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Frequently Asked Questions on Social

SecurityDecember 15, 2010

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Welcome

Why AARP is doing this webinar

How to obtain materials

If no sound dial: 877-509-0617 code 31403329

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Agenda

Social Security 101

Frequently Asked Questions (FAQs):

Claiming Social Security benefits

Your Social Security benefits

Question & Answer

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Shaun O’Brien

Vice President

My Financial Security Portfolio

Social Security 101

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Why was it created?

Created in 1935, the Social Security program was put in place

to make sure that income continues even when a worker

retires, dies or becomes disabled

The program was founded on the concept of earned benefits

and shared risk

Virtually every working American contributes to Social Security

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Who Receives

Social Security? Disabled workers

15%

Children8%

Spouses5%

Widows, Widowers, and

Parents8%

Retired workers64%

•In June 2010, 53.4 million

people received Social

Security.

•About 11 million under

age 62

•89% of persons 65 and

over receive Social

Security benefits.

SOURCE: Social Security Administration, Beneficiary Data. Accessed from www.ssa.gov/OACT/ProgData/icp.html.

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How does it work?

Workers and employers pay into Social Security through

payroll deductions (FICA)

Benefits have different eligibility rules (e.g., disability, survivor

benefits, retirement benefit)

For retirement benefit:

• Work for at least 10 years

• Benefits are based on how much you’ve earned throughout

your life and when you claim your benefit (early, full

retirement age and maximum benefit age)

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FAQs: Claiming Social Security

Benefits

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When should I claim Social Security

benefits?

There is no one “best age” - it depends on your circumstances

but make an informed decision

Assess your basic living expenses (keep in mind increases to

health, long-term care cost and inflation risk)

If you take your social security benefits before your full

retirement age, those benefits could be greatly reduced

Sign up at socialsecurity.gov/retireonline or

call 1-800-772-1213

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Shouldn’t I take Social Security as

early as possible since the program

has money problems?

The Social Security trust fund, where accumulated assets are

held, currently contains about $2.5 trillion

The trust fund and continuing tax contributions will allow

payment of all benefits at current rates until 2037

After that, there still will be enough tax revenue to pay about

78¢ on the dollar

Congress is being urged to make financial fixes to Social

Security to ensure it will be there for you.

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When I claim Social Security at full

retirement age and still work, will my

benefits be reduced?

If you are under your full retirement age for the entire year,

Social Security deducts $1 from your benefit payment for every

$2 you earn above the annual limit of $14,160 for an individual.

In the year you reach your full retirement age, it deducts $1 in

benefits for every $3 you earn above $37,680, but only for

earnings in the months before you reach your full retirement age

After you reach full retirement age, there are no limits on your

earnings

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If my wife and I are both 62, how much

can my wife and I make combined

without having it impact our Social

Security benefits?

Each of you can make up to $14,160 per year.

Social Security will deduct $1 from your benefit payment for every $2

you earn above the annual limit of $14,160 for an individual.

For example:

• Husband, age 62 makes $15,000 annual income; Social Security

benefit reductions equals $420

• Wife, age 62 makes $13,000 annual income; Social Security

benefit reductions equals $0

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Can I collect Social Security and

unemployment compensation at the same

time?

Yes! Unemployment benefits are not counted as wages under

Social Security’s annual earnings test, so you would still

receive your benefit

However, the amount of your unemployment benefit could be

cut if you receive a pension or other retirement income,

including Social Security and railroad retirement benefits

Contact your state unemployment office for more information

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My husband and I are getting a divorce.

He wants the settlement agreements

to say I will not get his Social Security

benefits. Can he do that?

No, he has no control over your future benefits

You can qualify for a divorced spouse’s benefits if you were

married at least 10 years, are now unmarried, are 62 or older,

and if any benefit from your own work record would be less

than the divorced spouse’s benefit

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If a woman is divorced and her former

husband is not collecting his Social

Security as yet, may she? For how

long?

If her former husband has not applied for Social Security

retirement benefits but is eligible to collect a benefit, she can

receive benefits on his record, if they have been divorced for at

least two years

She must also meet the other criteria for receiving benefits as

a divorced spouse (married for at least 10 years, etc.)

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Can you further explain the Social

Security death benefit for a survivor?

