Social Security 
• How do you apply for social security benefits?
• What is your full retirement age and the financial
impacts of taking your benefits earlier or Later?
• Can you apply for benefits through your spouse’s
social security number?
Think Social Security is confusing?
You’re not alone.
There are many rules and many exceptions to those rules. At American Steel
Bridge Insurance
Solutions we try to answer the questions that are common amongst most
people. Who Qualifies and When: To qualify for Social Security, you must have a
work history of 10 years or 40 quarters that you paid into the system. Some work categories do not pay into the
Social Security system. Most federal
employees, railroad workers and some state and local government employees
(including teachers) are not covered and it is likely that they will receive
reduced or no benefits. Technically, you qualify for benefits at age 62, and if
you choose, you can wait as late as age 70.
If you choose to take your benefits early, your benefit will be less,
and if you wait, your benefits will be larger.
Deciding at what age to take your benefit can be critical. The choice you make will decide the amount
you receive for the rest of your life. A
key milestone for Social Security benefits is your full retirement age which is
based on the year you were born (see below).
You’ll receive your full retirement benefit if you wait until your full
retirement age. Social Security uses
your full retirement benefit as a starting point to decide what benefit you or
your dependents will receive. Remember,
full retirement age does not represent the highest benefit amount you get. If your full retirement age is 66, by waiting
until age 70 your benefit will increase about 32% above your full retirement
benefit. The chart below shows the year
of your birth and your full retirement age.
Full
Retirement Age Based on Year of Birth
Year of Birth Full
Retirement Age
1937 or earlier 65 years
1938
65 years and 2 months
1939
65 years and 4 months
1940
65 years and 6
months
1941
65 years and 8 months
1942
65 years and 10 months
1943-1954 66
years
1955
66 years and 2 months 1956
66 years and 4 months
1957 66 years
and 6 months
1958
66 years and 8 months
1959
66 years and 10 months
1960 and later 67 years
*Found at https://www.ssa.gov
How Much monthly income will I receive?
There are two basic criteria that determine your
benefit; your earning during your lifetime that you paid into the Social Security
system and your age when you file for Social Security. The average benefit (in 2015) was about
$1300. The highest benefit you could
earn in 2018 was $2788 (if you filed for benefits at your full retirement
age).
Working in Retirement?
If you choose to work through retirement there are a
few things you should know. If you
decide to file for benefits before reaching your full retirement age, Social
Security imposes an annual earnings limit which is a cap on your earnings. Here, earnings refer to wages from a job; not
investments, rentals, pensions, annuities, government benefits, inheritances
etc.
In 2018, that limit is $17,040. That means you can earn up to $17,040 and
continue to receive your entire Social Security benefit. However, there are three criteria to consider
if your earnings exceed $17,040. It depends on whether you receive your Social
Security before, during, or after the year you reach your full retirement
age.
Before: Any year you work before the year you reach
your full retirement age; If you are earning more than the annual earnings
limit while collecting Social Security, they will take back $1 of your Social
Security benefit for every $2 you earn over the limit. The limit only applies to earnings you
receive after you start receiving Social Security During: During the year you
reach full retirement age, Social Security will deduct $1 for every $3 you earn
over the annual earnings limit up till the month you reach your full retirement
age. The annual earnings limit is also
increased. In 2018 the limit is
45,360. The earnings limit only applies
to earnings received before the month you reach your full retirement age.
After: Once you reach your full retirement age there is no limit placed on
earnings and no reduction in your Social Security benefit because of
earnings. So, work as much as you want
and put in all the overtime you can. It’s important to note that any Social
Security benefit withheld due to the annual earnings limit are eventually given
back gradually once you attain full retirement age.
Taxing Social Security:
Social Security used to be tax-free. Unfortunately, Congress changed all
that. Depending on your income, up to
85% of your Social Security can be taxed. The amount they choose to tax is
based on your combined or provisional income, which is the sum of wages,
interest, dividends, pensions, taxable income, non-taxable municipal bonds and
half your Social Security benefits. Just
about everything is included except distributions from cash values in life
insurance policies and Roth IRA’s. If
your provisional income is between $25,000 and $34,000 on a single return or
$32,000 and $44,000 on a joint return, up to 50% of your Social Security
benefits can be taxed. Anything higher
than this is taxed at 85%.
