Ch. 7.2: Types and Amounts of Social Security Benefits Available

What types of pensions can trigger the Government Pension Offset?

Any pension from a federal, state, or local government based on compensation on which Social Security taxes were not paid can trigger the Government Pension Offset.

Are benefits received by divorced spouses included in the maximum family benefit?

Benefits received by divorced spouses are not included in the maximum family benefit, except if the surviving divorced spouse qualifies for benefits only on the basis of caring for a dependent child of the worker.

If a worker starts taking their retirement benefits prior to FRA, how does it affect their benefits?

If a worker starts taking their retirement benefits before their FRA, their benefit amount will be reduced. The maximum reduction for a worker whose FRA is 67 (born in 1960 or later) is 30%.

What happens if the second threshold is exceeded in any taxable year?

If the second threshold is exceeded in any taxable year, generally 85% of the amount by which the Social Security benefits exceed the (second) threshold is subject to income tax. However, this amount cannot exceed the smaller of: 85% of the actual Social Security benefits received in any taxable year or 50% of the benefits plus 85% of any excess over the second threshold.

How is the spousal retirement benefit reduced if the spouse starts receiving it earlier than their FRA?

If the spouse starts receiving spousal retirement benefits earlier than their FRA, the benefit is reduced by 25∕36 of a percent for the first 36 months and 5∕12 of a percent per month for any months earlier than 36 months.

What is the definition of provisional income?

Provisional income is the beneficiary's modified adjusted gross income (MAGI) plus one-half of the Social Security or tier 1 railroad retirement benefits.

A Social Security fully insured worker is generally eligible for what benefits?

Retirement benefits Spousal retirement benefits Surviving spouse benefit for widow(er) age 60 or older Surviving spouse benefit caring for a dependent child (if spouse is caring for a dependent child younger than age 16) Dependent benefit Dependent parent benefit (if parent is age 62 or older) Lump-sum death benefit of $255

Whc=ich following survivors are eligible to receive survivor benefits based on the employment record of the Social Security insured worker?

Surviving spouse retirement benefit—current or qualifying divorced spouse A disabled widow(er) age 50 or older A surviving spouse currently taking care of a dependent child under the age of 16 An unmarried child under age 18, under age 19 if still in high school, or at any age, if the child became disabled before age 22 A dependent parent age 62 or older The divorced spouse who is age 60 or older and was married to the worker for at least 10 years and is unmarried (remarriage after age 60 will not affect eligibility for survivor benefits)

How is the average indexed monthly earnings (AIME) calculated in Social Security?

The AIME is calculated by taking the sum of the worker's highest 35 years of indexed earnings, divided by 420 (35 years x 12 months).

Why does the Government Pension Offset exist?

The Government Pension Offset exists because if a spouse, widow, or widower is receiving a Social Security benefit as a spouse, widow, or widower, the amount is offset by any amount the beneficiary qualifies to receive from Social Security based on their own work record. The Government Pension Offset mirrors this offset.

What is the Government Pension Offset?

The Government Pension Offset is a provision in the Social Security laws that may serve to reduce the Social Security benefits of spouses, widows, or widowers who receive a pension from a federal, state, or local government based on compensation on which Social Security taxes were not paid.

How is the PIA calculated in Social Security?

The PIA is calculated by applying a formula to the AIME. The formula uses "bend points" which change each year based on inflation. In general, the formula takes a percentage of the first portion of the AIME, then a lower percentage of the next portion, and a still lower percentage of the remaining portion.

What is the primary insurance amount (PIA) in Social Security?

The PIA is the amount used to determine a worker's monthly Social Security retirement benefit, disability benefit, or survivor benefit.

How is the WEP different from the GPO?

The WEP reduces the worker's own Social Security benefits, while the GPO reduces benefits for spouses and survivors. The W in WEP can help differentiate it as it stands for worker.

What is the Windfall Elimination Provision?

The Windfall Elimination Provision is a special provision in the Social Security laws that may reduce a worker's Social Security retirement or disability benefits if they receive a pension from an employer who does not withhold Social Security taxes.

How does the Windfall Elimination Provision work?

The Windfall Elimination Provision reduces the formula used to calculate a worker's Primary Insurance Amount (PIA), resulting in a lower benefit. The PIA is a higher percentage of career covered earnings for low-earning workers than for high-earning workers. The Windfall Elimination Provision accounts for the noncovered employment pension and results in a lower Social Security benefit.

