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1 Social Security www.socialsecurity.gov

Social Security - Benefitsbenefits.nmsu.edu/wp-content/uploads/sites/15/2015/... · How Social Security Determines Your Benefit Social Security benefits are based on how much an individual

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Social Security

www.socialsecurity.gov

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Today’s young workers can expect to spend 20 or

more years in retirement, so it is important to begin

financial planning as early as possible.

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Save for a Secure Future

OTHER INCOME

SAVINGS & INVESTMENTS

PENSION

SOCIAL SECURITY

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Social Security replaces an

average of about 40% of

pre-retirement earnings.

Financial planners generally

agree that retirees will need

70-80% of pre-retirement

earnings to enjoy a

comfortable retirement.

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To learn how to save and

invest for retirement, visit

www.mymoney.gov.

The website provides

helpful information

furnished by over 20

federal agencies, including

Social Security.

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How Do You Qualify for

Retirement Benefits?

You need to work to earn

Social Security “credits”

Each $1,220 in earnings

gives you one credit

You can earn a maximum

of 4 credits per year

Example: To earn 4 credits in 2015, you must earn at least $4,880. Earning 40

credits (10 years of work) throughout

your working life will qualify you for a retirement benefit.

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How Social Security

Determines Your Benefit

Social Security benefits are based on how much an individual earned

and paid in Social Security taxes while working

Step 1 -Your wages are adjusted for changes in wage levels over time

Step 2 -Find the monthly average of your 35 highest

earnings years

Step 3 -Result is “average indexed monthly earnings”

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If your average monthly earnings are = $5,200

90% of First $826 = $ 743

32% of Earnings over $826 through $4,980 $4,154 = $1,329 ($4,980 -$826=$4,154)

15% of Earnings over $4,980 $220 = $ 33

Your monthly benefit would be $2,105

2015 Retirement Benefit

Computation Example

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If any part of your pension is based

on work not covered by Social

Security, you may be affected by the

Windfall Elimination Provision.

Windfall Elimination Provision

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Windfall Elimination Provision

(WEP) - 2015

Normal Computation WEP Computation

90% of the First $826 40-85% of the First $826

32% of the Next $4,154 32% of the Next $4,154

15% of the Remainder 15% of the Remainder

Because your pension is based on work not covered by Social

Security, you may be affected by the Windfall Elimination

Provision.

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Full Retirement Age Chart

Year of Birth Full Retirement

Age

1943-1954 66

1955 66 and 2 months

1956 66 and 4 months

1957 66 and 6 months

1958 66 and 8 months

1959 66 and 10

months

1960 and later 67

The amount of benefits is affected by

the age when your client decides to

retire.

Early Retirement:

–Benefits as early as 62

–25 to 30 % reduction

Full Retirement:

–Full benefits at full retirement age

(100%)

Delayed Retirement:

–Benefits increase automatically if

retirement is delayed past full

retirement age up to age 70

–8 % per year

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Use the Retirement Estimator

www.socialsecurity.gov/estimator

Convenient, secure, and quick

financial planning tool

Immediate and accurate

benefit estimates

Lets you create “What if”

scenarios based on different ages and

earnings

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Benefits for Family Members

Spouses:

At age 62

At any age if caring for a child under age 16

or disabled

Is not entitled to a higher benefit on his or

her own record

Divorced Spouses:

Marriage lasted 10 years & they are

unmarried

Unmarried Children:

Up to age 18

Age 18-19 & still in high school

Disabled before the age of 22

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Spouse’s Benefit Computation

Benefit is 50% of worker’s unreduced benefit

Reduction for early retirement

If spouse’s own benefit is less than 50% of the worker’s, the benefits

are combined

Does not reduce payment to worker

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Who Can Get Survivors Benefits?

Widow/Widower:

Worker’s full benefit at their Full Retirement Age

• (If deceased worker received full retirement or disability benefits)

Reduced benefits as early as age 60, or age 50 if disabled

• (71.5% of deceased worker’s unreduced benefit)

At any age if caring for a child younger than 16 or disabled

Can receive reduced benefits at age 60 and then reduced or unreduced benefits at

age 62 or older

Remarriage after age 60 (50 if disabled)

Full benefits paid to both widow/widower and divorced widow/widower

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Government Pension Offset (GPO)

If you receive a government pension based

on work not covered by Social Security, your

Social Security spouse’s or widow(er)’s benefits may be

reduced.

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Example:

$4,200 of government pension 2/3 = $2,800

Social Security spouse’s benefits = $750

No benefit payable by Social Security

Government Pension Offset (GPO)

Applies to Spouse’s Benefits Only

2/3 of amount of government pension will be used

to reduce the Social Security spouse’s benefits

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Note: If some of your retirement benefits are withheld because of your earnings,

your benefits will be increased starting at your full retirement age to take into

account those months in which benefits were withheld.

How Earnings Affect Retirement Benefits

If You Are You Can Make Up To

Rate Benefits are

Withheld

Under Full Retirement Age $15,720/yr. ($1,310/mo.)

$1 for every $2

The Year Full Retirement

Age is Reached $41,800/yr. ($3,490/mo.) $1 for every $3

Month of Full Retirement

Age and Above No Limit No Limit

If You Work & Receive Benefits

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What Will You Need When Applying for Your Social Security Benefits?