If you are the widow or widower of a person who worked long

enough under Social Security, you can receive survivor’s

retirement benefits at a reduced rate as early as age 60

You will get full benefits if you wait until your full retirement age

Your benefit amount is based on the earnings of the person

who died

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If my husband passes away, can I

collect his benefit and my own?

You can collect either your own benefit or a widow’s benefit

Social Security will automatically give you the higher benefit

You may not collect both

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I got Social Security benefits many

years ago when my husband passed

away and I had young kids. Because I

took money out then, does that mean

my retirement benefit will be less?

Social Security’s survivor’s benefit is separate from the

retirement benefit

If you are eligible for both, the benefits will be calculated

independently

So the money you received as a widow when your husband

died will not impact the amount you’ll receive at retirement

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FAQs: Your Social Security Benefits

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Tell me again, why won’t retirees get a

cost-of-living adjustment (COLA) in

2011?

COLAs are based on the consumer price index (CPI), which

tracks inflation

Because inflation has been flat, according to the CPI, there will

be no benefit increase—for the second year in a row

AARP is calling on Congress to provide beneficiaries with

financial relief

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I filed for bankruptcy after losing my

job. What happens to my Social

Security benefits?

Your Social Security benefits are protected

Social Security is excluded from the calculation of disposable

income when setting up a debtor repayment plan

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I began drawing Social Security at age

62 in 2006, but I’m still working. Since

I’m still paying Social Security taxes,

will my benefits increase?

If your latest work years are among your highest-earning

years, the SSA refigures your benefit and pays you any

increase due.

This is automatic, with new benefits starting in December of

the following year.

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Once my wife and I start collecting

Social Security, how much will each of

us be able to earn monthly without

paying taxes on our income?

Regardless of age, some people who get Social Security will

have to pay taxes on their benefits

You will have to pay federal taxes on your benefits if you file a

federal tax return as an individual and your total income is

more than $25,000, or if you and your spouse have total

income exceeding $32,000

Less than one-third of beneficiaries pay taxes on their benefits

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I am 65, my wife is 60, I will begin

drawing on my Social Security next

year at age 66 (full retirement age).

When will my wife be able to draw her

benefit (half of mine) – will it be 62 for

her or 66??

If your wife has not worked, she will be eligible to receive her full

benefit (half of yours) at her full retirement age

She is eligible to claim the benefit at 62 at a reduced benefit rate

(usually 25% less)

If your wife has her own work record, she may want to consider

tapping into your spousal benefit earlier (62) and consider waiting

until full retirement age to claim her own benefit

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I have been on Social Security

disability since the age of 57. I turn 62

this month. Does this mean I have to

apply for Social Security Retirement

now?

As long as you are disabled, you will remain on Social Security

disability

At your Social Security full benefit age (66 if you are 62 in

2010), you will be switched automatically to a Social Security

retirement benefit

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Is it true that some people are

collecting Social Security benefits who

never paid into the program?

Social Security is an earned benefit

In order to collect a retirement benefit, a worker must pay into

the system for at least 10 years

In some cases, nonworking family members, such as a

spouse, may be eligible for benefits based on the worker’s

record

Tough rules in place assure that only legal residents can collect

Social Security benefits

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Do Members of Congress pay into

Social Security? What other

retirement benefits do they receive?

Since 1984, all Members of Congress pay into Social Security

Members receive retirement and health benefits under the

same plans available to other federal employees

Members elected after 1984 are covered by the Federal

Employees Retirement System (FERS) and vest after 5 years

of full participation

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Why would changes in Social Security

be considered as a way to help

balance the federal budget?

Some policymakers say all spending, including Social Security,

should be cut

Social Security has not contributed to the deficit. In fact, the

trust fund is projected to reach $4.3 trillion by 2023

AARP believes that Social Security benefits should not be

targeted to reduce the deficit

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Frequently Asked Questions on Social Security

Thank you for joining us for:

Disclaimer:

This webinar is intended to be informational and educational and DOES

NOT constitute investment advice. We strongly recommend that you seek

the advice of a tax, legal and financial services professional before making

decisions related to any investment or other financial decisions. AARP is

not responsible for the consequences of any decisions or actions taken in

reliance upon or as a result of the information provided during this event.