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 Insurance Survivor Insurance Disability Insurance Health Insurance (1965)

Social Security (FICA) OASDI – 4.2 % of wages to $106,800, paid by employee and 6.2% by employer = 10.4% contribution - maximum $11,107 Health Insurance – 1.45% of wages (no maximum), paid by employee and matched by employer = 2.90% contribution Total Social Security Contribution = 13.3%

Social Security Eligibility 4 Retirement: (40 quarters of covered employment) Age 62 with reduced benefits Age with full benefits Age 70 with enhanced benefits

Medicare Eligibility 5 Medicare: (40 quarters of covered employment or through your spouse) and age 65 Part A – Hospital Insurance Part B – Medical Insurance Part 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) = $ = $ = $310-$ = $ = $890-$1,120 (2011)

Calculating Your Benefit 8 PIA (Primary Insurance Amount) at FRA (Full Retirement Age) % of AIME up to $749 32% of AIME between $750 - $4,517 15% of AIME above $4,517 (Bend Points) : Maximum $2,323 in 2011

Calculating Your 2010 Benefit 9 Total Indexed Wages/420 months = $5,200 average monthly wages 1. 90% of first $749 = $ % of next $3,768 = $ 1, % of remainder = $ 102 SS Benefit (FRA) = $1,982/month

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New Language on Form 13 “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 2036, the payroll taxes collected will be enough to pay only about 76 percent of scheduled benefits.”

Full Retirement Age (FRA) 14 Born: 1937 earlier65 years old and 2 months and 4 months and 6 months and 8 months and 10 months years old

Full Retirement Age (FRA) 15 Born: and 2 months and 4 months and 6 months and 8 months and 10 months 1960 or after67 years old

Early Retirement 16 Retire before your full retirement age Earliest retirement is 62 years old Can retire anytime between age 62 and your full retirement age or later Can I retire early and keep on working? YES – but….

Social Security Benefits 17 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 Amounts 18 $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 Retirement 19 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 Retirement 20 Born between : Age 6275% of benefit Age 66100% of benefit Age 70132% of benefit

Spouse Benefit 21 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/mo You would get the $1,100/mo Can you qualify before your spouse retires?

Spouses and Marriage 22 Currently married Marriage lasted 10+ years (divorce) Ex-spouse 62 or older and unmarried Spouse’s benefit has no effect on your Social Security benefit

Death Benefits 23 Death payment of $255 Greater of earned Social Security benefit or your spouse’s full benefit Married Remarry (after death or divorce) Divorced spouse Dependent children also qualify until age 18 or 19 if still in K-12 school

Disability Benefit 24 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.

Medicare 25 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 Medicare 27 Apply about 4 months before you reach FRA or your early retirement date Apply online SS paid throughout month – and one month delay Medicare starts first day of month of birthday

For More Information Apply for benefits online Under each section, they have FAQ (frequently asked questions) Shows updates to questions Can receive when question is updated

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For More Information 30 Visit the Social Security office 3201 W Commercial Blvd Suite 100 Fort Lauderdale, FL :30 am – 3:30 pm (M-F) (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 identification Last two years of tax returns Marriage/divorce/military information Bank account for direct deposit