PPA 419 Aging Services Administration

1
PPA 419 Aging Services Administration

• Lecture 4b Program Characteristics of Social
  Security

2
Introduction

• Beneficiaries.
• People who have already retired.
• People who are disabled.
• Survivors of workers who have died.
• Dependents of beneficiaries.
• Money not held in personal account. Current
  taxes are being used right now to pay current
  beneficiaries.

3
Future of Social Security

• Funding crisis.
• Brought on by aging of Baby Boom Generation.
• In just 14 years, we will pay more in benefits
  than we take in taxes.
• In 2042, the fund will zero out.
• At that point, there will only be enough money
  coming in to pay 73 of benefits for current
  beneficiaries.
• Issues need resolving.

4
Social Security Taxes

• In 2007, taxable income up to 97,500

5
Where Do the Social Security Dollars Go?

• 85 of your Social Security taxes go into the old
  age and survivors trust fund.
• 15 go into the disability trust fund.
• Less than one percent goes into administrative
  costs.

6
Eligibility

• As the employee works and pays taxes, he or she
  earns Social Security credits.
• If you make 900 in earnings during a year you
  receive one credit. You can earn up to four
  credits per year. The earnings limit is adjusted
  to inflation.
• Most people need 40 credits (10 years of work) to
  qualify for benefits. Younger people need fewer
  credits to be eligible for disability or for
  family members to be eligible for survivors
  benefits if the primary worker dies.

7
Full Retirement Age
8
Early Retirement

• Retirement can start as early as 62, but benefits
  are reduced by one half of one percent for each
  month before full retirement age that the
  recipient receives Social Security.
• If the recipient continues to work from 62 until
  full retirement and receive early retirement,
  benefits will be reduced by 1 for every 2 of
  earnings.
• During the year of the recipients retirement,
  benefits will be reduced by 1 for every 3 of
  earnings over an annual limit until the month the
  recipient reaches retirement age.
• Retired widows and widowers can switch to their
  own retirement benefits at 62.

9
Disability Benefits

• U.S. residents who cannot work because of a
  physical or mental condition that is expected to
  last one year or result in death may be eligible
  for disability benefits.
• If they meet the needs test, they may also be
  eligible for SSI benefits.

10
Family Benefits

• Benefits can be paid to the spouse if
• He or she is age 62 or older.
• At any age if he or she is caring for a child
  under 16 or disabled and receiving benefits on
  your record.
• Benefits can be paid to unmarried children if
  they are
• Younger than 16
• Between 18 and 19, but in elementary or secondary
  school as a full-time student
• Or age 18 or older and severely disabled (the
  disability must have started before age 23).
• Family benefit is up to half of the retirement or
  disability payment for the primary member. The
  total for the whole family may not exceed 150 to
  180 percent of the retirement benefit.

11
Divorced Recipients

• Married at least 10 years.
• Divorced at least 2 years.
• Be at least 62.
• Be unmarried
• Not eligible for an equal or higher benefit based
  on their own work.

12
Survivors Benefits

• Widow or widower.
• 60 or older, or
• 50 or older and disabled, or
• Any age if he or she is caring for your child who
  is younger than 16 or disabled and receiving SS.
• Children
• Younger than 18 years.
• Between 18 and 19, but in elementary or secondary
  as full-time students.
• Age 18 or older and severely disabled (since
  before 22).
• Survivors get somewhere between 75 and 100
  percent of the primary family members benefit,
  but family collectively may not receive more than
  150 to 180 percent of total benefit.

13
Benefits Taxable

• If you file a federal tax return as an
  "individual" and your combined income is between
  25,000 and 34,000, you may have to pay income
  tax on 50 percent of your Social Security
  benefits. If your combined income is above
  34,000, up to 85 percent of your Social Security
  benefits is subject to income tax.
• If you file a joint return, you may have to pay
  taxes on 50 percent of your benefits if you and
  your spouse have a combined income that is
  between 32,000 and 44,000. If your combined
  income is more than 44,000, up to 85 percent of
  your Social Security benefits is subject to
  income tax.
• If you are married but file a separate tax
  return, you probably will pay taxes on your
  benefits.

14
One-Time Death Benefit

• One time payment of 255 to widow or minor
  children upon death.

15
Benefit Calculation

• How does SSA determine your PIA for first
  eligibility or death after 1978?
• Average indexed monthly earnings (AIME) Best 35
  years.
• Your PIA is determined by applying a mathematical
  formula to the AIME if you either
• Become eligible for retirement insurance benefits
  at age 62
• Have a period of disability established or
• Become eligible for survivors' insurance benefits
  on the basis of death in 1979 or later.
• For an individual who first becomes eligible for
  old-age insurance benefits or disability
  insurance benefits in 2007, or who dies in 2007
  before becoming eligible for benefits, his/her
  PIA will be the sum of
• 90 percent of the first 680 of his/her average
  indexed monthly earnings, plus
• 32 percent of his/her average indexed monthly
  earnings over 680 and through 4,100, plus
• 15 percent of his/her average indexed monthly
  earnings over 4,100.