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Social Security
THE TEN MOST RELEVANT SOCIAL SECURITY QUESTIONS
1. What are the eligibility requirements?
People born in 1929 and after need 40 "credits" to be able to receive retirement benefits. Currently, a credit is earned for each $1,050 of earnings and you can earn up to four credits per year. (You can earn this in one day or throughout the year.) Thus, you will need at least 10 years of work for eligibility. Your earnings covered by Social Security are automatically tracked and recorded through your employer on Form W-2. Self-employed people report earnings to the IRS on Schedules C and SE, and IRS provides that to Social Security.
The number of credits needed is reduced if you become disabled or die before age 62, but a minimum of six credits is necessary. You cannot buy credits; they must be earned through work covered by Social Security. See Documents You Need When You Retire
2. What are my options regarding age at retirement?
62 is the earliest age for retirement and anyone can retire at age 62 if they meet the eligibility requirements.
If you retire prior to your "full retirement age" your benefits will be reduced. If you retire later than your full retirement age, your benefits will be increased up until age 70. The full retirement age is gradually being increased for all people born after January 2, 1939 to account for the increase in life expectancy.
Keep in mind that the ONLY AGE at which you qualify for MEDICARE is 65, unless you qualify for Social Security disability. See Full Retirement Age and Signing Up for Medicare
3. How does retirement age affect dollars?
If you decide to retire at age 62 and your birth date is 1937 or earlier, your benefit amount is reduced 20 percent. For people born after 1937 the full retirement age is older than 65 so reductions are less. Benefits are reduced a fraction of a percent for each month before your full retirement age. Examples follow:
Full retirement age is 66; the reduction for starting your retirement benefits at age
- 62 is approximately 25 percent.
- 63 is approximately 20 percent.
- 64 is approximately 13.3 percent.
- 65 is approximately 6.7 percent.
Full retirement age is 67; the reduction for starting your retirement benefits at age
- 62 is approximately 30 percent.
- 63 is approximately 25 percent.
- 64 is approximately 20 percent.
- 65 is approximately 13.3 percent.
- 66 is approximately 6.7 percent.
For a quick calculation by Social Security go to http://www.ssa.gov/OACT/quickcalc/index.html
Keep in mind that the highest 35 years of earnings are used to calculate benefit amount. If you do not have 35 years of work, all earnings are used, factoring in an annual total of $0.00 for each of the remaining years.
Benefit amounts increase each year with an annual cost-of-living increase based on the consumer price index.
4. What happens if I work after I retire?
In 2008 a retiree under full retirement age can earn $13,560 (these limits are usually raised every year) with no effect on benefits. If he/she earns more than $13,560, one dollar is held back for each two dollars earned above that limit. Gross wages are used for work as an employee and net earnings are used for self-employment.
When a person reaches full retirement age there is no limit as to earnings; however, for the months in the year that you reach full retirement age, your benefits are reduced one dollar for each three dollars earned above a different limit, which in 2008 is $36,120.
Pensions, interest, investment income, annuities, capital gains, inheritance money, IRA distributions and other government benefits DO NOT affect your benefits. Also exempt are payments like vacation or sick pay and bonuses for work performed before retirement.
Work you perform after retirement may increase your benefit amount since Social Security recomputes your benefits after additional earnings are posted to your record.
5. Is my Social Security Statement important?
Yes. This statement, which is automatically mailed out every year to all workers age 25 and older-or which can be ordered online at any point in time-plays a key role in your financial planning and allows you to verify your lifetime earnings.
Page two shows your estimated benefits for retirement and other benefits. Estimates given are in today's dollar amounts, so they are not adjusted for inflation. Assumptions made in providing these estimates include that you will continue to work up to the retirement ages shown, and that your earnings will continue at your current level. If you request the statement yourself-as opposed to automatically receiving it-the information you actually provide is used for the estimates instead of the assumptions.
Page three shows your earnings by year, although some or all of your earnings from the previous year may not be included since Social Security may be processing those. You should examine the chart and verify your earnings. Discrepancies in the earnings or in the credits shown on your statement should be called in to the Social Security toll-free number at (800)-772-1213. See Making Sense of Your Statement
6. How do I apply?
When retiring, you have choices about how to notify Social Security. Some of these choices aren't always generally known by everyone. Here are some tips to keep in mind. See How to File: Do's and Don'ts
7. Are there benefits for a spouse?
Yes, but if a spouse is eligible for his/her own retirement, Social Security pays their own benefit first. If the spousal benefits are higher than the retirement benefit, a combination of benefits which equal the higher spouse's benefits is paid.
Spousal benefits are one-half of the retired worker's full benefits if the spouse collects at full retirement age. If the spouse collects before full retirement age, the benefit amount is permanently reduced by a percentage based on the number of months before he/she reaches full retirement age.
If the spouse is caring for a child who is under age 16 or receiving Social Security disability, the spouse will receive the full benefit (one-half), no matter what his/her age is. See Full Retirement Age
8. If I retire and still have children at home, will they receive benefits?
Children are eligible for monthly benefits if they are unmarried and under age 18, or if they are age 19 and still in high school. Disabled children age 18 and over are eligible but they must have become disabled before age 22.
9. How do I apply online?
You can go to www.ssa.gov or http://www.ssa.gov/onlineservices where you will find useful information, links to other services, and background information on what you need to know about the application-before you actually begin the Internet application process. Social Security uses encryption to ensure safety and privacy and users must have 128-bit encryption to apply online. Online service is available weekdays from 5 a.m.-1 a.m.; Saturdays from 5 a.m.-11 p.m.; and Sundays from 8 a.m.-11:30 p.m. (times shown are EST).
Tips to remember include:
- Plan on spending at least one to two hours online.
- You cannot print out the application or skip forward-the internet application must have all entries on a page completed before it will take you to the next page.
- At the end of your application process you will receive an Internet Benefit Claim Confirmation Number, which you should keep until you receive your official notice of award. If you wish to speak to the claims representative who is working on your application, call the toll-free number at (800)-772-1213 for the number of the office handling your claim.
- Once you have completed an Internet application you cannot delete it. If you change your mind about retirement you should call your local office.
10. Does Social Security issue passwords for Internet usage?
Yes. When you apply for retirement benefits Social Security will ask you if you want to do business online with them. If you answer "yes" you will receive a letter within 15 days after your application is approved that will tell you how to create a password. All passwords are restricted to numbers only. If you answer "no" and then change your mind you can go to http://www.ssa.gov/login.htm to apply for a password. Or, you can call the toll-free number at (800)-772-1213 and follow the menu instructions.
This discussion is provided for informational purposes only. Although care is taken in preparing this material and presenting it accurately, Transamerica Retirement Management disclaims any express or implied warranty as to the accuracy of this material and any liability with respect to it. Consumers should contact the Social Security Administration for complete details regarding their specific circumstances.