eligible $161.40 per eligible 2007 Part B, Medical Ins Premiums (75% subsidy ends for some)

  32. 2006 Medicare Part B, Medical Insurance • If covered by group insurance via active employment, Medicare is secondary payer. • Yearly deductible, $124 • $131 for 2007 • Maximum 80% of allowable charges paid after $124 annual deductible met.

  33. Medicare Prescription Drug Law – Part D • Administered by private companies with CMS oversight • Different rates for different coverage • Not every company covers every drug • All people with Medicare eligible – no income or resource limits

  34. Part D Enrollment • Initial enrollment period 3 months before 65th birth month to 3 months after (same as Part B) • Annual right to change plans, November 15 – December 31 • Penalty for late enrollment unless “creditable coverage”, 1% per month

  35. How to pick a plan? • www.medicare.gov1-800-MEDICARE (1-800-633-4227) • Will need, list of prescription drugs you take • Your current cost per prescription • The pharmacy you get your drugs at • Medicare will issue you a “compare” sheet SOCIAL SECURITY NOT INVOLVED

  36. Local Help with Part D • County Commission on Aging, County Aging Department, or Tribal Aging Department • Benefit Specialist • Wisconsin Prescription Drug helpline: Age 60 or older, 1-866-456-8211 Under age 60, 1-800-926-4862 www.wismedrx.org

  37. Social Security’s “Extra Help” Program for Part D • Depending on income and resource level • Premium covered (up to $31.27 per month) • Deductible covered (up to $250 per year) • Small co-pay for drugs • Sign up with Social Security before choosing a plan

  38. “Extra Help” program limits • Income limit: Individual: $14,700 ($1,225 per month) Couples: $19,800 ($1,650 per month) AND • Resource limit: Individual: $11,500 Couple: $23,000 • Your home and vehicles, are not counted

  39. If found eligible for Extra Help • You must still pick a plan for “extra help” to start. • If no plan chosen, a plan (at random) will be selected for you. • Plan selected for you may not be the best plan, depending on what and where you get your drugs • Social Security CANNOT help you select a plan or answer questions about plans.

  40. For More Information • Social Security and SSI • Toll-free, 800-772-1213 • Business days from 7am to 7pm • Internet, www.socialsecurity.gov • Medicare • General, 800-633-4227 • Internet, www.medicare.gov

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