Social Security number for each applicant

Birth certificate(if date of birth allegation doesn't match Social Security

records)

Latest W-2 or self- employment tax return

Earnings estimate

Bank information for direct deposit

Information about marriages and divorces

Information about military or railroad services

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Strategies

• Pick and Choose

• File and Suspend

• The Do-Over

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Retirement Strategies

Pick and Choose: (Claim Now, Claim More Later)

If you are between full retirement age and 70 and your spouse is already receiving benefits, you can apply for spousal benefits, delay your own benefit and earn delayed retirement credits at 8% up to age 70 at which time your own benefit could very well be higher.

File and Suspend:

If you are of retirement age and your spouse is full retirement age but does not want to receive his/her benefits, your spouse can apply for benefits and request payments to be suspended. These allows you to receive benefits on your spouse’s Social Security record even though he/she is not receiving theirs.

Do Over at Risk:

If you file for benefits early and within 12 months you now regret your decision you can withdraw your claim, pay back all the benefits you receive and restart them at higher amount based on your age at time of re-applying.

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About 1/3 of people who get Social Security pay income taxes on their

benefits.

At the end of each year, you’ll receive a Social Security Benefit Statement

(Form SSA-1099).

Use this statement to complete your Federal income tax return to find out

if you have to pay taxes on your benefit.

Your Benefits May Be Taxable

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Your Benefits May Be Taxable

Couple, Married Filing Joint Tax Return

$31,999 or less - no Federal tax

$32,000 - $44,000 - pay Federal tax on 50% of Social Security benefit

More than $44,000 - pay Federal tax up to

85% of Social Security benefit

Individual Tax Return

$24,999 or less - no Federal tax on Social Security benefit

$25,000 - $34,000 - pay Federal tax on 50% of Social

Security benefit

More than $34,000 - pay Federal tax up to 85% of Social Security benefit

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Who Qualifies for Medicare ?

Age 65

24 months after entitlement to Social Security disability

• Amyotrophic Lateral Sclerosis (ALS)

Permanent kidney failure and receive maintenance

dialysis or a kidney transplant

If you filed for Social Security benefits before age 65, you will be

automatically enrolled

If you are close to 65, still working and not receiving benefits you will have to

sign-up

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Medicare Coverage

Part A - Hospital Insurance

Covers most inpatient hospital expenses

2015 Deductible $1,260

Signing up for Medicare prohibits you from participating under

employer Health Saving Accounts

Part B - Medical Insurance

Covers 80% doctor bills & other outpatient medical expenses

after first $147 in approved charges

2015 Standard Monthly Premium $104.90

Part C – Health care services through a provider organization

Part D - Medicare Prescription Drug Plan

Covers a major portion of prescription drug costs for Medicare

beneficiaries

Enroll With Medicare prescription drug provider not SSA

When Can I Sign Up for Medicare Part B?

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Initial enrollment – 7 month period

• 3 months before and 3months after 65th birthday

Special enrollment – still working

• Anytime you are still covered by employer group health plan

• During the 8-month period that begins the month after the employment

or coverage ends whichever happens first

• COBRA is not considered coverage based on active enrollment

Annual General Enrollment

• January thru March with July being effective month of coverage

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Medicare Savings Program

– Helps pay Part B premiums & for some the Part A & B deductibles

and coinsurance

Extra Help

– Helps pay for the cost of Part D

premiums, deductibles, and co-

payments

www.socialsecurity.gov/prescriptionhelp/

Medicare Savings Programs

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Medicare

For More Information:

1-800-MEDICARE

(1-800-633-4227)

TTY 1-877-486-2048

www.medicare.gov

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Connecting With Social Security

• Online Services

– www.socialsecurity.gov

• Call Social Security to

schedule an appointment

– 1-800-772-1213

– TTY 1-800-325-0778

• Apply at local Office

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Applying for Retirement Benefits

You can apply online for

Retirement Benefits by

visiting

www.socialsecurity.gov

and clicking “Benefits”

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my Social Security

Your Online Account ... Your Control ...

www.socialsecurity.gov/myaccount

my Social Security is an easy-to-access,

easy-to-use portal to view and update some

of your own Social Security information.

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Who Can Create a

my Social Security Account?

A valid E-mail address;

A Social Security number; and

A U.S. mailing address.

You must be at least 18 years old and have:

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If you don’t get benefits, you can—

View, save, and print your online

Social Security Statement.

If you do get benefits you can—

Get your benefit verification letter;

Check your benefit and payment

information and your earnings record;

Change your address and phone number; and

Start or change your direct deposit.

my Social Security Services

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Your Online

Social Security Statement Provides

Estimates of the retirement and disability benefits you may receive;

Estimates of benefits your family may get when you receive Social

Security or die;

A list of your lifetime earnings according to Social Security’s records;

The estimated Social Security and Medicare taxes you’ve paid;

Information about qualifying and signing up for Medicare; and

A printable version of your Social Security Statement.

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What you can do Online

www.socialsecurity.gov

Online Services:

Request forms and pamphlets

Benefit Eligibility Screening Tool (BEST)

Create your online account

Apply for Retirement, Disability, Medicare, and Extra Help with

Medicare Part D

Retirement Estimator

Planners for Retirement, Disability, and Survivors

Request an Online Social Security Statement

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my Social Security provides an online benefit

verification letter immediately.

Visit: www.socialsecurity.gov/myaccount

My Social Security is the fastest, easiest and most secure

way to access your personal Social security Information

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