Presented by Tammy Flanagan - NARFEPresented by Tammy Flanagan . National Active and Retired Federal...
Transcript of Presented by Tammy Flanagan - NARFEPresented by Tammy Flanagan . National Active and Retired Federal...
1 National Active and Retired Federal Employees Association
Claiming Social Security
A NARFE Federal Benefits Institute Webinar
Presented by Tammy Flanagan
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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
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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
Audience Poll
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What Is Your Retirement Timeline?
55 62 65 - 67 70 90
Retire from Federal Service
Eligible for Social Security
Full Social Security
Retirement Age
Maximum Delayed Social
Security Credits
Expiration Date
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Full Retirement Age
If you were
born in:
Your full retirement age
is:
1943 – 1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67
Social Security’s Full
Retirement Age (FRA)
is increasing gradually
because of legislation
passed by Congress
in 1983
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True or False:
1. I plan to continue to work after age 62.
2. 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.
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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).
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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
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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
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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
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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.
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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 85.
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I am not in good health
65 75 85 95
Single with average earnings history
Age 62
($1,305)
$46,980 $203,580 $360,180 $516,780
Age 66
($1,740)
$0 $187,920 $396,720 $605,520
Age 70
($2,300)
$0 $138,000 $414,000 $690,000
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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
$1,276 / month or
$15,321.90 / year
And have
$15,321.90 -
$25,689.05 in the
“bank”
(invest one year
of benefits at 62)
63 with 3%
inflation
$772.50 / month x 12 =
$9,270 / year
Invest $9,000 at 6% for 18 years: $25,689.05
Invest $9,000 at 5% for 18 years: $21,659.57
Invest $9,000 at 3% for 18 years: $15,321.90
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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
$16,330.13
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Not good at math?
• Computer models
• Education
• Hire professional
• More likely to follow the crowd / current hype
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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
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I am single
• Never married – Independent –Social Security may provide significant
retirement income
• Widowed –Option to receive widow’s benefit
• Divorced –Dual entitlement
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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.
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Deemed Filing Rules Changing
• Restrict your application
to spousal benefits
• Delay your own earned
benefit
• If you reach age 62
before January 2, 2016
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Scenario
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
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.
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File and Suspend Deadline
Individuals who have already
requested, or who request
voluntary suspension before
April 30, 2016, are not
affected by the changes.
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Scenario
Paul (age 67) Judy (66)
Earned Benefit $1,800
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
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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.
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What About Medicare?
• Apply parts A & B within 3 months of age 65
• Delay part B if covered by current employment health insurance
• www.ssa.gov or 1-800-772-1213
• $121.80 / month or more (higher income)
• $121.80 / month or less (if withheld from Social Security benefit)
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If your yearly income in 2014 (for what you pay in 2016) was You pay
(2016)
Part B File individual
tax return
File joint tax
return
File married & separate
tax return
$85,000 or less $170,000 or less $85,000 or less $121.80
above $85,000 up
to $107,000
above $170,000
up to $214,000 Not applicable $170.50
above $107,000
up to $160,000
above $214,000
up to $320,000 Not applicable $243.60
above $160,000
up to $214,000
above $320,000
up to $428,000
above $85,000 and up to
$129,000 $316.70
above $214,000 above $428,000 above $129,000 $389.80
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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 ($22,050 - 2016)
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WEP
40% X $856 = $342.40
32% X $1,721 = $550.72
15% X $0 = $0
Monthly benefit at age 66 $893.12
Monthly benefit at age 62 $669.84
Monthly benefit without the WEP at age 66 $1,321.20
Monthly benefit at age 62 without the WEP $990.90
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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
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GPO
Monthly
CSRS
Joan (66)
Monthly
SSA Joan
Earned / Spousal / Widows
Jim
(SSA)
$4,612
(reduced SBP)
$893.12 (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.
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GPO
Monthly
CSRS
Joan (66)
Monthly
SSA Joan
Earned / Spousal / Widows
Jim (SSA)
$5,100 (unreduced
for SBP)
$893.12 (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.
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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
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