Module 3 Flashcards
Social Security Work History Requirements
10 years and 40 work credits (1) per quarter for 10 years
Two Eligibility Requirements for Social Security
1.) Age (62)
2.) Work History
Calculate minimum number of credits to be fully insured under Social Security
Worker’s Age - 22
(Absolute minimum is 6 credits)
Social Security Milestones
Age 50: When disabled surviving spouses can start receiving retirement benefits (the benefit for starting this early is currently set by law at 71.5% of the deceased worker’s PIA)
Age 60: When non-disabled survivors can start receiving benefits
Age 62: Earliest one can start receiving retirement benefits at a reduced rate
Age 65–67: Full retirement age, depending on one’s birth year; they receive 100% of benefits if filing here
Age 70: Delayed retirement age; one receives the maximum increased benefits for waiting until this time to file
Social Security - Breakeven Age
The age at which the total amount of the higher benefits the retiree will receive from delaying benefits equals the total amount of the lower benefits they will have received at that point from starting early.
Social Security - Calculate Breakeven Age
1.) Determine an assumed early date and an assumed later date.
2.) Calculate the Social Security benefit at the earlier date.
3.) Calculate the Social Security benefit at the later date.
4.) Calculate the monthly difference between his benefit at the two dates
5.) If he starts at the earlier date, how much will he be “ahead” on the second date?
6.) Calculate the “breakeven” time frame by dividing the extra monthly amount from waiting into the amount the client is “ahead” on the second date.
7.) Finish the calculation by determining the “breakeven age.”
Social Security - Earned Income Test
This test impacts those who begin their Social Security benefits before full retirement age and have “earned income” in excess of threshold amounts. Earned income is defined as income from wages or net earnings from self-employment; investment income, pensions, capital gains, and inheritances are not included in this definition.
Social Security Taxation
Social Security benefits are subject to taxation only if the worker’s total provisional income exceeds certain thresholds.
Provisional Income Calculation
Adjusted gross income (ex SS) + Nontaxable interest + 50% of SS benefits
*Roth distributions aren’t counted
Provisional Income Taxable Thresholds
< $25,000/$32,000 = Tax free
Between $25,000/$32,000 and $34,000/$44,000 = 50% taxable
> $34,000/$44,000 = 85% taxable
Social Security - Deemed Filing
Rule that mandates that someone claiming a Social Security benefit must file for all eligible benefits.
AIME
35 highest earnings years averaged and adjusted for inflation
Primary Insurance Amount (PIA) Calculation using AIME
First Threshold = 90%
Second Threshold = 32%
Third Threshold = 15%
Social Security Reduced Benefits Calculation
Payment is reduced 5/9 of 1% for each month filed before FRA, up to 36 months
Payment is reduced 5/12 of 1% for each month filed early in excess of 36 months
Windfall Elimination Provision (WEP) & Government Pension Offset Provision (GPO)
If you have a client who has worked in a federal, state, or other government related job that was not covered by Social Security, and is receiving a pension from that employment, their eligibility for Social Security benefits may be reduced, or even eliminated
