Social Security
Retirement Earning Limit. Earnings test
65+), there is no limitation or restriction on the amount of income he or she can earn from any type of employment. decides to begin receiving retirement income prior to reaching full retirement age (age 62 through 64+), whatever they earn will reduce the retirement benefit This is known as the earnings test.
Survivor benefits
A Social Security benefit of 75% of the Primary Insurance Amount (PIA) is given to each eligible parent. If only one parent is eligible, the benefit is increased to 82.5% of the worker's PIA.
Fully Insured
A worker is considered be fully they have earned the required number of quarters of coverage. A worker with 40 quarters of coverage (i.e., ten years of employment) is considered to be fully insured. Is entitled to retirement benefits, and survivors are eligible for retirement benefits when the worker dies.
Quarter of Coverage:.
Coverage: is a basic unit for determining whether a worker is insured under the Social Security program.
taxable wage base.
FICA tax is applied to an employee's income up to a certain income amount. There is a maximum amount of earnings that can be subject to Social Security tax each year. This amount is indexed each year to the national average wage index. This maximum applies to employers, employees, and self-employed individuals. Medicare Part A taxes are not subject to a maximum taxable wage cap.
Fully Insured and disability benefits
Fully insured status alone does not provide for disability benefits. is provided worker is fully insured and meets the definition of disability. a worker must have 40 quarters of coverage and 20 of the 40 quarters must be earned immediately preceding the disabling event. under this classification, the worker is entitled to retirement benefits, disability benefits, and survivors are eligible retirement benefits when the worker dies.
Full Retirement Age (FRA)
If a covered worker retires at the full (normal) retirement age, they will receive 100% of the PIA, starting on the first day of the month if a covered worker retires early at the age of 62, the maximum Social Security benefit is 80% of the PIA. This reduction remains all through retirement. if a covered worker chooses to delay benefits beyond reaching full retirement age (up to age 70), they will experience a slight benefit increase.
Death/Survivor's Benefits cont.
In addition to the lump sum Social Security provides survivor monthly life income equal to the deceased spouse's PIA at death. A surviving spouse of a fully insured deceased worker without dependent children is eligible for Social Security survivor benefits as early as age 60. However, benefits are reduced if taken prior to age 65.
Coverage and Eligibility not covered:
Most federal employees hired before 1984 who are covered by Civil Service Retirement or another similar plan. Approximately 25% of state and local government employees who are covered by a state pension program and elect not to participate in the Social Security Program. Railroad workers covered under a separate federal program called the Railroad Retirement System.
Retirement Benefits
Retirement pay covered retired workers, their spouses, and other eligible dependents a monthly retirement income. Workers who are age 65 or older and fully insured are entitled to monthly retirement income for the remainder of their lives. retirement income paid by Social Security begins on the first day of the month in which an eligible individual reaches age 65 (or other qualifying age). However, retirement income is not paid automatically when a retiree reaches age 65. recipient must complete an application and submit it if he or she wishes to receive a monthly income.
Taxation of Social Security Benefits
Social Security benefits are subject to federal income tax if the beneficiary files an individual tax return, and his annual income is greater than $25,000. Joint filers will pay federal income tax on their Social Security benefits if their income is greater than $32,000.
average indexed monthly earnings (AIME) earnings
The amount of Social Security benefits a person receives is based on the individual's average indexed monthly earnings (AIME) during their working years. Average indexed monthly earnings are used to account for inflation and bring past earnings up to current economic standards.
(PIA)
The primary insurance amount (PIA) determines the full amount of retirement benefits for an eligible person at age 65. If a worker retires early, for example, at age 62, his retirement benefits will be 80% of his PIA and will remain lower for the covered worker's life.
Insured Status
There are two types of insured statuses that qualify individuals for Social Security benefits: fully insured and currently insured. Most Social Security benefits are paid to fully insured individuals.
Maximum Family Benefit
There is a limitation when several family members are eligible for Social Security benefits. Similar to the Primary Insurance Amount, a maximum family benefit is established by Social Security for every level of average earnings.
Coverage and Eligibility. COVERED
Those who are actively contributing to the Social Security program through FICA taxes are considered covered. Coverage does NOT guarantee benefit eligibility. Each Social Security benefit has eligibility requirements that must be met prior to receiving the benefit.
(FRA) normal retirement age (NRA),
While age 65 is typically thought of as full (normal) retirement age, full retirement age is determined by the covered worker's birth year. Age 65 is the full retirement age for covered retired workers born prior to 1938. Since 1938, the full retirement age gradually increases by a few months for every birth year until it reaches 67 for people born in 1960 and later.
Requirements to be fully insured
a covered worker must accrue a total of 40 quarters of credit, which is about ten years of work. To be considered currently insured and eligible for limited survivor benefits, a worker must have earned six credits during the last 13-quarter period.
