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


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


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


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


Full Retirement Age

If you were

born in:

Your full retirement age

is:

1943 – 1954 66

1955 66 and 2 months





1960 and later 67

Social Security’s Full

Retirement Age (FRA)

is increasing gradually

because of legislation

passed by Congress

in 1983


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.


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).


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


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


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


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.


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.


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


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




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


Not good at math?

• Computer models

• Education

• Hire professional

• More likely to follow the crowd / current hype


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


I am single

• Never married – Independent –Social Security may provide significant

retirement income

• Widowed –Option to receive widow’s benefit

• Divorced –Dual entitlement


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.


Deemed Filing Rules Changing

• Restrict your application

to spousal benefits

• Delay your own earned

benefit

• If you reach age 62

before January 2, 2016


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.


File and Suspend Deadline

Individuals who have already

requested, or who request

voluntary suspension before

April 30, 2016, are not

affected by the changes.


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


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.


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)

http://www.ssa.gov/


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


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)


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


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


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.


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.


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

presented by tammy flanagan - narfepresented by tammy flanagan . national active and retired federal...

Documents