Your Most Burning Questions On Social Security
Readers asked. Here are our replies.
People have lots of questions about Social Security: Will it still be around when I retire? How much will I get? How does the spousal benefit work?
Thats not surprising.
No government program is more important to so many Americans. This year, Social Security is expected to pay $1.1 trillion to 69 million recipients of retirement and disability benefits and Supplemental Security Income. Nearly all Americans pay into the program and can expect to receive a benefit at some point in their lives. And it is the largest retirement income source for a majority of older households.
The New York Times recently invited readers to submit their questions about Social Security. Today, were responding to some of the most frequent ones.
Is Social Security financially secure? Should people in their 60s who can afford to wait to claim benefits wait until they can get the highest monthly benefit, or should they consider signing up now because the program may not be there in 20 years?
In the years ahead, Social Security does face a financial shortfall that requires action by Congress. The combined trust funds for Social Securitys retirement and disability programs are on course to be depleted in 2035 without changes, funding from payroll tax receipts will be sufficient to pay only 80 percent of currently scheduled benefits.
Could you provide a full explanation of spousal benefits for living spouses, and for widows, widowers and divorced people?
Calculate My Social Security Income
These days thereâs a lot of doom and gloom about Social Securityâs solvency – or lack thereof. And regardless of whether you think Social Securityâs future is secure, the fact remains that you shouldnât plan on living exclusively off your Social Security benefits. After all, Social Security wasnât designed to make up a retireeâs entire income.
Still, many people do find themselves in the position of having to live off their Social Security checks. And even if you have other income sources in retirement, Social Security can make up a significant part of your retirement income plan. That’s why itâs important to know all the rules surrounding eligibility, benefit amounts, taxation and more.
Do you need help managing your retirement savings? To find a financial advisor near you, try our free online matching tool.
How To Correct An Error On Your Social Security Statement
If you have evidence of your covered earnings in the year or years for which you think Social Security has made an error, call Social Security’s helpline at 800-772-1213, Monday through Friday, from 7 a.m. to 7 p.m. This is the line that takes all kinds of Social Security questions, and it is often swamped, so be patient. It is best to call early in the morning or late in the afternoon, late in the week, or late in the month. Have all your documents handy when you speak with a representative.
If you would rather speak with someone in person, call your local Social Security office and make an appointment to see someone there, or drop into the office during regular business hours. If you drop in, be prepared to wait, perhaps as long as an hour or two, before you get to see a representative. Bring with you two copies of your benefits statement and the evidence that supports your claim of higher income. That way, you can leave one copy with the Social Security worker. Write down the name of the person with whom you speak so that you can reach the same person when you follow up.
The process to correct errors is slow. It may take several months to have the changes made in your record. After Social Security confirms that it has corrected your record, request another benefits statement to make sure the correct information made it to your file.
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Gaining Back The Reduction In Benefits From Working
The amounts of early retirement benefits you lose as a setoff against your earnings are not necessarily gone forever. When you reach full retirement age, Social Security will recalculate upward the amount of your benefits to take into account the amounts you lost because of the earned income rule. The lost amounts will be made up only partially, however, a little bit each year. It will take up to 15 years to completely recoup your lost benefits. And remember, none of this readjustment will change the permanent percentage reduction in your benefits that was calculated when you claimed early retirement benefits .
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.
Costs Of The Solution
Two issues that are likely to arise in any discussion of fixing this problem are its cost to the Social Security trust fund and its cost to the federal budget. With regard to the cost to the Social Security trust fund, there are three ways to look at the issue.
One way is to view the cost relative to costs in a world in which no pandemic had occurred. For example, the cost could be measured using the economic assumptions in the most recent Social Security trustees report , which were formulated before the pandemic began. From this perspective, the cost would be zero because the legislative change would restore the world of Social Security benefits to what it would have looked like had there been no pandemic.
A second way of looking at the issue is to view the cost of the change relative to costs in a world that reflected economic assumptions indicative of the economic recession caused by the pandemic. From this viewpoint, there would be a cost associated with fixing the problem. For example, the chief actuary of the SSA estimates that if the AWI in 2020 were to fall 5.9 percent below its 2019 level, the AWI adjustments proposed by Chairman Larson would cost $90 billion in present-value dollars for the 75-year period from 2020 through 2094about 0.02 percent of taxable payroll over that period. . The cost over the 10-year period from 2020 to 2029 would be about $21 billion in nominal dollars.
