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T he B asics of . S ocial S ecurity. A Public Service Presentation provided by the Society of Certified Senior Advisors. What this Presentation Will Cover. Social Security Retirement How to Qualify How Social Security Income is Determined How Do I Receive My Benefits

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t he b asics of

The Basics of

Social Security

A Public Service Presentation provided by the Society of Certified Senior Advisors

what this presentation will cover
What this Presentation Will Cover

Social Security

  • Retirement
  • How to Qualify
  • How Social Security Income is Determined
  • How Do I Receive My Benefits
  • Taxes and Social Security
  • Survivor Benefits
  • Disability and Social Security
social security overview
Social Security Overview
  • Social Security began in 1935 and was designed to be a financial “safety net” to ensure the well being of retired workers and their families
  • The 5 major components of Social Security are:
    • Retirement
    • Disability and SSI
    • Survivor’s Benefits
    • Medicare
retirement
Retirement
  • Social Security (S.S.) is designed to be a foundation
  • It is not designed to be the only income source in retirement
    • Financial advisors recommend to use S.S. as 30% of retirement income
    • Average worker uses S.S. as 40% of retirement income
    • 1 out of 5 seniors uses S.S. as their only income source
  • The Social Security program will undergo changes in order to keep the system solvent and functioning
how do i qualify
How Do I Qualify?
  • By working and paying Social Security taxes workers earn credits
  • Credit requirements are dependent on your birth year
    • Anyone born after 1929 needs 40 credits to receive benefits
    • 1 credit earned in covered employment, with a maximum of 4 per year
    • Individuals are “fully insured” after 10 years (40 credits)
how do i qualify1
How Do I Qualify?
    • Workers who stop working prior to earning 40 credits cannot receive benefits
  • At full retirement age workers can receive full benefits
    • 65 used to be standard, but this varies based on year of birth:
how do i qualify2
How Do I Qualify?
  • Reduced retirement benefits can be collected as early as age 62 (with 40 credits)
    • Benefits are about 25% less than they are at full retirement age
  • Although Social Security retirement age varies, Medicare eligibility remains at 65
how is social security income determined
How is Social Security Income Determined?
  • Retirement benefits are calculated on lifetime earnings under the Social Security system
    • Generally, your 35 highest years of earnings are averaged
    • Zero is averaged in for every year under 35 years of work
  • Calculating Social Security Income
    • The benefit computation is complex and not simple
how is social security income determined1
How is Social Security Income Determined?
  • Social Security sends a yearly statement to everyone age 25 or older (that has paid S.S. taxes) and not received benefits
    • Statements arrive 3 months prior to your birthday
  • Statements can be requested by asking for a form SSA-7004 from the S.S. Administration or at www.socialsecurity.gov/online/ssa-7004.html
  • Go to www.socialsecurity.gov/planners to estimate your benefits
how do i receive my benefits
How Do I Receive My Benefits?
  • To receive Social Security benefits you must apply
    • It takes about 3 months from when you apply to when you will receive benefits
    • To get info on applying call 1-800-772-1213 or go to www.socialsecurity.gov
  • Social Security benefits can still be received while you are working
    • There is no income restriction on receiving benefits after full retirement age
how do i receive my benefits1
How Do I Receive My Benefits?
  • If you are under full retirement age, every $1 in benefits is deducted for each $2 earned above the annual limit
    • Earnings limit changes yearly
  • The year you reach full retirement age, $1 in benefits is deducted for each $3 you earn above a different limit, only applied to earnings before the month you reach full retirement age.
    • Earnings limit changes yearly
how do i receive my benefits2
How Do I Receive My Benefits?
  • Social Security benefits can be increased by a percentage (depending on DOB)
    • Delaying receiving benefits beyond full retirement age means you will draw a higher percentage
    • The benefit increase stops at age 70, even if you continue to delay taking benefits.
taxes and social security
Taxes and Social Security
  • Some people have to pay federal income taxes on their Social Security Benefits
    • Only applies if you have substantial other income (wages, businesses, interest, dividends, etc.)
  • No one pays federal income tax on more than 85% of their Social Security Benefits
  • If you are between the annual limits you may pay income tax on 50% of benefits
taxes and social security1
Taxes and Social Security
  • Each January you are sent a statement (Form SSA-1099) showing amounts of benefits you received
    • This is used on your tax returns to calculate if S.S. Benefits are subject to tax and at what rate
  • Federal taxes can be withheld from Social Security benefits
    • This is not required, but can be simpler than paying out each year or each quarter
  • Combined income = sum of adjusted gross income, + nontaxable interest, + ½ of your S.S. Benefits
investment income
Investment Income
  • Non-work sources of income do not count as wages for the earnings test
  • These Include:
    • Inheritance payments
    • Pensions
    • Income from investments
    • IRA distributions
    • Interest
    • Other sources determined by the Social Security program
survivor benefits
Survivor Benefits
  • Family members eligible to receive survivor benefits are:
    • Widow (er) – receive full benefits at retirement age or reduced benefits as early as 60
    • Disabled Widow (er) – as early as age 50
    • Widow (er) – at any age if they take care of deceased’s child who is: under age 16 or disabled and receiving S.S. benefits
survivor benefits1
Survivor Benefits
  • Unmarried Children under 18 (up to 19 if still in high school)
  • Children All Ages – disabled before age 22 and remain disabled
  • Dependent Parents – age 62 or older
disability and supplemental security income
Disability and Supplemental Security Income
  • Provides a distribution of cash in the event of interruption of employment
    • Disability
    • Unemployment
  • Benefit is based on work record only
    • Must be “fully insured” under Social Security rules
  • 5 month waiting period for benefits
    • Benefits continue till able to work, or till beneficiary reaches retirement age
    • Call 800.772.1213 for more information
resources
Resources
  • Social Security Administration Website, www.ssa.gov
  • Working with Seniors (2009), Society of Certified Senior Advisors