Friday, May 20, 2022

What Is Social Security Based On

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Estimated Net Benefits Under Differing Circumstances

How Social Security benefits are calculated on a $75,000 salary

In 2004, Urban Institute economists C. Eugene Steuerle and Adam Carasso created a Web-based Social Security benefits calculator. Using this calculator it is possible to estimate net Social Security benefits for different types of recipients. In the book Democrats and Republicans âRhetoric and Reality Joseph Fried used the calculator to create graphical depictions of the estimated net benefits of men and women who were at different wage levels, single and married , and retiring in different years. These graphs vividly show that generalizations about Social Security benefits may be of little predictive value for any given worker, due to the wide disparity of net benefits for people at different income levels and in different demographic groups. For example, the graph below shows the impact of wage level and retirement date on a male worker. As income goes up, net benefits get smaller âeven negative.

However, the impact is much greater for the future retiree than for the current retiree . The male earning $95,000 per year and retiring in 2045 is estimated to lose over $200,000 by participating in the Social Security system.

The next image shows estimated net benefits for married men and women at different wage levels. In this particular scenario it is assumed that the spouse has little or no earnings and, thus, will be entitled to collect a spousal retirement benefit. According to Fried:

Claim That Politicians Exempted Themselves From The Tax

Critics of Social Security have said that the politicians who created Social Security exempted themselves from having to pay the Social Security tax. When the federal government created Social Security, all federal employees, including the president and members of Congress, were exempt from having to pay the Social Security tax, and they received no Social Security benefits. This law was changed by the Social Security Amendments of 1983, which brought within the Social Security system all members of Congress, the president and the vice president, federal judges, and certain executive-level political appointees, as well as all federal employees hired in any capacity on or after January 1, 1984. Many state and local government workers, however, are exempt from Social Security taxes because they contribute instead to alternative retirement systems set up by their employers.

How Workers Can Get Estimates Of Benefits

The Social Security Administration provides benefit estimates to workers through the Social Security Statement. The Statement can be accessed online by opening an online account with SSA called my Social Security. With that account, workers can also construct “what if” scenarios, helping them to understand the effect on monthly benefits if they work additional years or delay the start of retirement benefits. The my Social Security account also offers other services, allowing individuals to request a replacement Social Security card or check the status of an application.

A printed copy of the Social Security Statement is mailed to workers age 60 or older.

In 2021, SSA began producing Retirement Ready fact sheets, available online and as part of the online Statement, that tailor retirement planning information to different age groups .

SSA also has a Benefits Calculators web page with several stand-alone online calculators that help individuals estimate their benefits and prepare for retirement. These include benefit calculators for spouses, calculators for persons affected by the Windfall Elimination Provision or the Government Pension Offset and calculators to determine a person’s full retirement age or the effect of the earnings test on benefits.

SSA also provides a life expectancy calculator to help with retirement planning.

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Next Steps To Consider

This information is intended to be educational and is not tailored to the investment needs of any specific investor.

Fidelity does not provide legal or tax advice. The information herein is general and educational in nature and should not be considered legal or tax advice. Tax laws and regulations are complex and subject to change, which can materially impact investment results. Fidelity cannot guarantee that the information herein is accurate, complete, or timely. Fidelity makes no warranties with regard to such information or results obtained by its use, and disclaims any liability arising out of your use of, or any tax position taken in reliance on, such information. Consult an attorney or tax professional regarding your specific situation.

Investing involves risk, including risk of loss.

Past performance is no guarantee of future results.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

Do You Qualify For Social Security Benefits

(PDF) Social Security and Sustainable Economic Growth ...

Not everyone who pays into the Social Security system qualifies to receive retirement benefits. To receive Social Security benefits on your record, you must have at least 40 credits. You generally earn four credits per year that you work. In 2018, you’ll receive one credit for each $1,320 you earn, up to four credits per year.

If you don’t qualify for benefits under your own record, you may be able to claim benefits under the record of your spouse or former spouse.

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Getting A Social Security Number For A New Baby

The easiest way to get a Social Security number for your child is at the hospital after they are born when you apply for your childs birth certificate. If you wait to apply for a number at a Social Security office, there may be delays while SSA verifies your childs birth certificate.

Your child will need their own Social Security number so you can:

  • Claim your child as a dependent on your income tax return
  • Open a bank account in their name
  • Get medical coverage for them
  • Apply for government services for them

Keep your Social Security card in a safe place to protect yourself from identity theft.

What’s Included In Social Security Wages And What’s Not

Some common types of compensation payments made to employees are exempt from being included as Social Security wages. They’re not subject to FICA tax.