What is ‘The Windfall Elimination Provision’?
If you spent part of your career working in a field
where you did not pay into Social Security, such as some local, State
and Federal government workers, and qualified for a pension, you may get hit
with the Windfall Elimination provision (due to your pension). Meaning your Social Security benefits may be
reduced.
Are there any Exception?
This provision doesn’t apply to federal workers hired
after December 31, 1983. Although this
provision may reduce your benefits, it’s capped at 50% of your pension
amount. So, if your pension was $1500,
the most that your Social Security benefit could be reduced by is $750.
What about Spousal Benefits?
Both current and ex-spouses, if you have been married
for 10 years, you are eligible for spousal benefits. You must be at least age 62 to file for
benefits. You are not eligible to
receive benefits however, until your current spouse files for their own
benefits first. You don’t have to wait
for an ex-spouse to file, but they must be at least age 62. Spousal benefits do not reduce nor effect the
amount that your spouse will receive. As a spouse, you can claim Social
Security benefits based on your own earnings or you can collect up to a maximum
of 50% of your spouse’s benefit based on their full retirement age. When you
file for benefits, Social Security will automatically calculate your benefit
based on your work history vs the benefit you would receive based on your
spouse’s work history and pay-out the higher of the two. You cannot receive both. If you file before
reaching your full retirement age you will receive a further permanent
reduction due to the early filing rule discussed earlier. That’s something most people should avoid doing. Born before January 1, 1954 Individuals
born on or before January 1, 1954, and after reaching their full retirement age
(or age 60 for widows and widowers), may choose to receive only the spousal
benefit by filing a restricted application.
This will allow you to delay taking your own Social Security benefits
based on your own earnings record until a later date, up to age 70. This allows your own benefit to grow larger
while receiving half of your spouse’s benefit; then later, you can switch to
your own benefit that will have grown larger.
This can be an excellent strategy for many people. However, you must be
born before January 1, 1954 to use this strategy.
Who Else Qualifies?
Widows: If you have been married for at least nine
months to someone who has passed away, and they qualified for Social Security
benefits based on their work history, you qualify for widow/widower
benefits. The earliest you can qualify is
age 60. So, if you are 58, and your
deceased spouse died at age 57, you would be eligible for benefits at age
60. The amount you qualify for depends
on the following four criteria:
1. If your deceased spouse had already started
receiving benefits before reaching their full retirement age then you are
eligible for the larger of what your deceased spouse was getting or 82.5% of
their full retirement amount if you have reached your full retirement age. This amount is of course proportionately
reduced if you have not reached your full retirement age.
2. If your deceased spouse had begun taking benefits
at or after his full retirement age you the surviving spouse would be entitled
to 100% of what your deceased spouse was getting if you have reached your full
retirement age (subject to reduction).
3. If your deceased spouse had not begun receiving
benefits and died prior to reaching their full retirement benefits you the
surviving spouse would be entitled to 100% of the deceased spouse full
retirement amount if you yourself have reached full retirement age. This amount is subject to reduction if you
are not at full retirement age.
4. If the
deceased spouse had not begun receiving benefits and died after their full
retirement age, then the surviving spouse would be entitled to 100% of the
deceased spouse’s benefit plus additional credits earned for delaying their
benefit, subject to a reduction if the surviving spouse has not yet reached
full retirement age.
What if you are a Widow with a Child or Children?
A widow or widower with a dependent child under 16
qualifies for benefits at any age. The
benefit amount is 75% of your full retirement amount.
What if you are a Spouse with a Child of Children?
A spouse as we have seen, qualifies for benefits at
age 62. A spouse with a dependent child
(while under age 16 or disabled) is eligible for 50% of the covered worker’s
full retirement amount and may receive benefits at any age.
What if you were a Divorced Spouse?
