Retirement - Social Security

What is the formula for computing benefits received before reaching full retirement age?

Benefits are reduced 5/9 of 1% for each month of early retirement, up to a maximum of 36 months. A further reduction applies for each month over 36 months at the rate of 5/12 of 1% per month. For the first 3 years, therefore, the annual retirement benefits will be reduced by 20% (5/9 x 36). For the fourth year, the reduction will be 5/12 x 12 = 5%. The total reduction for retiring four years early would be 25%.

What is the waiting period for Disability benefits?

Benefits begin the 6th full month of a person's disability. There is no waiting period for disabled children's benefits or SSI benefits.

How are credits toward Social Security benefits earned?

1 credit is earned for each $1,120 in earnings (2011). A maximum of 4 credits can be earned in a year. 40 credits (10 years) are needed for benefits.

How is tax on Social Security benefits computed?

1. Combined Income between $32,000 and $44,000 = 50% tax on benefits. 2. Combined Income over $44,000 = 85% 3. Combined Income = AGI + nontaxable interest + 1/2 of Social Security Benefits 4. Tax is on the lesser of 50% of SS benefits or 50% of MAGI over the $32,000 threshold.

Who may receive Survivor's benefits?

1. a widow or widower who is 60 years or older 2. a widow or widower who is 50 years or older and disabled 3. a widow or widower of any age who is caring for a child under 16 years old or any age and disabled receiving benefits. 4. children if they are unmarried and a. under age 18 b. under age 19 if a full time student in elementary or secondary school. c. age 18 or older and severly disabled and the disability started before age 22. 5. parents if they were dependent on the worker for at least 50% of their support.

Other than for retirement, what are reasons persons receive Social Security benefits?

1. disabled 2. a spouse or dependent of someone receiving benefits 3. a widow or widower caring for a child under 16 4. a child under 18 (19 if in high school) 5. a widow or widower age 60 or older 6. dependent parent of someone who has died.

What are the requirements for an ex-spouse to receive Social Security benefits?

1. have been married to the worker for at least 10 years. 2. at least 62 years old 3. unmarried 4. not be eligible for an equal or higher benefit on their own record or another persons.

What is the Social Security definition of "Disability"?

A condition under which the individual is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to last for a continuous period of not less than 12 months or result in death." Disability under Social Security is based on an individual's inability to work in any occupation.

How is Social Security computed for a self-employed worker making $55,000 per year?

$55,000 x .9235 = $50,792.50 (This subtracts 7.65% from the gross income.) $50,792.50 x 15.3% = $7,772 (Total FICA due rounded up to nearest dollar.)

What is the current Social Security/Medicare tax.

7.65% = 6.2% for Social Security on earnings up to $106,800 and 1.45% for Medicare on all wages earned.

What is the 2011 taxable wage base?

7.65% on all wages up to $106,800 and 1.45% on all wages above the base.

How much do employees pay in Social Security tax in 2011 and 2012?

Employees portion is reduced from 7.65% to 5.65%. 4.2% for Social Security and 1.45% for medicare.