Social Security and Your Retirement

1. Social Security and Your Retirement 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.

2. What is Social Security? Social Insurance – FDR (1935) • Retirement Insurance • Survivor Insurance • Disability Insurance • Health Insurance (1965)

3. Social Security Eligibility Retirement: (qualify with 40 quarters of covered employment = 10 years) • Age 62 with reduced benefits • Age 65-67 with full benefits • Age 70 with enhanced benefits

4. Medicare Eligibility Medicare: (40 quarters of covered employment or through your spouse) and age 65 • Part A – ($0) – Hospital Insurance (hospital, nursing facility, hospice, psychiatric) • Part B – ($96.40/mo and indexed to income) – Medical Insurance (physicians, outpatient services)

5. Medicare • Part C – ($ premium) – Medicare Advantage (provider organizations (99) – includes A and B - may include drugs: at age 65 or open season each year) • Part D – ( $ premium) Prescription Drug Benefit (2006) (drug costs)

6. Social Security (FICA) - 2010 OASDI – 6.2 % of wages to $106,800, paid by employee and matched by employer = 12.4% contribution - maximum $13,243 Medicare – 1.45% of wages (no maximum), paid by employee and matched by employer = 2.90% contribution Total Social Security Contribution = 15.3%

7. How is Social Security Calculated? 35 years of best Social Security wages (indexed) – add zero for years below 35 Divide by 420 months to get AIME (average indexed monthly earnings) Need 40 quarters of covered employment to qualify for Social Security – earn maximum of 4 quarters per year based on wages

8. How is Social Security Calculated? Earnings required for 1 quarter: (born after 1940) • 1951-77 = $50 • 1978-80 = $250-290 • 1981-90 = $310-$500 • 1991-2000 = $540-780 • 2001-2010= $890-$1,120 (2010)

9. Calculating Your Benefit PIA (Primary Insurance Amount) at FRA (Full Retirement Age) - 2010 • 90% of AIME up to $761 • 32% of AIME from $762 to $4,586 • 15% of AIME above $4,586 (Bend Points): Maximum $2,323 in 2010

10. Calculating Your 2010 Benefit Total Indexed Wages (35 yrs) = $1,800,000 $1,800,000/420 = $4,286 AIME • .90 x $761 = $ 684.90 ($4,286-$761) • .32 x $3,525 = $ 1,128 • .15 x $0 = $ 0 SS Benefit (FRA) = $1,813/month

14. New Language on Form “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 2037, the payroll taxes collected will be enough to pay only about 76 percent of scheduled benefits.”

15. Full Retirement Age (FRA) Born: 1937 earlier 65 years old 1938 65 and 2 months 1939 65 and 4 months 1940 65 and 6 months 1941 65 and 8 months 1942 65 and 10 months 1943-1954 66 years old

16. Full Retirement Age (FRA) Born: 195566 and 2 months 1956 66 and 4 months 195766 and 6 months 195866 and 8 months 195966 and 10 months 1960 or after67 years old

17. Early Retirement Retire before your full retirement age Earliest retirement is 62 years old Can retire anytime between age 62 and your FRA Can I retire early and keep on working? YES

18. Early Retirement Before Full Retirement Age: • Reduction in your monthly benefit • 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)

19. Spouse Benefit Greater 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/mo You would get the $1,100/mo Can you qualify before your spouse retires?

20. Death Benefits Death payment of $255 Greater of earned Social Security benefit or your spouse’s full benefit • Married • Remarry (after death or divorce) • Divorced spouse Dependent children also qualify until age 18 or 19 if still in K-12 school

21. Disability Benefit 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.

22. Social Security Benefits Income limit on work if you retire before FRA ($1 for $2 offset - $14,160) Social Security 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

23. Medicare 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

24. What about government employees? 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]

25. Applying for SS and Medicare Apply about 4 months before you reach FRA or your early retirement date Apply online SS paid throughout month – and one month delay Medicare starts first day of month of birthday

26. For More Information www.socialsecurity.gov www.medicare.gov Apply for benefits online • Under each section, they have FAQ (frequently asked questions) • Show updates to questions • Can receive email when question is updated

27. For More Information • www.ssa.gov - Social Security website

28. For More Information Visit the Social Security office Shoppes of Wilton Manor 2276 Wilton DRWilton Manors, FL 33305 8:30 am – 3:30 pm (M-F) 1-800-772-1213 (7am-7pm, M-F) Make an appointment

29. What do you need? • Social Security card (apply for replacement if you can’t find it) • Birth certificate (original) • Official photo identification • Last two years of tax returns • Marriage/divorce information • Bank account for direct deposit