Xcel Chapter 9 Social security

All of the following statements correctly describe the purpose of Social Security EXCEPT

It provides a source of income for a meaningful standard of living during retirement

Social Security is also know as

Old Age, Survivors, and Disability Insurance (OASDI)

How benefits are determined

Person must be insured under social security program for survivors, disability , or retirement benefit to pay. Social Security benefits are based on how long a covered worker has worked throughout his life

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.

Social Security Survivors benefits or death benefits:

pay a lump-sum death benefits, child's benefit, and parent benefit

"Currently Insured" status is based on what

workers age at the time of disability you have to have 6 credits in the last three years

Retirement Benefits

- Benefits are only available to covered workers who are fully insured upon retirement - Benefits paid monthly - If 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 -Retirement benefits pay covered retired workers at least 62 years of age, their spouses and other eligible dependents monthly retirement income - Retirement benefits include monthly retirement payments to the covered worker, spousal benefits, and child's benefits

Definition of Disability: In order to be considered totally disabled, an individual has to qualify according the following requirements:

- The inability to engage in any gainful work that exists in the national Economy -The disability must result from a medically determinable physical or mental impairment that is expected to result on early death, or has lasted, or is expected to last for a continuous period of 12 months

Social Security established benefit eligibility based on an "Insured" statuses that qualify individuals for Social Security benefits:

- To obtain Fully Insured Status, a covered worker must accrue a total of 40 quarters of credit, which is about 10 years of work -To be considered Currently Insured, and thus eligible for for limited survivor benefits, a worker must have earned 6 credits during the 13-quarter period

Social Security extends coverage virtually ever American who is employed or self-employed, with few expectations. Those not covered Include:

-Most federal employees hired before 1984 who are covered y civil service Retirement or another plan -Approximately 25% of state and local government employees who are covered by state pension program and elect not to participate in Social Security Program -Railroad workers covered under a separate federal program called the railroad Retirement Style

Survivor Benefits are available to:

-Spouse of any age who is caring for children under age 16 -Children under age 18 -Children under age 19 who are full time students -Children at any age if disabled before 22 and remain disabled -A Social Security benefit of 75% of the Primary Insurance Amount (PIA) is given to an underage child of deceased worker

How long is a person expected to be disabled in order to receive Social Security disability benefits?

12 months

Calculating Benefits

Based on the individual average monthly wage during the working year The primary insurance amount (PIA) is used to establish the benefit. It is equal to the worker's full retirement benefit at age 65 If worker retires early, for example 62, his retirement benefit will be 80% of his PIA and will remain lower for the covered worker's life The PIA is based on the average earning over your lifetime

An insured's status under Social Security can be described as

Fully Insured

Social Security Payroll Taxes

Funding for Social Security is collected from FICA payroll taxes. Social Security payroll taxes are collected from employers, employees, and self-employed individuals. FICA tax is applied to an employee's income up to a certain income amount. This amount is called the taxable wage base. 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.

Surviving benefits:

Include a $255 lump-sum death benefit, surviving spouse benefits, Childs benefits , and parents benefits - A surviving spouse without dependent children is eligible for Social Security survivor benefits as early as age 60

How does one qualify as a fully-insured individual under Social Security disability coverage?

Individual has been credited with the appropriate number of quarters of coverage

Black-Out Period

This refers to benefits paid to the surviving spouse of a deceased person who was receiving Social Security. The "black-out period" begins when Social Security survivorship benefits cease. This is when the youngest child turns 16 years old, or if no children- immediately. The "black-out period" ends when the surviving spouse turns at least 60 years old.

Fully insured and currently insured

To obtain fully insured status, a covered worker must accrue a total of 40 quarters of credit, which is about 10 years of work. To be considered currently insured, and thus eligible for limited survivor benefits, a worker must have earned 6 credits during the last 13-quarter period.

The period in which there are no Social Security benefits for the surviving spouse is called

blackout period

Disability Benefits

only available to covered workers who are fully insured, as defined by social security, at the tie of the disability Disability income benefits are paid to the covered worker in the amount of the PIA after a 5-month waiting period Does not pay partial disability or short-term disability benefits Disability must be a total of and expected to last 12 months or end in death Benefits include monthly payments to the disabled worker, spousal benefits , and Childs benefits