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Frequently asked questions about Social Security benefits for retirement

What are Social Security credits?
Your eligibility to collect Social Security benefits will depend on your earnings history. You receive Social Security "credits" based on the amount that you earned during your working years and the number of years that you actually paid Social Security taxes. If you’ve worked for a decade or more, you won’t have any trouble meeting the credit requirement. Currently, 40 credits are required to collect benefits. If you don’t have enough credits because you didn’t pay Social Security taxes long enough, you don’t qualify for a retirement benefit. There’s no partial benefit for fewer credits. Congress has slowly but steadily been increasing the number of credits needed for retirement benefit eligibility. The most recent rule is that people who reach age 62 after 1990 need 40 credits to be eligible.

How much will I get from Social Security?
The exact size of your monthly payments from Social Security will depend on a variety of factors, including how much you earned over your career and how much money you have paid into the Social Security system through taxes. The size of your monthly benefits check will also depend on when you choose to start taking your payments. You can start collecting as early as age 62 or as late as age 70. The sooner you begin collecting, the smaller your benefits check will be. You can order a copy of your Social Security Benefit Statement which contains your earnings history and an estimate of your retirement and disability benefits directly from the Social Security Administration. The order can be placed online, but delivery is via snail mail for security reasons.

If your full retirement age is 65, and you are thinking about collecting your benefits early, consider this: at 62, they are reduced about 20%; at 63, they are reduced about 13 1/3%; at 64, they are reduced about 6 2/3 %. Also remember that this reduced rate is for the remainder of your life, not until you reach 65, so it will be better to wait if at all possible.

What is the full retirement age for Social Security?
The full retirement age for Social Security benefits is 65. You can retire sooner, but your monthly benefits will be reduced. It’s worth noting that 65 is the full retirement age only for those who plan on retiring relatively soon. According to "The Truth About Money" (Georgetown University Press, Washington, D.C.), "For younger workers, Congress already has cut back the benefits. . . . Those born after 1959 are not eligible for full Social Security benefits until age 67." Those younger workers can start receiving benefits at 62, but they will get 30% less than if they wait until 67 -- not 20% less, like those retiring today. Considering the sorry shape that the Social Security system is in today, it’s probable that further cutbacks will have to be made.

Should I begin my Social Security benefits at age 62, 65 or 70?
The longer you wait to begin collecting Social Security payments, the higher your monthly checks will be. Most Americans are eligible to begin drawing full benefits at age 65. But you can start drawing benefits as early as 62 if you’re willing to accept smaller monthly payments. Although people who wait until age 62 get 20% lower payments, they also get 36 more monthly checks than they would if they waited the additional three years to collect. If they continue working, their earnings over $10,680 in 2001 will reduce their benefit $1 for every $2 in excess earnings. Because of this complication, we need to consider two cases: 1. You will not need to work and you will save the benefit checks until the latest age in the comparison (either 65 or 70). 2. You will need or want to continue working as long as possible and you will save the benefit checks until the latest comparison age(either age 65 or 70). For case 1, the the time weighted value of the income stream for beginning early (62) exceeds the value of beginning at 65 or 70 until an assumed age of death at 90. Thus, for case 1, beginning at 62 is the preferred choice. For case 2, we assume that the need to work creates enough income to reduce the early retirement benefit to zero (assuming a $12,000 benefit and earnings greater than $34,680). Therefore, the comparison is between beginning at 65 or delaying until 70 since earnings prior to 65 reduces the benefit to zero. Because there is no longer a benefit reduction for earnings after age 65 and because the time weighted value of the benefit income stream is greater for beginning at age 65 even though the benefits at age 70 are 40% larger we must conclude that beginning benefits at 65 is the best option for case 2.

Can I lose my Social Security benefits?
It’s possible to lose all of your Social Security benefits. If you start benefits at 62 and continue working, your benefits will be reduced by $1 for every $2 you earn over $10,680 in 2001. Thus if you earn $34,680 or more and your benefit was $12,000 per year, you will lose all of your benefits until you reach age 65 if your earnings remain that high.

I didn't work enough to qualify for Social Security benefits. My husband gets Social Security, but he is ill and is not expected to live much longer. Will I be able to collect benefits?
Yes, but your monthly benefit depends on your age and situation. For example: If you're at full retirement age or older, you'll get 100% of your deceased husband's benefit. A widow or widower between 60 and full retirement age receives from 71% to 99%. Surviving spouses of any age with children under age 16 or with disabled children receie 75%. Children also get 75%. For details and to calculate your benefit, visit Social Security.