What are the bend points in Social Security?

The bend points are specific dollar amounts used in the PIA formula that determine how much of the AIME will be counted toward the worker's PIA. The bend points are adjusted annually for inflation.

Which following individuals may receive income from a disability benefit from the Social Security program based on the worker's employment record?

The disabled worker (Note: the disability benefit is equal to 100% of the worker's PIA or retirement benefit) The spouse of the disabled worker An unmarried child (of the disabled worker) under age 18 or under age 19 if still in high school An unmarried child (of the disabled worker) of any age who became disabled before attaining age 22 The divorced spouse who is age 62 or older and was married to the worker for at least 10 years and is unmarried

What is the earnings limit for workers or beneficiaries under their FRA who are receiving Social Security benefits in 2022?

The earnings limit for workers or beneficiaries under their FRA who are receiving Social Security benefits in 2022 is $19,560.

What are the two threshold amounts that determine the amount of Social Security retirement benefits that must be included in income for federal income tax purposes?

The first threshold or base amount is $25,000 of provisional income for all single, unmarried taxpayers and $32,000 of provisional income for married taxpayers filing jointly. The second threshold or base amount is $34,000 of provisional income for all single, unmarried taxpayers and $44,000 of provisional income for married taxpayers filing jointly.

How does the AIME affect the PIA in Social Security?

The higher the AIME, the higher the PIA will be. The PIA formula is designed to provide a higher replacement rate of income for lower earners and a lower replacement rate of income for higher earners.

What is the maximum family benefit in Social Security?

The maximum family benefit is a limit on the total amount of benefits that can be paid to a family based on the worker's employment record.

What is the maximum number of credits a worker can earn per year?

The maximum number of credits a worker can earn per year is 4.

What is the maximum number of work credits needed to be fully insured for Social Security benefits?

The maximum number of work credits needed to be fully insured is 40.

What is the minimum number of work credits needed to be fully insured for Social Security benefits?

The minimum number of work credits needed to be fully insured is 6.

How is the reduction of retirement benefits calculated if a worker starts taking benefits early?

The reduction is calculated based on the number of months between the worker's actual retirement date and their FRA. For the first 36 months, the PIA is reduced by 5/9 of 1% per month. For any additional months, the reduction is 5/12 of 1% per month.

What is the retirement earnings test?

The retirement earnings test is a limit on earnings from employment that applies to workers or beneficiaries under their full retirement age if they are receiving Social Security benefits.

What is the separate qualification requirement to receive disability income benefits from the Social Security program?

The separate qualification requirement to receive disability income benefits from the Social Security program is that workers must be so severely impaired, physically or mentally, that they cannot perform any substantial gainful activity and this impairment must be expected to last at least 12 months or result in death.

For the surviving spouse retirement benefit, What is the special survivor FRA?

The special survivor FRA is the age at which the survivor can receive their full survivor benefit without any reduction, which is increasing towards age 67 for those born in 1962 or later.

Is the spousal retirement benefit affected by the worker starting benefits earlier than their FRA?

The spousal retirement benefit is not affected by the worker starting Social Security benefits earlier than their FRA.

How much of the worker's PIA is the spouse entitled to receive?

The spouse is entitled to receive 50% of the worker's PIA if the spouse begins spousal retirement benefits at their FRA.

For the surviving spouse retirement benefit, Does the survivor benefit increase or decrease if the worker delayed Social Security retirement benefits?

The survivor benefit increases if the worker delayed the start of Social Security past FRA (up to age 70) but decreases if the survivor takes it early.

For the surviving spouse retirement benefit, How is the survivor benefit calculated?

The survivor benefit is calculated based on what the retired worker was receiving at the time of death and is then permanently reduced if the widow(er) takes it before their special survivor FRA.

What is the taxable wage base in Social Security for 2022?

The taxable wage base in Social Security for 2022 is $147,000. This means that earnings above this amount are not subject to Social Security taxes.

How many work credits does a worker earn for every $1,510 of compensation earned?

A worker earns 1 credit of coverage for every $1,510 (2022) of compensation earned.

What is full retirement age (FRA) under the Social Security program?

