Social Security Flashcards
How is social security funded?
- socially security benefits are paid from taxes on wages from employees and employers.
- From FICA (Federal Insurance Contributions Act) and SECA (Self Employed Contributions Act) taxes paid by the employee and employer
- 6.2% on wages up to the wage base of $147,000 in 2022, employee and employer
- 1.45 % Medicare Tax on all wages, payed by employee and employer
- also a Medicare surge tax on wages and self employment income over a threshold, payed by employee
Medicare Surtax
.90% Medicare surtax on wages and self employment income over thresholds in photo
OASDI
Old Age, survivor, and disability insurance.
Common name for social security insurance
Whose covered by OASDI?
-federal employees hired since 1984
- us armed forces,
- self employed persons
- employees of nonprofit organizations
- hospital interns
- domestic workers
- farmer and agricultural workers.
Whose not covered by OASDI
-Federal employees hired prior to 1984
-Railroad employees
-family employment*
-ministers
-members of religious orders
-student nurses
-newspaper delivery persons under age 18
-students working for a
college or club.
- Family employment rules disallow:
- a child under 18 hired by a parent (not corporation)
- A child 18-24 employed for work that is not in the parent’s trade or business (ie. cleaning the office),
- a spouse employed for work that is not in the spouse’s trade or business
- a parent employed for work that is not in the child’s trade or business.
Categories of Social Security Benefits
- retirement benefit
- disability Benefit
- Death Benefit
- Survivors Benefit
- Medicare
Reduced Benefit for Early Retirement at Age 62
- If full retirement is age 65 then age 62 is 80% of full retirement benefits.
- If full retirement is age 66 then age 62 is 75% of full retirement benefits.
If full retirement is age 67 then age 62 is 70% of full retirement benefits.
Benefits are reduced by 5/9 of 1% for each month, for the first three years that a worker retires early.
Benefits are then reduced by 5/12 of 1% for each month beyond three years.
shortcut: 6.66% reduction for each year for the first 3 years. Additional 5% reduction for each year after that.
What is needed to qualify for SSN Retirement Benefits?
- to qualify for retirement benefits a worker must be “fully insured”
- fully insured means a worker must earn 40 quarters of coverage.
In 2022:
1 quarter = $1510 in wages subject to SSN
Delaying retirement benefits
- retire gain an additional increase in monthly benefits by delaying each month after reaching their FRA until age 70
- retirees benefit may increase by 8% (simple interest) each year the retiree delays their benefit
Benefit Reduction - Early retirement age
- benefits can be temporarily reduced if you earn too much
The benefit is reduced $1 for every $2 above the earnings threshold for persons below full retirement
age.
Threshold: $19,560 (Annual limit, monthly test).
Benefit Reduction - Full Retirement Age
-the year in which you reach the age of retirement the benefit is reduced $1 for every $3 above the
earnings threshold.
Threshold: $51,960 (Annual limit, monthly test).
Earnings based reductions end at full retirement age.
https://www.ssa.gov/benefits/retirement/planner/whileworking.html#:~:text=If%20you%20are%20younger%20than,2022%2C%20that%20limit%20is%20%2419%2C560.
How is SSN Benefit Taxed?
Up to 50% of Social Security income is taxable for individuals with a total gross income including Social Security of at least $25,000 or couples filing jointly with a combined gross income of at least $32,000.
Up to 85% of Social Security benefits are taxable for an individual with a combined gross income of at least $34,000 or a couple filing jointly with a combined gross income of at least $44,000.
Social Security: Disability Benefit
- There is severe physical or mental impairment for 5 months that is expected to prevent the worker from
performing substantial work for at least one year or result in death for ANY OCCUPATION - Benefits would begin in the 6th month following the 5 month waiting period.
- How much of a benefit is paid depends on credits earned and the age of the worker when disabled.
Survivorship Eligibility
- A worker must be either fully insured (40 quarters)
OR - currently insured - at least 6 quarters of coverage in the last 13 quarters.
-A child under Age 18, under 19 if in high school (aka secondary school), or disabled prior to age 22, is entitled to survivorship benefits wether a worker was currently or fully insured
Spouse with a child under age 16 is entitled to survivorship benefits, wether worker was currently or fully insured.
No coverage for spouse of a currently insured worker
Coverage for spouse of a fully insured worker.
Medicare benefits
- federal health insurance for people 65 and older
- spouses can qualify at age 65 based on the other spouses work record
- three parts Medicare A, B, D
- eligible people are automatically enrolled if at least receiving retirement benefits or any age if receiving social security disability benefits for at least two years.
Social security payout schedule