Retirement Benefits
are only available to covered workers who are fully insured upon retirement, and these benefits are paid monthly. If a covered worker retires at the normal retirement age, he or she will receive 100% of the PIA. However, if a covered worker retires early at the age of 62, the maximum Security benefit is 80% of the PIA. This reduction remains all through retirement. Retirement benefits pay covered retired workers, their spouses, and other eligible dependents a monthly retirement income.
Credits:
are the determining factor between being classified as fully insured or currently insured. Once a person becomes fully insured, death benefits are extended to his (or her) family. In other words, the family becomes eligible for survivorship benefits. Four credits are the maximum any one person can earn in a given year. Therefore, for the 40-quarter rule to apply, an individual must have been employed and have paid FICA taxes for ten years, at least.
Blackout Period
blackout period the period of time from the insured's death until the surviving spouse is permitted to receive retirement income benefits. However, benefits are provided for other dependents (i.e., children) during the blackout period until the youngest child reaches age eighteen (18). The "blackout period" begins when Social Security survivorship benefits cease. This is when the youngest child turns 16 years old, or immediately if no children. The "blackout period" ends when the surviving spouse turns at least 60 years old.
Social Security Act of 1935
created to provide for United States citizens' general welfare who are 65 years of age and older. furnishing financial assistance to the aged, blind, dependent and crippled children, maternal and child welfare, public health, and to establish more adequate provisions for the administration of their unemployment compensation laws, to establish a Social Security Board, to raise revenue and to provide a basic floor of protection to all working Americans against the financial problems brought on by death, disability, and aging. In 1939 the law was changed to add survivors' benefits and benefits for the retiree's spouse and children. In 1956 disability benefits were added. Social Security is an entitlement program, not a welfare program. It is based on a "pay now in exchange for benefits later" system.
Requirements for a worker to be currently insured
currently insured if he or she has earned at least six quarters of coverage in the 13 quarters immediately preceding death or disability. This status provides for survivor benefits only. It does not provide for disability or retirement benefits.
Currently Insured:
in regards to Social Security, is a status of limited eligibility that provides only death benefits.
Fully Insured:
is a status of complete eligibility for the full range of Social Security benefits: death benefits, retirement benefits, disability benefits, and Medicare benefits. A person must have contributed to FICA taxes for 40 quarters of employment to be fully insured.
Old Age, Survivor, and Disability Insurance (OASDI):
is more commonly referred to as Social Security. Federal government imposes a tax on earned income that must be withheld by your employer. deduction on your paycheck shows how much was withheld.
Primary Insurance Amount: (PIA)
is the benefit (before rounding down to the next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.
Disability Benefit Qualifications
is when Social Security uses both medical disability criteria and non- medical criteria to determine whether you qualify for Social Security disability (SSDI, based on work credits) or Supplemental Security Income (SSI, the low-income program). you must be able to prove that you are medically disabled first.
Fully and Permanently Insured:
means an individual has paid FICA contributions for at least 40 quarters (which are not required to be consecutive).
Death/Survivor's Benefits
pay a lump-sum death benefit and, in some cases, monthly income to survivors of deceased covered workers. to be paid to the eligible spouse and, in some cases, the children when a fully or currently insured worker dies. The lump sum death benefit is $255 and has been capped at that amount for over 60 years.
Funding Social Security Benefits
social insurance counterparts (i.e., Medicare, Medicaid) is accomplished through the Federal Insurance Contributions Act (FICA) payroll taxes. Social Security payroll taxes are collected from employers (7.65%), employees (7.65%), and the self-employed (15.3%). Therefore, employers, employees, and self-employed (i.e., sole proprietor) fund social insurance programs.
Dual Benefit Liability
sometimes eligible for two retirement income benefits. However, he or she is only allowed to collect one. instance, a surviving spouse reaches age 65 or his or her actual retirement eligible age. He or she is now eligible for a retirement income benefit. However, he or she is also entitled to his or her deceased spouse's benefit, as well. Since both cannot be collected, the surviving spouse will select the greater of the two.
FICA taxes (Federal Insurance Contributions Act):
taxes are used to fund the Social Security program. If a person has not contributed through their payroll program, they are not eligible for benefits.
Blackout period:
the period following the death of a family breadwinner, during which no Social Security benefits are available to the surviving spouse.
earnings test.
under full retirement age benefit reduction of $1 for every $2 earned above the annual limit. full retirement age during the year experience a benefit reduction of $1 for every $3 earned above a different limit. earnings up to the month before you reach full retirement age count, not earnings for the entire year. An individual collecting retirement income benefits at full retirement age is still allowed to work, and there is no longer any reduction or offset from Social Security income.
Survivor benefits
• A spouse of any age who is caring for children under age 16, or over age 15 and disabled. • Unmarried children under age 18, or 19 if still in high school. • Children at any age if disabled before age 22 and remain disabled. A Social Security benefit of 75% of the Primary Insurance Amount (PIA) is given to an underage child of a deceased worker. • Parents, beginning at age 62, of a deceased, fully insured worker, if the child provided at least 50% of the parent's support at the time of death.