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) - 20103

OASDI – 6.2 % of wages to $106,800, paid by employee and matched by employer = 12.4% contribution - maximum $13,243

Health Insurance – 1.45% of wages (no maximum), paid by employee and matched by employer = 2.90% contribution

Total Social Security Contribution = 15.3%

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 (2010)

Calculating Your Benefit8

PIA (Primary Insurance Amount) at FRA (Full Retirement Age) 2010

90% of AIME up to $76132% of AIME between $762 - $4,586

15% of AIME above $4,586(Bend Points): Maximum $2,323 in

2010

Calculating Your 2010 Benefit9

Total Indexed Wages/420 months =$5,200 average monthly wages

1.90% of first $761 = $ 6852.32% of next $3,825 = $ 1,2243.15% of remainder = $ 92

SS Benefit (FRA) = $2,001/month

10

11

12

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 2037, 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 Information29

www.ssa.gov - Social Security website

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

What do you need?31

Social Security card (apply for replacement if you can’t find it)

Birth certificate (original)Official photo identificationLast two years of tax returnsMarriage/divorce/military information

Bank account for direct deposit