If you were married to your ex-spouse for at least
ten years and you did not remarry before age 60, you may file for benefits as
early as age 62 under your ex-husbands work history. At full retirement age, you would be entitled
to 50% of your ex-spouse’s full retirement amount subject to a reduction if you
file early. If your ex-spouse is deceased, you may file for widow / widower’s
benefits on their work record at age 60. Child of Retirees: When you qualify
for Social Security benefits, your children may also qualify based on your earnings
record. Children generally receive 50%
of your full retirement benefit. Your
eligible child could be your biological child, stepchild, adopted child or
grandchild. Your unmarried children must
be under 18, or up to age 19 if full time students. A child who was disabled before age 22 is
also eligible.
Child Survivor?
Your unmarried children who are under 18, or up to
age 19 if full time students, can receive Social Security benefits when you
die. And your child can receive benefits
at any age if they were disabled before age 22.
The benefit amount is 75% of your full benefit amount.
What is the Government Pension Offset Provision (due
to a Spouse or Survivor’s pension)?
If you’re the spouse or survivor of someone that
qualifies you for Social Security benefits, but you also get a pension because
of your work in local, state or federal government, your benefit may be reduced
due to the Government Pension Offset Provision.
The reduction comes to two thirds of your government pension. So, if you’re receiving a pension of $1,200
per month, and your eligible for a spousal benefit of $1,300, your benefit
would be reduced by $800 (two thirds of $1,200) leaving you with a Social
Security benefit of $500.
Does Social Security cover Disability Benefits?
There are two types of disability benefits:
1)Social Security Disability Insurance (SSDI) which
covers disabled workers and some family members who depend on them.
2) Supplemental Security Income (SSI) to cover low-
income individuals including the disabled, blind and those 65 and over.
SSDI: A disability can be financially devastating to
an individual or a family dependent on income that is lost due to someone’s
inability to work. Social Security
Disability Insurance, (SSDI) is a benefit that is available to anyone who is
eligible for Social Security benefits, regardless of income. Generally, to qualify for SSDI, you must
expect to be either physically or mentally disabled and unable to work for at
least 12 months. You must also be under age 65 and have worked at least five of
the last 10 years prior to your disability.
If you’re thinking of applying for SSDI you can count on a wait time of
six to eight months. You must also pass
two tests based on your work history; the recent-work test, and the
durationof-work-test. Check with your Social
Security office to see if you qualify.
Once you have received benefits for 24 months you are also eligible for
Medicare parts A, B and D (See section on Medicare). Benefits for family
members: If you should become disabled,
dependent members of the family may also qualify based on your work.
How old do I need to be to expect benefit if I were a
Spouse?
A spouse age 62 and older or a spouse of any age if
they are caring for your child who is under age 16 or who disabled.
Widow: A surviving spouse, if age 60 or over, is
eligible to receive their spouse’s benefits. For a disabled widow or widower,
the eligible age is reduced to age 50.
Child: Your
unmarried child, adopted child, stepchild or grandchild may be eligible. Your child must be under 18 (under 19 if
still a student) or any age if disabled before age 22. How much can you
earn: Benefits are calculated much like
Social Security calculates your retirement benefits. For instance, someone age 50, with current
earnings of $50,000 could expect a monthly benefit of around $1,500. A qualifying child could expect about $1,125,
and a spouse caring for a qualifying child could also expect $1,125. The family maximum would be $2,695 which
could reduce the benefits of some family members. Your SSDI benefits are not
reduced if you are receiving Veterans Administration (VA) benefits or private
disability insurance (although private insurance may reduce their benefits if
you receive SSDI). You may receive SSDI
and workers’ compensation concurrently if the total benefit does not exceed 80%
of your pre-disability earnings.
How does SSI differ from SSDI?
Unlike SSDI, Supplemental Security Income (SSI) pays
benefits based on need without regard to your work history. If you are 65 or older, blind or disabled and
you are in severe financial need, you likely qualify for SSI. To qualify you must have little or no income
and very few assets. For 2018 the most
you can receive from SSI, living in California, is $910.72 per month for an
individual and $1,532.14 per month for a couple. There are several categories depending on
your age, health or living facilities, so you should check with Social Security
to confirm eligibility. Additionally, the value of your assets can not exceed
$2,000 if you are single or $3,000 if you are a married couple. Social Security does not count the value of
your home or car in making its determination.