FRA is the age at which a worker becomes eligible to receive their full retirement benefits under the Social Security program. It is age 65 for workers born before 1938 and gradually increases for those born in later years, reaching age 67 for workers born in 1960 or later.

How does the retirement earnings test affect Social Security benefits for workers or beneficiaries under their FRA who earn above the limit?

For workers or beneficiaries under their FRA who earn above the earnings limit, $1 in Social Security benefits will be withheld for every $2 in earnings above the limit.

How does the benefit reduction formula change for workers in the year they attain full retirement age?

In the year a worker attains full retirement age, the benefit reduction formula changes to $1 in benefits withheld for every $3 earned in excess of the threshold, which is much higher than the threshold for workers under their FRA. In 2022, the threshold for workers in the year they attain full retirement age is $51,960.

What is the minimum number of recent work credits needed for individuals age 31 and above to qualify for Social Security disability benefits?

Individuals age 31 and above must have earned at least 20 of the most recent 40 credits as of the date of disability onset to qualify for Social Security disability benefits.

How is Currently insured coverage achieved?

It is achieved if the worker has earned six credits of coverage during the 13 calendar quarters ending with the calendar quarter in which the individual died, most recently became eligible for disability benefits, or became entitled to retirement insurance benefits.

What is the definition of MAGI?

MAGI is the beneficiary's adjusted gross income plus any tax-exempt interest, including muni bonds, interest earned on savings bonds used to finance higher education, amounts excluded under an employer's adoption assistance program, and any foreign earned income or foreign housing expense (either deducted or excluded).

Can a current spouse qualify for spousal retirement benefits if the worker spouse has not yet started receiving Social Security retirement benefits?

No, a current spouse may only qualify for spousal retirement benefits if the worker spouse is actually receiving Social Security retirement benefits.

Will a worker who has reached full retirement age experience a reduction in Social Security benefits if they continue to work?

No, a worker who has reached full retirement age (FRA) will not experience a reduction in Social Security benefits if they continue to work.

Does the Government Pension Offset apply to all Social Security benefits?

No, the Government Pension Offset only applies to Social Security benefits for spouses, widows, or widowers. It does not apply to the retirement or disability benefits of the worker who receives the pension.

Does the Windfall Elimination Provision apply to survivors benefits?

No, the Windfall Elimination Provision does not apply to survivors benefits under Social Security.

Is the maximum reduction in retirement benefits the same for all workers, regardless of their FRA?

No, the maximum reduction in retirement benefits varies depending on a worker's FRA. For example, the maximum reduction for a worker born before 1938 (FRA of 65) is 20%, while the maximum reduction for a worker born in 1960 or later (FRA of 67) is 30%.

Are workers disabled solely because of alcoholism or drug addiction eligible for Social Security disability benefits?

No, workers disabled solely because of alcoholism or drug addiction are not eligible for Social Security disability benefits.

Are workers who have not worked for over five years eligible for Social Security disability benefits?

No, workers who have not worked for over five years are not eligible for Social Security disability benefits even if they are fully insured for all other benefits.

How much are Social Security benefits reduced under the Government Pension Offset?

Social Security benefits for spouses, widows, or widowers may be reduced by two-thirds of the government pension.

What benefits are available to someone with currently insured coverage?

Surviving spouse caring for a dependent child Dependent benefit Lump-sum death benefit of $255

Can a worker receive more than their PIA if they delay taking retirement benefits past their FRA?

Yes, if a worker delays taking their retirement benefits past their FRA, their benefit amount will be increased. The increase is calculated based on the number of months between their FRA and the date they start receiving benefits, up to age 70. The increase is 2/3 of 1% per month, or 8% per year.

For the surviving spouse retirement benefit, Is the survivor benefit reduced if it is taken early?

Yes, the survivor benefit is reduced if it is taken early. The reduction is based on the widow(er)'s age when the benefits start and the number of months before their special survivor FRA.

Is there a special monthly test for the retirement earnings test in the first calendar year of retirement?

Yes, there is a special monthly test for the retirement earnings test in the first calendar year of retirement, where earnings prior to the month of retirement are not considered in the annual limit and the retiree may receive benefits in a given month if they do not earn more than one-twelfth of the annual earnings limit in that month.

How many work credits do you need for each calendar year after you reach age 21 to be fully insured?

You need at least 1 work credit for each calendar year after you reach age 21 to be fully insured.