  • Some disabled worker wages paid after the year in which the worker was entitled to collect disability insurance
  • Employee business travel expenses reimbursed for amounts not exceeding the specified government rate for per diems or the standard mileage rate
  • Compensation paid to family employees under age 18, or age 21 for domestic work
  • Some”excess” fringe benefits that are taxable on an excess of the fair market value of the benefit over the sum of an amount paid for it by the employee and any amount that’s excludable by law
  • Employee insurance
  • Workers compensation benefits

Additionally, earnings are only taxable for the Social Security portion of the FICA tax up to a certain maximum, which changes each year. Earnings begin accumulating again toward this “wage base” on January 1 of the next year.

The Social Security wage base is indexed for inflation so it can be expected to increase a bit annually.

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Can I Get Social Security If I Work

Yes, you can receive Social Security benefits while you are still working. If youve reached full retirement age, you can work and earn as much as youd like and receive full benefits. If youre under full retirement age, your benefits will be reduced temporarily. The money is not lost, however. Social Security will credit it to your record when you reach full retirement age, resulting in a higher benefit.

The reduction is $1 for every $2 of earned income over $18,960 in 2021 for those younger than full retirement age. During the year when you reach full retirement age, your benefits will be reduced by $1 for every $3 in income over $50,520 in 2021. That continues until the month when you become fully eligible.

Retirees can contribute to individual retirement accounts as long as they have earned income. However, Social Security benefits are not considered earned income for this purpose.

Cola Calculation Controversy: Cpi

Social Security Disability Claims Based on Adult ADD or ADHD

When Social Security implemented automatic COLAs in 1975, the CPI-W was the only national consumer price index produced by the Bureau of Labor Statistics. Today, the CPI-W represents expenditures made by just 29 percent of the U.S. population.

The use of the CPI-W to calculate COLAs has been the subject of controversy for years. There are critics on both sides of the issue some saying the CPI-W overestimates the effects of inflation on seniors and others saying it underestimates the costs.

Those who think the CPI-W overestimates real-life increases in the cost of living want to rein in spending by using an index called the chained CPI. This index considers adjustments consumers make when prices rise. They might switch brands or stop using certain products. If the price of steak went up significantly, for example, consumers might buy more chicken instead.

Other critics argue that the CPI-W applies to the general population and doesnt consider the expenses shouldered more by seniors, such as medical costs and shelter, two expenses that rise at a faster rate. They urge the adoption of an index like the CPI-E, which is an experimental index designed to consider seniors costs.

For example, the CPI-W gives food and beverages a weight of 16.4 percent, compared with 12.4 percent for the CPI-E. For housing, those weights are 39.2 percent versus 46.6 percent, and for medical care, the CPI-W weight is 5.4 percent and the CPI-E weight is 11.3 percent.

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Divorced Spouse Social Security: Recent Rule Change

The basic rules for divorced spouses and Social Security say that if an individual was married for at least 10 years and then divorced, they are eligible to collect spousal benefits on the earnings record of their ex-spouse as long as they are at least 62 years of age and currently single. The divorced spouse can collect on the ex-spouses account under these circumstances even if the ex-spouse has remarried.

Furthermore, if the couple has been divorced for at least two continuous years, the ex-spouse can claim benefits based on the other partners earnings even if the latter has yet to file for benefits. This contrasts with the rules for current spouses, who cant collect benefits unless their spouse is already collecting them.

Ex-spouses who were born on or before Jan. 1, 1954, are allowed to file a restricted claim for spousal benefits at their full retirement age and suspend their own benefits until later, a practice known as file and suspend. This allows their own benefit to keep growing by 8% a year up to age 70, when their benefit maxes out. At that pointor sooner, if they wishthey can switch over to their own, higher benefit.

However, under the rule change, divorced spouses who were born on or after Jan. 2, 1954, are deemed to be filing for all available benefits when they apply for Social Security. They will automatically receive whichever benefit is higher, but they can no longer take one type of benefit now and switch to another one later.

What If I Delay Taking My Benefits

If you retire sometime between your full retirement age and age 70, you typically earn a “delayed retirement” credit . For example, say you were born in 1951 and your full retirement age is 66. If you started your benefits at age 68, you would receive a credit of 8% per year multiplied by two . This makes your benefit 16% higher than the amount you would have received at age 66. .

That higher baseline lasts for the rest of your retirement, and serves as the basis for future increases linked to inflation. While its important to consider your personal circumstancesits not always possible to wait, particularly if you are in poor health or cant afford to delaythe benefits of waiting can be significant.

If you decide to wait past age 65, you may still need to sign up for Medicare. In some circumstancesyour Medicare coverage may be delayed and cost more if you do not sign up at age 65.

To review your situation, your annual Social Security statement will list your projected benefits at age 62, full retirement age, and age 70, assuming you continue to work and earn about the same amount until age 62, full retirement age, or age 70 before retiring. If you need a copy of your annual statement, you can request one from the Social Security Administration .

