Social Security

Question 1

What is the actual name of SS and what is its beginnings?

Answer 1

Old Age, Survivors and Disability Insurance (OASDI) which was born from the Great Depression and put into law 1935.

Question 2

What funds SS?

Answer 2

Payroll taxes
-Federal Insurance Contributions Act (FICA) EE and ER each pay 7.65% for total of 15.3%. Of the 7.65%, 6.2% is SS and 1.45% is Medicare.

Question 3

What are the major exceptions to those covered by SS?

Answer 3

-Federal Civil Retirement System (1983)
-~25% state and local government EEs who have not elected SS
-Workers covered under the Railroad Retirement

Question 4

What are some of the other special circumstances where people might be covered by SS?

Answer 4

-Household EEs: if paid above a certain amount, must have SS and Medicare taxes withheld
-Ag workers: if paid $150 a year, is covered
-Family workers: if a taxpayer is SE and hires a family member, they are covered.
-Clergy: they can opt out of SS if they are religiously opposed to receipt of government insurance benefits.

Question 5

To be eligible, what are the funding minimums to SS?

Answer 5

1 credit per year since age 21(max 4 credits earned per year) with a minimum of 6 credits and maximum of 40

Question 6

What SS benefits do you get if you are fully insured (40 credits)?

Answer 6

-Retirement
-Spouse retirement
-Surviving spouse benefit (60+)
-Surviving spouse caring for child dependent under 16
-Dependent benefit
-Dependent parent benefit
-Lump-sum benefit of $255

Question 7

What SS benefits do you get if you are currently insured (6 credits)?

Answer 7

-Survivor spouse caring for dependent child
-Dependent benefit
-Lump-sum death benefit $255

Question 8

What qualifies someone for SS disability benefits?

Answer 8

They are so disabled, that they cannot perform any work generating meaning income. Also the disability must be expected to last more than 12 months or result in death. Disability cannot be drug or alcohol related.

Question 9

What is the credit requirement for SS disability when the person is 31-42?

Answer 9

40 credits AND 20 of the 40 must have come from when you were age 31-42 showing a connection to the workforce. Less credits needed for younger EEs and more for older EEs.

Question 10

What is a quick way to determine the number of credits someone needs if they’ve been working since 21?

Answer 10

Subtract 22 from their age. If less than 6, then 6. If more than 6, then go with the answer.

Question 11

What is the requirement to be currently covered by SS?

Answer 11

Achieved if the worker has earned 6 credits during the 13 calendar quarters leading up to the death or disability.

Question 12

What is the average indexed monthly earnings (AIME)?

Answer 12

This is what is used to determine a workers primary insurance amount (PIA)

Question 13

How is AIME calculated?

Answer 13

Add the 35 highest inflation adjusted years and divide by 420

Question 14

How is the PIA reduction calculated for the worker?

Answer 14

PIA x 20% (for first 36 months), 5% per 12 months after.

Question 15

If one waits until 70, what is the formula?

Answer 15

For a worker born in 1943 or later, the annual increase is 8% per year.

Question 16

Who can get the SS retirement benefits?

Answer 16

-A retiree
-The spouse - 50% if wait until FRA, otherwise reduced
-Divorced spouse age 62+, married to the worker 10 years and is unmarried
-Unmarried child under 18 or disabled before 22
-Spouse, taking care of dependent child under 16
-A parent taking care of a disabled child under 22

Question 17

What is the two-step process for SS survivor benefits?

Answer 17

1) the SS benefit is what it is at death - if the worker waited, the benefit increased. Took early, the benefit decreased. The survivor gets what the worker got.

2) Permanently lower the benefits if taken early as compared to the special survivor FRA.

Question 18

Who are eligible survivors?

Answer 18

Spouse
Disable widow(er)
Surviving spouse taking care of dependent 16-
Unmarried dependent under 18 or disabled before 22
A dependent parent
Divorced spouse, married to worker for 10 yrs and unmarried.

Question 19

Who can get disability benefits?

Answer 19

The worker
The spouse
An unmarried child under 18 or who becomes disabled before 22
The divorced spouse, married to worker for 10 yrs and still unmarried

Question 20

What is the maximum family benefit?

Answer 20

A family cannot go above a certain total percentage. In that case, the payments are reduced to prevent overpaying a family

Question 21

What is the purpose of the Windfall Elimination Provision (WEP)?

Answer 21

To reduce or eliminate higher or excess SS benefits for those who may not have paid into SS by taxes. Overall benefit can’t be less than 50%

Question 22

What are the reduction percentages for spouses taking the workers SS early?

Answer 22

Start with 50% of PIA
25% for first 36 months
5% every 12 months after

Question 23

What is the percentage for SS delayed credit?

Answer 23

8% per year

Question 24

What is the Windfall Elimination Provision (WEP)?

Answer 24

A provision that eliminates or reduces SS benefits where the worker looked poor to SS, but in fact it is only because the worker didn’t contribute to SS.

Question 25

What is the Government Pension Offset (GPO)?

Answer 25

A reduction of 2/3 SS benefit if the worker receives a federal, state, or local pension based on compensation that did not pay into SS.

Question 26

In the years prior to workers obtaining their FRA who begin to take benefits, how is their SS payments affected?

Answer 26

Their benefits are reduced $1 for every $2 earned over a limit specified each year.

Question 27

In the year a worker is going to obtain their FRA who begin to take benefits, how is their SS payments affected?

Answer 27

Their benefits are reduced $1 for every $3 earned over a limit specified each year.

Question 28

What are the ages a spouse can claim SS retirement benefits (worker, deceased worker)?

Answer 28

62 as long as the worker has started his benefits
For deceased, 60 or even 50 if the surviving spouse is 50 and disabled.

Question 29

What is the calculation for determining whether or not to take or delay SS payments?

Answer 29

Amount lost (SS payment per month x # of months) / amount gained (difference between original and new SS payment) = # months / 12 = # years

Question 30

What are the two provisional income thresholds for single and married and if exceeded, how is SS income taxed?

Answer 30

$25k(s) / $32k(m) = 50%
$34k(s) / $44k(m) = 85%

Question 31

How is a credit earned?

Answer 31

1 credit for every $1,510 annual earnings up to 4 credits per year