If I move to another country after I retire, can I still be eligible to receive Social Security benefits?
A growing number of older Americans are choosing to spend their retirement years abroad, either traveling or settling down where living expenses are much lower. But before you pack your bags, make sure you understand how a move to a foreign country -- or even just an extended visit -- may affect your ability to collect Social Security benefits. For example, U.S. Treasury Department regulations prohibit sending payments to you if you are in Cuba, Cambodia, North Korea or Vietnam. In addition, Social Security restrictions prohibit sending payments to countries other than Armenia, Estonia, Latvia, Lithuania and Russia that were part of the former Soviet Union. You can’t receive payments while you are in one of these countries, and Social Security can’t send payments to anyone for you. If you’re already abroad, ask the U.S. Embassy or Consulate. You can also visit the Social Security Administration’s Web site and review a document titled "Your Payments While You Are Outside the United States."

What are cost of living adjustments (COLAs) for Social Security payments?
Social Security payments, as well as many labor agreements, have regular "cost-of-living adjustments." Commonly referred to as "COLAs," they’re designed to prevent inflation from devouring an ever-growing piece of your income and savings. COLAs for Social Security recipients are based on increases in the government’s Consumer Price Index. The government calculates the CPI increase every fall and then raises every recipient’s check in January.

Is there any way to estimate what my Social Security benefits will be before I retire?
The Social Security system has the difficult task of tracking the earnings of more than 100 million American workers and making sure that the Social Security taxes those workers pay are credited properly to their individual accounts. The tracking system is good, but not infallible. To make sure you’re getting proper credit for Social Security taxes you have paid, check every few years. You can submit your request for your Social Security Benefit Statement online at the Social Security Web site or download and mail the form. A few weeks after you complete the one-page form, the Social Security Administration will mail a report that lists how much you have paid into the system, how many credits you have built up and an estimate of the monthly benefits you will receive when you retire. If there’s an error, you can submit copies of W-2 forms or income tax returns to have the figures adjusted upward.

My husband has earned five times more than I have. Is it true that I can claim benefits based on his work history?
Yes. You can either receive benefits based on your contributions to the system or get an amount equal to half of your husband's benefits, whichever is greater. However, you can get benefits based on your husband's record only when he starts receiving benefits himself. So, if you happen to be older than he is, you can initially claim benefits based on your own work record, and then switch to half of his benefits when he signs up.

Is there any way for me to get online information about Social Security?
The Social Security Administration is one of the federal government’s largest and oldest agencies. However, the Social Security Web site is surprisingly handy and easy to use. It has answers to hundreds of frequently asked questions, forms that you can download and a variety of other helpful features.

Is the Social Security retirement age likely to be raised because people are living longer?
Most financial experts agree that some form of Social Security will always be available, but that the system of the future will be very different. People are living longer, the first of the Baby Boomers are only now reaching retirement age, and fewer young people are entering the work force and paying Social Security taxes. The current system has to be changed or the whole thing will go bankrupt. Some in Congress have already talked about ways to change the Social Security system to ensure it will remain solvent enough for everyone to get at least some of their money back. One way would be to increase the age at which you would become eligible to start collecting benefits. Another would be to reduce the amount you can collect. The list of suggestions goes on and on, but one thing is certain: Change is coming, and benefits will be cut. That’s one more reason why you need a retirement plan of your own instead of relying solely on Social Security.

Does receiving Social Security affect my ability to make a deductible IRA contribution?
Social Security payments you receive could restrict your ability to deduct contributions to your IRA. If you are covered by a qualified pension plan where you work, Social Security benefits can affect your deductible contribution to an IRA. Deductibility of an IRA contribution depends on your adjusted gross income, which includes the taxable portion of Social Security benefits. So your Social Security can reduce the deductible portion of an IRA contribution.

What type of documents will I need when I first apply for Social Security benefits?
Here’s a list of the most common documents needed to claim benefits: 1. Your Social Security card, or at least a record of your number. 2. Your birth certificate. 3. Your child’s birth certificate, if you’re applying for benefits on behalf of your son or daughter. 4. A marriage certificate, if you’re signing up on a spouse’s record. 5. Your most recent W-2 form from your employer, or your tax return if you’re self-employed. 6. Your military discharge papers, if you had military service. Remember, you must supply either the original documents or certified copies of the originals. The Social Security Administration won’t accept photocopies or carbons.

