Frequently Asked Questions on Social Security December 15, 2010 1
Welcome Why AARP is doing this webinar How to obtain materials If no sound dial: 877-509-0617 code 31403329 2
Agenda Social Security 101 Frequently Asked Questions (FAQs): Claiming Social Security benefits Your Social Security benefits Question & Answer If no sound dial: 877-509-0617 code 31403329 3
Shaun O Brien Vice President My Financial Security Portfolio 4
Social Security 101 If no sound dial: 877-509-0617 code 31403329
Why was it created? Created in 1935, the Social Security program was put in place to make sure that income continues even when a worker retires, dies or becomes disabled The program was founded on the concept of earned benefits and shared risk Virtually every working American contributes to Social Security If no sound dial: 877-509-0617 code 31403329 6
Who Receives Social Security? In June 2010, 53.4 million people received Social Security. Disabled workers 15% Children 8% About 11 million under age 62 89% of persons 65 and over receive Social Security benefits. Retired workers 64% Spouses 5% Widows, Widowers, and Parents 8% SOURCE: Social Security Administration, Beneficiary Data. Accessed from www.ssa.gov/oact/progdata/icp.html. 7
How does it work? Workers and employers pay into Social Security through payroll deductions (FICA) Benefits have different eligibility rules (e.g., disability, survivor benefits, retirement benefit) For retirement benefit: Work for at least 10 years Benefits are based on how much you ve earned throughout your life and when you claim your benefit (early, full retirement age and maximum benefit age) 8
FAQs: Claiming Social Security Benefits 9
When should I claim Social Security benefits? There is no one best age - it depends on your circumstances but make an informed decision Assess your basic living expenses (keep in mind increases to health, long-term care cost and inflation risk) If you take your social security benefits before your full retirement age, those benefits could be greatly reduced Sign up at socialsecurity.gov/retireonline or call 1-800-772-1213 10
Shouldn t I take Social Security as early as possible since the program has money problems? The Social Security trust fund, where accumulated assets are held, currently contains about $2.5 trillion The trust fund and continuing tax contributions will allow payment of all benefits at current rates until 2037 After that, there still will be enough tax revenue to pay about 78 on the dollar Congress is being urged to make financial fixes to Social Security to ensure it will be there for you. 11
When I claim Social Security at full retirement age and still work, will my benefits be reduced? If you are under your full retirement age for the entire year, Social Security deducts $1 from your benefit payment for every $2 you earn above the annual limit of $14,160 for an individual. In the year you reach your full retirement age, it deducts $1 in benefits for every $3 you earn above $37,680, but only for earnings in the months before you reach your full retirement age After you reach full retirement age, there are no limits on your earnings 12
If my wife and I are both 62, how much can my wife and I make combined without having it impact our Social Security benefits? Each of you can make up to $14,160 per year. Social Security will deduct $1 from your benefit payment for every $2 you earn above the annual limit of $14,160 for an individual. For example: Husband, age 62 makes $15,000 annual income; Social Security benefit reductions equals $420 Wife, age 62 makes $13,000 annual income; Social Security benefit reductions equals $0 13
Can I collect Social Security and unemployment compensation at the same time? Yes! Unemployment benefits are not counted as wages under Social Security s annual earnings test, so you would still receive your benefit However, the amount of your unemployment benefit could be cut if you receive a pension or other retirement income, including Social Security and railroad retirement benefits Contact your state unemployment office for more information 14
My husband and I are getting a divorce. He wants the settlement agreements to say I will not get his Social Security benefits. Can he do that? No, he has no control over your future benefits You can qualify for a divorced spouse s benefits if you were married at least 10 years, are now unmarried, are 62 or older, and if any benefit from your own work record would be less than the divorced spouse s benefit 15
If a woman is divorced and her former husband is not collecting his Social Security as yet, may she? For how long? If her former husband has not applied for Social Security retirement benefits but is eligible to collect a benefit, she can receive benefits on his record, if they have been divorced for at least two years She must also meet the other criteria for receiving benefits as a divorced spouse (married for at least 10 years, etc.) 16
