Retirement Planning Flashcards
What programs are covered under the Social Security act?
Social Security (OASDI)
Medicare
Federal unemployment insurance
Supplemental security income (SSI)
What is the difference between fully insured and currently insured?
Fully insured: 40 credits of coverage, insured for life, eligible for both survivor, benefits, and retirement benefits
Currently insured: only obtain six credits of coverage and is only eligible for the following - lump sum death benefit for spouse or dependent $255, surviving spouse’s benefits (if children under age 16), dependent benefit
Note: cannot earn more than four credits per calendar year
What are the worker benefits under Social Security?
Fully insured age 62 or over is entitled to retirement benefits
Disability benefits if under age 65 disabled for 12 months expected to be disabled for at least 12 months or has a disability which is expected to result in death and has completed five month waiting. (Paid on the 1st day of the 6th month.)
What are the Social Security spousal benefits?
The spouse must meet any of the following requirements: 62 or over or at any age if the spouse has a child in care under age 16, child age 16 and over and disabled before age 22
What are the surviving spouses Social Security benefits of a deceased insured worker?
Deceased insured worker qualifies for Social Security payments if the widow is age 60 or over
Surviving divorce spouse: must have been married to the worker for at least 10 years and never remarried. Divorce spouse, who is at least 62 has been divorced from the worker for at least two years can receive retirement benefits based on the workers earnings, even if the worker claims no retirement benefits.
What are the Social Security dependent benefits?
Surviving to dependent qualifies for Social Security payments if the dependent is either of the following:
Under 19 and a full-time student
Age 18 or over but has a disability which began before age 22
What is the reduced benefit amount formula for taking Social Security before full retirement age?
PIA - [( # of months before FRA / 180) x PIA]
PIA is primary insurance amount
FRA is full retirement age
What happens to your Social Security benefits if you are working after retirement?
Limited on how much you can earn if you have not reached full retirement age
Government will deduct $1 from benefits for each $2 dollar earned above $22,320.
In the year you reach full retirement age the government will deduct $1 dollar for each $3 dollars earned above $59,520
What is the taxation of Social Security benefits?
50% included in taxable income if: 1/2 of social security benefits plus income above $25,000 single and $32,000 married
85% of benefits will be taxable if: 1/2 of social security and income is greater than $34,000 single and $44,000 MFJ
Note: municipal bond interest is considered income for the purposes of determining the taxation of Social Security benefits
What benefits are guaranteed by the PBGC?
Guarantees to find benefit and cash balance plans
Guarantees a monthly benefit (no lump sum) adjusted annually
Guarantees only nonforfeitable benefits prior to termination and pension benefits, monthly payments
Covers participants who are entitled to the benefit or benefits already being paid
What are the two kinds of defined benefit plan terminations?
Voluntary termination, also call a standard termination occurs when there are sufficient assets to fund accrued benefits
Distressed termination, occurs when there are insufficient assets to fund accrued benefits, only allowed in the following situations:
Employer is in a bankruptcy liquidation proceedings
Employer is in a bankruptcy reorganization proceeding
The employer can prove to the PBGC that plan termination is necessary to pay debts
Note: only the PBGC can initiate an involuntary termination of a defined benefit plan
