frederick h. nesbitt, consultant florida public pension trustees association this presentation on...
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FREDERICK H. NESBITT, CONSULTANT FLORIDA PUBLIC PENSION TRUSTEES
ASSOCIATION
THIS PRESENTATION ON SOCIAL SECURITY IS FOR INFORMATIONAL PURPOSES ONLY. NO ONE SHOULD MAKE A RETIREMENT DECISION BASED SOLELY ON THE INFORMATION PRESENTED.
1
Social Security and Your Retirement
What is Social Security?2
Social Insurance – FDR (1935)Retirement InsuranceSurvivor InsuranceDisability InsuranceHealth Insurance (1965)
Social Security (FICA) - 20113
OASDI – 4.2 % of wages to $106,800, paid by employee and 6.2% by employer = 10.4% contribution - maximum $11,107
Health Insurance – 1.45% of wages (no maximum), paid by employee and matched by employer = 2.90% contribution
Total Social Security Contribution = 13.3%
Social Security Eligibility 4
Retirement: (40 quarters of covered employment)
Age 62 with reduced benefitsAge 65-67 with full benefitsAge 70 with enhanced benefits
Medicare Eligibility5
Medicare: (40 quarters of covered employment or through your spouse) and age 65
Part A – Hospital InsurancePart B – Medical InsurancePart D – Medicare Prescription
Drug Plan
How is Social Security Calculated?6
35 years of best Social Security wages (indexed) – zero for years below 35
Divide by 420 months to get AIME (average indexed monthly earnings)
How is Social Security Calculated?7
Wages required to earn one quarter:(maximum 4 quarters per year) 1951-77 = $50 1978-80 = $250-290 1981-90 = $310-$500 1991-2000 = $540-780 2001-2010= $890-$1,120 (2011)
Calculating Your Benefit8
PIA (Primary Insurance Amount) at FRA (Full Retirement Age) 2011
90% of AIME up to $74932% of AIME between $750 - $4,517
15% of AIME above $4,517(Bend Points): Maximum $2,323 in
2011
Calculating Your 2010 Benefit9
Total Indexed Wages/420 months =$5,200 average monthly wages
1.90% of first $749 = $ 6742.32% of next $3,768 = $ 1,2063.15% of remainder = $ 102
SS Benefit (FRA) = $1,982/month
New Language on Form13
“Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2036, the payroll taxes collected will be enough to pay only about 76 percent of scheduled benefits.”
Full Retirement Age (FRA)14
Born:
1937 earlier 65 years old1938 65 and 2 months1939 65 and 4 months1940 65 and 6 months1941 65 and 8 months1942 65 and 10 months1943-1954 66 years old
Full Retirement Age (FRA)15
Born:1955 66 and 2 months1956 66 and 4 months1957 66 and 6 months1958 66 and 8 months1959 66 and 10 months1960 or after 67 years old
Early Retirement16
Retire before your full retirement ageEarliest retirement is 62 years oldCan retire anytime between age 62
and your full retirement age or later
Can I retire early and keep on working?YES – but….
Social Security Benefits17
Income limit on work if you retire before full retirement age ($1 SS for $2 wage offset - $14,160)
Benefit can be taxable if your income is high enough (including pensions)
If you work after retirement, you will pay FICA and benefits could increase at FRA
Three Key Amounts18
$14,160 – wage limit on earning until FRA$1,120 – wages required to earn one-
quarter credit toward 40 quarters to qualify for SS
$25,000/$32,000 – up to 50% of benefits are taxable – could be as high as 85%
Deferring money into 457 does not reduce Social Security benefits
Early Retirement19
Before Full Retirement Age: Reduction in your monthly benefit Affects SS COLA Causes reduction in spouse benefit if
spouse uses your SS benefit(If FRA is 67 – retire at 62 – there is a 30%
reduction [maximum] and a reduction in spouse benefits of 67% at age 62)
Early Retirement20
Born between 1943-1954: Age 62 75% of benefitAge 66 100% of benefitAge 70 132% of benefit
Spouse Benefit21
Higher of earned Social Security benefit or 50% of the spouse’s or former spouse’s benefit (if divorced)
If your spouse’s benefit is $1,800/mo = $900/mo OR
If your earned benefit is $1,100/moYou would get the $1,100/moCan you qualify before your spouse retires?
Spouses and Marriage22
Currently marriedMarriage lasted 10+ years (divorce)
Ex-spouse 62 or older and unmarried
Spouse’s benefit has no effect on your Social Security benefit
Death Benefits23
Death payment of $255Greater of earned Social Security
benefit or your spouse’s full benefit Married Remarry (after death or divorce) Divorced spouseDependent children also qualify until
age 18 or 19 if still in K-12 school
Disability Benefit24
If you become disabled before full retirement age, you can receive disability benefits after six months if you have:
enough credits from earnings; and physical or mental impairment that’s
expected to prevent you from doing “substantial” work for a year or more or result in death.
Medicare25
Qualify for coverage at age 65 (whether retired or not)
Must sign-up for Medicare at age 65 or there is a penalty (even if you are working)
Can qualify for Medicare through spouse’s coverage
What about government employees?
26
If you pay into Social Security – No offsets apply to you
If your spouse works and doesn’t pay into Social Security – there could be an offset in the spouse’s benefits [GPO = Government Pension Offset]
Applying for SS and Medicare27
Apply about 4 months before you reach FRA or your early retirement date
Apply online SS paid throughout month – and
one month delayMedicare starts first day of month
of birthday
For More Information28
www.socialsecurity.govwww.medicare.gov
Apply for benefits onlineUnder each section, they have FAQ (frequently asked questions)
Shows updates to questionsCan receive email when question is updated
For More Information30
Visit the Social Security office3201 W Commercial BlvdSuite 100Fort Lauderdale, FL 33309
8:30 am – 3:30 pm (M-F)1-800-772-1213 (7am-7pm, M-F)Make an appointment