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Earn Ssa Work Credits In Some Countries

You may not have enough credits from your work in the United States to qualify for retirement benefits. But, you may be able to count your work credits from another country. The SSA has agreements with 24 countries. If you earned credits in one of those countries, they can help you qualify for U.S. benefits.

How To Understand Social Security Retirement Benefits

Social security benefits based on the work records of a ...

Social Security, managed by the U.S. federal government, pays benefits to retirees. Social Security benefits are one part of a broader retirement plan. These benefits can supplement other sources of retirement income, such as 401s, individual retirement accounts or other retirement savings plans.

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Learn What Your Fra Means To Your Retirement And How To Find It

    As you prepare for retirement, you should keep in mind one crucial part of the planning process that is often neglected: choosing when you’ll start the clock on your Social Security benefits. Understanding your full retirement age is the first step in choosing the best time to receive your benefit.

    The Best Age To Start Collecting

    There are two schools of thought about whether to start collecting Social Security at 62 or wait.

    The first is that everyone should start getting their money out of the system as soon as possible.

    This theory is based on two things:
  • You have no assurances that you will live to full retirement age.
  • You must live deep into retirement to make up the difference in the two potential payouts, the one you can collect at 62 and the one you can collect if you wait until full retirement age.
  • In other words, getting some benefits now is better than the promise of more benefits later.

    The second theory states that you should wait until full retirement age in order to collect larger monthly sums. If you live long enough, this option will be more profitable.

    Lets take a closer look at your total payout potential based on the age at which you begin collecting benefits. Assume your full benefit amount would be $1,000 per month, or $12,000 each year, and your full retirement age is 67. Heres the total amount you could receive from the Social Security program.

    Starting benefits at age 62 would mean more money overall if you dont live past age 79. However, if you live to 79 or older, youd receive more money during your lifetime if you began earning benefits at age 67.

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    How Do I Qualify For Social Security Retirement Benefits

    When you work and pay taxes, you earn credits toward Social Security retirement benefits. These credits are based on your annual earnings you can accrue a maximum of four credits per year. Once youve acquired 40 credits , youre fully insured and eligible to receive retirement benefits.

    Your paychecks will withhold Federal Insurance Contributions Act tax until youve earned up to the taxable earnings base for the year.

    Social Security Number Theft

    Social Security Disability Based on Cardiovascular Disease – Marasco & Nesselbush, LLP

    Because Social Security Numbers have become useful in identity theft and other forms of crime, various schemes have been perpetrated to acquire valid Social Security Numbers and related identity information.

    In February 2006, the Social Security Administration received several reports of an email message being circulated addressed to “Dear Social Security Number And Card owner” and purporting to be from the Social Security Administration. The message informs the reader “that someone illegally is using your Social Security number and assuming your identity” and directs the reader to a website designed to look like Social Security’s Internet website.

    “I am outraged that someone would target an unsuspecting public in this manner,” said Commissioner Jo Anne B. Barnhart. “I have asked the Inspector General to use all the resources at his command to find and prosecute whoever is perpetrating this fraud.”

    Once directed to the phony website, the individual is reportedly asked to confirm his or her identity with “Social Security and bank information”. Specific information about the individual’s credit card number, expiration date and is then requested. “Whether on our online website or by phone, Social Security will never ask you for your credit card information or your PIN,” Commissioner Jo Anne B. Barnhart reported.

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    Total Benefits Paid By Year

    Year

    Workers in Social Security covered employment pay FICA or SECA taxes and earn quarters of coverage if earnings are above minimum amounts specified in the law. Workers with 40 quarters of coverage are “fully insured” and eligible for retirement benefits. Retirement benefit amounts depend upon the average of the person’s highest 35 years of “adjusted” or “indexed” earnings. A person’s payroll-taxable earnings from earlier years are adjusted for economy-wide wage growth, using the national average wage index , and then averaged. If the worker has fewer than 35 years of covered earnings these non-contributory years are assigned zero earnings. The sum of the highest 35 years of adjusted or indexed earnings divided by 420 produces a person’s Average Indexed Monthly Earnings or AIME.

    The AIME is then used to calculate the Primary Insurance Amount or PIA. For workers who turn 62 in 2021, the PIA computation formula is:

    90 percent of the first $996 of average indexed monthly earnings, plus

    32 percent of average indexed monthly earnings between $996 and $6,002, plus

    15 percent of average indexed monthly earnings over $6,002

    Monthly benefit amounts are based on the PIA. Once the PIA is computed, it is indexed for price inflation over time. Thus, Social Security monthly benefit amounts retain their purchasing power throughout a person’s retirement years.

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