Can you further explain the Social Security death benefit for a survivor? If you are the widow or widower of a person who worked long enough under Social Security, you can receive survivor s retirement benefits at a reduced rate as early as age 60 You will get full benefits if you wait until your full retirement age Your benefit amount is based on the earnings of the person who died 17
If my husband passes away, can I collect his benefit and my own? You can collect either your own benefit or a widow s benefit Social Security will automatically give you the higher benefit You may not collect both 18
I got Social Security benefits many years ago when my husband passed away and I had young kids. Because I took money out then, does that mean my retirement benefit will be less? Social Security s survivor s benefit is separate from the retirement benefit If you are eligible for both, the benefits will be calculated independently So the money you received as a widow when your husband died will not impact the amount you ll receive at retirement 19
FAQs: Your Social Security Benefits 20
Tell me again, why won t retirees get a cost-of-living adjustment (COLA) in 2011? COLAs are based on the consumer price index (CPI), which tracks inflation Because inflation has been flat, according to the CPI, there will be no benefit increase for the second year in a row AARP is calling on Congress to provide beneficiaries with financial relief 21
I filed for bankruptcy after losing my job. What happens to my Social Security benefits? Your Social Security benefits are protected Social Security is excluded from the calculation of disposable income when setting up a debtor repayment plan 22
I began drawing Social Security at age 62 in 2006, but I m still working. Since I m still paying Social Security taxes, will my benefits increase? If your latest work years are among your highest-earning years, the SSA refigures your benefit and pays you any increase due. This is automatic, with new benefits starting in December of the following year. 23
Once my wife and I start collecting Social Security, how much will each of us be able to earn monthly without paying taxes on our income? Regardless of age, some people who get Social Security will have to pay taxes on their benefits You will have to pay federal taxes on your benefits if you file a federal tax return as an individual and your total income is more than $25,000, or if you and your spouse have total income exceeding $32,000 Less than one-third of beneficiaries pay taxes on their benefits 24
I am 65, my wife is 60, I will begin drawing on my Social Security next year at age 66 (full retirement age). When will my wife be able to draw her benefit (half of mine) will it be 62 for her or 66?? If your wife has not worked, she will be eligible to receive her full benefit (half of yours) at her full retirement age She is eligible to claim the benefit at 62 at a reduced benefit rate (usually 25% less) If your wife has her own work record, she may want to consider tapping into your spousal benefit earlier (62) and consider waiting until full retirement age to claim her own benefit 25
I have been on Social Security disability since the age of 57. I turn 62 this month. Does this mean I have to apply for Social Security Retirement now? As long as you are disabled, you will remain on Social Security disability At your Social Security full benefit age (66 if you are 62 in 2010), you will be switched automatically to a Social Security retirement benefit 26
Is it true that some people are collecting Social Security benefits who never paid into the program? Social Security is an earned benefit In order to collect a retirement benefit, a worker must pay into the system for at least 10 years In some cases, nonworking family members, such as a spouse, may be eligible for benefits based on the worker s record Tough rules in place assure that only legal residents can collect Social Security benefits 27
Do Members of Congress pay into Social Security? What other retirement benefits do they receive? Since 1984, all Members of Congress pay into Social Security Members receive retirement and health benefits under the same plans available to other federal employees Members elected after 1984 are covered by the Federal Employees Retirement System (FERS) and vest after 5 years of full participation 28
Why would changes in Social Security be considered as a way to help balance the federal budget? Some policymakers say all spending, including Social Security, should be cut Social Security has not contributed to the deficit. In fact, the trust fund is projected to reach $4.3 trillion by 2023 AARP believes that Social Security benefits should not be targeted to reduce the deficit 29
Thank you for joining us for: Frequently Asked Questions on Social Security Disclaimer: This webinar is intended to be informational and educational and DOES NOT constitute investment advice. We strongly recommend that you seek the advice of a tax, legal and financial services professional before making decisions related to any investment or other financial decisions. AARP is not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided during this event. 30