Social Security Income Limits
More than 65 million peopleor more than one in six U.S. residentscollect some type of Social Security benefit. The Social Security Administration estimates that as of January 2021, the average monthly retirement benefit will be $1,543. While that regular monthly income helps, it’s usually not enough to cover living expenses. That’s one reason many people are working longer.
If you work, the money you bring home can affect your Social Security benefitsbut the specifics depend on your age and how much you earn. Remember that, although your full retirement age might be 67, you can start receiving benefits at 62, even if you’re still working.
But here’s the catch. If you start benefits prior to full retirement age, you can only earn up to $18,960 and still get your full benefits. Once you earn more than the limit, Social Security deducts $1 from your benefits for every $2 you earn.
In the year you reach full retirement age, Social Security becomes more forgiving. If you earn more than $50,520, it deducts $1 for every $3 you earnbut only during the months before you reach full retirement age. Once you reach full retirement age, you can earn any amount of money, and it won’t reduce your monthly benefits.
Note, however, that this money is not permanently lost. After you reach full retirement age, Social Security will recalculate your benefit and increase it to account for the benefits that it withheld earlier.
How To Receive Federal Benefits
To begin receiving your federal benefits, like Social Security or veterans benefits, you must sign up for electronic payments with direct deposit.
If You Have a Bank or Credit Union Account:
- Call the Go Direct Helpline at .
If You Don’t have a Bank or Credit Union Account:
- Direct Express debit card – a pre-paid debit card. Get help by calling the Go Direct Helpline at .
Make Changes to an Existing Direct Deposit Account:
Learn how to make changes to an existing direct deposit account. You also may contact the federal agency that pays your benefit for help with your enrollment.
How Does Social Security Know
You might wonder how the Social Security Administration keeps track of your work and your earnings. The answer: It doesn’t. It’s your responsibility to report how much you’ve made.
“The biggest thing to remember if you are working is to notify the Social Security Administration if you’re going to earn wages in excess of the earnings threshold,” says Matt Ahrens, an associate financial advisor at Integrity Advisory Group.
Otherwise, he notes, “They will not be notified of your earnings until you file your taxes the following year. And if you were receiving excess benefits, you can be fined, forced to pay back the excess, or receive lower future benefits.”
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You Want To Start A Business
Some people think of retirement as a time to relax, but you might see it as an opportunity to do things you couldn’t do before, such as starting your own business. For example, you might have put off starting a business before because you were afraid you wouldn’t be generating enough income. Social Security benefits could provide enough income to let you launch your business. And if your business is successful, the income it generates could be more than enough to offset the future reduction in benefits.
What Happens If I Work And Get Social Security Retirement Benefits
You can get Social Security retirement benefits and work at the same time. However, if you are younger than full retirement age and make more than the yearly earnings limit, we will reduce your benefit. Starting with the month you reach full retirement age, we will not reduce your benefits no matter how much you earn.
- We use the following earnings limits to reduce your benefits: If you are under full retirement age for the entire year, we deduct $1 from your benefit payments for every $2 you earn above the annual limit.
For 2021 that limit is $18,960.
- In the year you reach full retirement age, we deduct $1 in benefits for every $3 you earn above a different limit, but we only count earnings before the month you reach your full retirement age.
If you will reach full retirement age in 2021, the limit on your earnings for the months before full retirement age is $50,520.
Starting with the month you reach full retirement age, you can get your benefits with no limit on your earnings.
Use our Retirement Age Calculator to find your full retirement age based on your date of birth.
Use our Retirement Earnings Test Calculator to find out how much your benefits will be reduced.
What counts as earnings:
Your benefits may increase when you work:
When youre ready to apply for retirement benefits, use our online retirement application, the quickest, easiest, and most convenient way to apply.
If you need to report a change in your earnings after you begin receiving benefits:
More From Life Changes:
The annual adjustments are based on inflation. So bigger monthly checks mean that consumer prices have also gone up. Consequently, the extra cash may not go as far.
