Claiming Social Security

Transcription

1 Claiming Social Security A NARFE Federal Benefits Institute Webinar Presented by Tammy Flanagan 1

2 When do you plan to claim Social Security retirement benefits: I am already receiving my Social Security benefits As soon as I am eligible I plan to delay application as long as possible I am not yet eligible for Social Security retirement I am not sure Audience Poll 2

3 Audience Poll What is your federal retirement system? CSRS FERS or I transferred to FERS CSRS Offset I am not sure I am already retired from CSRS I am already retired from FERS I am already retired from CSRS Offset Something else 3

4 What Is Your Retirement Timeline? Eligible for Social Security Maximum Delayed Social Security Credits Retire from Federal Service Full Social Security Retirement Age Expiration Date 4

5 Full Retirement Age If you were born in: Your full retirement age is: and 2 months and 4 months and 6 months Social Security s Full Retirement Age (FRA) is increasing gradually because of legislation passed by Congress in and 8 months and 10 months 1960 and later 67 5

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7 True or False: 1. I plan to continue to work after age I can afford to retire without Social Security. 3. There is longevity in my family, and I am healthy. 4. I m good at math and a successful money manager. 5. I am married. 7

8 Mostly true or false? True It might make sense to delay your Social Security application. False You may be a candidate for claiming Social Security at retirement or at age 62 (whichever is later). 8

9 I plan to work past age 62 Earnings test to full retirement age ($15,720) $1 reduction for $2 earned above limit At full retirement age, earnings test ends CSRS employees not affected by WEP or GPO Benefit continues to grow 9

10 I don t plan to work past age 62 Social Security is one part of the three parts of FERS - you may need the income to afford to retire! Social Security is an actuarial benefit smaller benefit more years larger benefit fewer years 10

11 Afford retirement without Social Security CSRS or FERS covers living expenses Additional income from TSP or other investments Social Security provides less replacement income for higher wage earners 11

12 Cannot afford retirement without Social Security Social Security is tilted toward the low-wage earner. Social Security can replace more of your wages if you had average or low income. Social Security replaces about 40% of an average wage earner s earnings. 12

13 Longevity factors A person's life span is thought to be largely determined by the combined effects of genetics and environmental factors. Twin studies, however, suggest genetics only account for approximately 20 to 30 percent of an individual's chance of surviving to age

14 I am not in good health Single with average earnings history Age 62 ($1,305) Age 66 ($1,740) Age 70 ($2,300) $46,980 $203,580 $360,180 $516,780 $0 $187,920 $396,720 $605,520 $0 $138,000 $414,000 $690,000 14

15 I am good at Math Claiming age: Monthly / yearly amount 3% inflation / benefit at 80 Option One 62 $750 / month x 12 = $9,000 / year 63 with 3% inflation $ / month x 12 = $9,270 / year Invest $9,000 at 6% for 18 years: $25, Invest $9,000 at 5% for 18 years: $21, Invest $9,000 at 3% for 18 years: $15, $1,276 / month or $15, / year And have $15, $25, in the bank (invest one year of benefits at 62) 15

16 I am good at Math Claiming age: Monthly / yearly amount 3% inflation / benefit at 80 Option Two 3% inflation and delay to age 63 $824 / month x 12 = $9,880 / year $16,

17 Not good at math? Computer models Education Hire professional More likely to follow the crowd / current hype 17

18 I am married While there are two of you, finances are good but what happens when there is one of you? One of you delay to earn delayed retirement credits up to 32% Delayed credits are included in widow s benefits Other option both start at age 62 and invest the proceeds for surviving spouse Lump sum of invested benefits left for surviving spouse Dependent Spouse: Worker: $1,000 Spousal benefit: up to $500 Dual Entitlement: Spouse 1: $1,000 or $700 Spouse 2: $1,400 or $500 18

19 I am single Never married Independent Social Security may provide significant retirement income Widowed Option to receive widow s benefit Divorced Dual entitlement 19