What is Supplemental Security Income (SSI)?
If you don’t qualify for Social Security benefits, or if your benefits are unusually small, you may be eligible for the federal Supplemental Security Income (SSI) program. Unlike Social Security benefits, SSI payments are funded completely out of the federal budget. Those payments are small, typically about $450 for a single person or $650 for a couple. People who live in New York, California and other expensive areas can get a little more. Only U.S. citizens qualify for SSI payments. You must either be 65 years old, blind or disabled. Eligibility is also affected by your income and assets.

How do I qualify for SSI?
The federal Supplemental Security Income (SSI) program was designed only for the neediest of older people and the disabled. If you don’t qualify for Social Security benefits, or if your benefits are small, you may be eligible for SSI payments. Only U.S. citizens qualify for SSI payments. In addition, you must either be 65 years old, blind or disabled. The SSI program is restricted to those who don’t have a financial safety net of their own. In general, that means singles who have less than $2,000 in assets and couples who have less than $3,000. Your home and car aren’t included in eligibility calculations, but the value of any savings accounts or other investments you hold is. You can work and still be eligible for SSI payments, but income limits are relatively low and vary from state to state.

How do I apply for survivor benefits from Social Security?
When someone who is receiving Social Security payments dies, the surviving spouse is eligible for "survivor" benefits. Apply for those benefits as quickly as possible. You’ll need a copy of the deceased’s death certificate and evidence of your relationship, marital situation and age. In addition to monthly checks, the Social Security Administration will give you a one-time $255 payment to help meet burial or other expenses. Survivor benefits are also available to minor children when a parent dies, even if the parent wasn’t old enough to collect Social Security retirement benefits. These monthly payments can be quite substantial, subject to the maximum allowable earnings limit prior to taxation, and are a good source of cash to meet the child’s living expenses and savings for college.

Will I lose the survivor benefits I collect from Social Security if I remarry?
If your spouse has died and you are receiving Social Security survivor benefits, you won’t lose those benefits if you marry as long as you have already reached the age of 60. If you’re blind, you can continue receiving survivor benefits as long as you have reached 50. In fact, if you remarry, you might even see your monthly Social Security check increase. That’s because you may qualify for higher benefits based on your new spouse’s earnings history. You get to choose the higher of the two figures. If you have children who are also receiving benefits, their status will be unaffected by remarriage.

My wife and I are both drawing Social Security checks, what will happen when one of us dies?
When both partners in a marriage are receiving Social Security payments and one dies, the survivor is entitled to receive the greater of 100% of the late spouse’s monthly benefit or his or her own monthly benefit. This does not mean that you will begin receiving two monthly checks when your spouse dies. Instead, it means that you will be able to choose whether to continue collecting the same monthly benefit that you have always received, or start collecting the amount that your spouse received when he or she was alive. For example, if your spouse’s monthly check was $1,100 and yours is $600, you would choose to collect payments under your spouse’s plan so you could receive $1,100 a month.

Can I work while collecting Social Security benefits?
You can continue to work while you collect Social Security benefits, but your benefits will be reduced if you earn more than a certain amount of money. As of 2001, retirees under 65 lose one dollar in Social Security benefits for every two they earn over $10,680. In the year retirees turn age 65, they lose one dollar for every three they earn over $25,000 duing the months preceding the month of their birthday. For the month of their 65th birthday and after, retirees have no reduction in their benefits, regardless of how much they earn from their job. These ceilings rise with inflation every year, but not by much.

How much can I earn from my part-time job before I start losing some of my monthly Social Security benefits?
You can work and still draw Social Security benefits, but those benefits are reduced if you earn too much money from your job. The earnings ceiling rises annually to keep pace with inflation. The maximum amount you can earn without losing benefits is also based on your age. As of 2001, retirees under 65 lose one dollar in Social Security benefits for every two they earn over $10,680. In the year retirees turn age 65, they lose one dollar for every three they earn over $25,000 duing the months preceding the month of their birthday. For the month of their 65th birthday and after, retirees have no reduction in their benefits, regardless of how much they earn from their job. These ceilings rise with inflation every year, but not by much. You should have your company’s personnel department or a Social Security representative do the calculations for you.

What’s the purpose of Social Security’s annual report of earnings form?
If you’re older and have begun drawing Social Security checks, there’s a limit to how much you can earn from a job and still collect full benefits. You must notify the Social Security Administration if you are working using the agency’s Annual Report of Earnings form. Use it to estimate your earnings and then mail it back to the SSA. Based on your estimate, the agency will reduce the number of monthly checks you get the following year. If you earn less than you estimated, Social Security will send you a check for the amount of benefits you are owed. But if you earn more than expected, you’ll have to pay back the excess.