Social Security Basics Flashcards
A participant turns 62 on June 15. When is she eligible for her first monthly benefit, and when will she receive it?
She eligible for a benefit for the month of July, the first full month of being 62, and will receive it in August, since benefits are paid in arrears. Since she was born on the 15th, she’ll get her payment via direct deposit in the X week of the month.
What is the time limit for correcting ones earnings record with the SSA?
3 years, 3 months and 15 days after the year in which the earnings were earned. Note that there are certain exceptions that allow for corrections well past the normal time limit.
A participant applies for benefits after turning 64, but decides she wants to use a claiming date based on her earliest eligibility at age 62. How will the SSA handle this?
They will pay her all back benefits, adjusted for COLAs based on her PIA reduced by the appropriate age-based reduction as of her AIME at age 62??
How is self employment income treated for purposes of FICA?
Net SE is taxed at 15.3%. However, the employer contribution of 7.65% is deductible as a business expense.
T or F - Employees (W2) cannot deduct their 7.65% FICA contribution, and therefore are double taxed on this amount.
True. Employees pay FICA and also pay income tax on this amount.
How does the tax status of FICA differ between employees and employers.
Employees are double taxed on FICA payments. Businesses, including self employed persons, can deduct the employer contribution as a business expense.
Private Pensions are typically calculated on either the last five year’s pay, or on the three highest year’s pay. What is SS based on?
Highest 35 years of pay
What % of earned income is SS meant to replace for retirees with an average wage over their working lifetime?
About 42%.
For those with below average wages, the replacement % is higher, for those wages are higher, the ratio is much lower.
How is the calculation of benefits skewed to benefit lower wage participants?
Through the application of bend points. The bend points direct a higher percentage of the AIME to those lower earnings than those with a higher AIME.