20 What Is Deemed Filing? If you are eligible for your own earned benefit and a spousal benefit, Social Security considers that you are filing for both benefits. You will receive the higher of the benefits that you are entitled to receive. 20

21 Deemed Filing Rules Changing Restrict your application to spousal benefits Delay your own earned benefit If you reach age 62 before January 2,

22 Scenario Because Cindy was 62 before January 2, 2016, she may file for her spouse s benefits now or at a future date if she chooses. Mike Age 62 $1,800 Begins benefits May 2016 Cindy Age 64 $500 She can: Receive higher spousal benefit (less than $900) Continue receiving her benefit $500 22

23 File and Suspend Deadline Individuals who have already requested, or who request voluntary suspension before April 30, 2016, are not affected by the changes. 23

24 Scenario Earned Benefit $1,800 Paul (age 67) Judy (66) Spousal Benefit $900 Suspends benefit July 2016 $0 Resumes benefit January 2017 $1,800 + COLA + delayed credit January 2017 $900 + COLA Prior to the legislation, Judy could have continued to receive spousal benefit when Paul suspended his benefit 24

25 Scenario FRA in May 2016, requests voluntary suspension Suspend benefits beginning June 2016 December 2016, he has a life-altering event Earliest benefits resume is January 2017 Prior to the new legislation, benefits would have been reinstated back to June 2016, which would have generated a lump-sum payment for the suspense period. 25

26 What About Medicare? Apply parts A & B within 3 months of age 65 Delay part B if covered by current employment health insurance or $ / month or more (higher income) $ / month or less (if withheld from Social Security benefit) 26

27 If your yearly income in 2014 (for what you pay in 2016) was File individual tax return File joint tax return File married & separate tax return You pay (2016) Part B $85,000 or less $170,000 or less $85,000 or less $ above $85,000 up to $107,000 above $107,000 up to $160,000 above $170,000 up to $214,000 above $214,000 up to $320,000 Not applicable $ Not applicable $ above $160,000 up to $214,000 above $320,000 up to $428,000 above $85,000 and up to $129,000 $ above $214,000 above $428,000 above $129,000 $

28 Windfall Elimination Provision Affects earned SSA of individuals who receive a pension from work not covered by Social Security, i.e., CSRS Modified SSA formula Exception for 20+ years of substantial earnings ($22, ) 28

29 WEP 40% X $856 = $ % X $1,721 = $ % X $0 = $0 Monthly benefit at age 66 $ Monthly benefit at age 62 $ Monthly benefit without the WEP at age 66 $1, Monthly benefit at age 62 without the WEP $

30 Government Pension Offset Reduces the spousal SS benefit by $2 for every $3 in CSRS benefit Opponents: GPO is imprecise and unfair Defenders: Preserves original intent of supporting financially dependent spouses and also eliminates unfair advantage for Government (CSRS) spouses compared with spouses who are subject to the dual entitlement rule Does not apply to FERS employees 30

31 Monthly CSRS Joan (66) GPO Monthly SSA Joan Earned / Spousal / Widows Jim (SSA) $4,612 (reduced SBP) $ (Joan s Earned SSA) $1,200 (Spousal benefit) - $3,075 = $0 $2,400 (age 66) GPO: 2/3 of $4,612 = $3,075 Joan s spousal / widow s benefits are offset by 2/3 of her CSRS retirement benefit. 31

32 Monthly CSRS Joan (66) GPO Monthly SSA Joan Earned / Spousal / Widows Jim (SSA) $5,100 (unreduced for SBP) $ (Joan s Earned SSA) $2,400 (Widow s Benefit) - $3,396 = $0 $0 (deceased) GPO: 2/3 of $5,100 = $3,396 Joan s spousal / widow s benefits are offset by 2/3 of her CSRS retirement benefit. 32

33 GPO Monthly CSRS Joan (66) Jim SSA Jim SSA and CSRS Survivor Benefit $0 (Deceased) $2,400 $2,805 (CSRS Survivor benefit 55% of $5,100) GPO: Does not impact surviving spouse of CSRS retiree 33

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