The average monthly retirement benefit will go up by $92 to $1,657 in 2022 from $1,565 in 2021.
But the size of the increase will vary by beneficiary.
“Anybody who is currently in receipt of a benefit should take a look at what their benefit is and imagine what a roughly 5.9% increase will do to that benefit level,” Stephen Goss, chief actuary at the Social Administration, said during a recent webinar hosted by the Bipartisan Policy Center.
However, there is one thing that will offset how large those checks will be: Medicare Part B premiums.
Those payments toward Medicare Part B are often deducted directly from beneficiaries’ monthly checks. However, not everyone has Medicare Part B coverage, particularly if they are still covered under an employer health plan or if they have not yet reached Medicare eligibility age, which is 65.
The standard Medicare Part B premium is projected to be $158.50 per month, up from $148.50 this year. However, the rates for next year have not been officially announced.
If you are not covered by Medicare Part B, you can multiply your monthly benefit amount by 1.059 to approximate your payment for next year, said Joe Elsasser, founder and president of Covisum, a Social Security claiming software company.
Spouses And Social Security
You can claim Social Security benefits based on your spouses work record. If claiming spousal benefits provides more, claiming before your FRA on a spouses record means youll lose even more than claiming on your own recordthe benefit reduction for a spouse is up to 35% while the reduction for claiming your own benefit is up to 30%. For instance, if youre the spouse of Colleen in the above example and you are the same age, youd be eligible for only $650 a month at age 6235% less than the $1000 a month you would get at your FRA of 67.
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Your decision to take benefits early could outlive you. If you were to die before your spouse, they would be eligible to receive your monthly amount as a survivor benefitif its higher than their own amount. But if you take your benefits early, say at age 62 versus waiting until age 70, your spouses survivor Social Security benefit could be up to 30% less for the remainder of their lifetime.
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You’re Only Working Part
If you claim Social Security prior to your full retirement age while still holding down a part-time job, you might have your benefits reduced if your work income exceeds the annual limit. For 2021, if you are under full retirement age, your benefits go down by $1 for every $2 your income exceeds $18,960. If you reach full retirement age in 2021, your benefits go down by $1 for every $3 your income exceeds $50,520 prior to reaching full retirement age. If you’re working part-time to help make ends meet, taking Social Security at 62 might make sense.
Change In How You Report Earnings
The Social Security Administration bases its benefit calculations on earnings reported on W-2 forms and on self-employment tax payments. Most individuals are not required to send in an estimate of earnings.
However, the Social Security Administration does request earnings estimates from some recipients: those with substantial self-employment income or those whose reported earnings have varied widely from month to month, including people who work on commission. Toward the end of each year, Social Security sends those people a form asking for an earnings estimate for the following year. The agency uses the information to calculate benefits for the first months of the following year. It will then adjust the amounts, if necessary, after it receives actual W-2 or self-employment tax information in the current year.
Once a beneficiary reaches full retirement age, his or her income will no longer be checked. Because there is no Social Security limit on how much a person can earn after reaching full retirement age, there is nothing to report.
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The Source Ofand Solution Tothe Problem
When the current Social Security formula was put in place in 1977, no provision was made for the contingency that economic conditions would be so dire that average wages would fall in any given year. This problem first surfaced in 2009 during the Great Recession. The AWI, however, fell by a relatively small amount, and policymakers chose not to do anything about it. As a result of the COVID-19 pandemic, however, the decline in the AWI is likely to be about four times as big now as it was during the Great Recession.
There is ample precedent for fixing this problem. The first precedent concerns Social Security cost-of-living allowances . As mentioned above, payments in years after beneficiaries first year of retirement are indexed to inflation using a version of the consumer price index . However, under the law, if prices fall in any year, benefits are not adjusted downward rather, they remain the same. The second precedent concerns the Social Security contribution and benefit base, also known as the taxable maximum. The taxable maximum is the dollar amount of annual earnings above which the Social Security payroll tax does not apply. The taxable maximum is indexed to the AWIbut like COLAs, it is never adjusted downward.