Over a lifetime many Americans contribute substantial amounts to Social Security, especially when the portion contributed by the employee is matched by the employer.
These contributions, the government refers to them as contributions. The word ‘contributions’ sound as though it is voluntary. These so-called contributions are actually required taxes. These contributions are made by over 100 million workers, either weekly or monthly. When we begin to think about it more, that is slightly over 2 billion records of dollar amounts that are matched my names and account numbers. And they are tallied each and every year. Our hats off to the Social Security Administration, they do a good job of keeping track of these very important records. But what happens when the records are not correct?
Have your accumulated earnings been properly credited to your account at the Social Security Administration? If they have not, your monthly Social Security Benefits at retirement may be less than the amount to which you are entitled.
Social Security Benefit payments change from one taxpayer to the next depending on different factors including retirement age and the specific amount of earnings credited to each taxpayers account. We know that the computer age has reduced the number of errors in the tabulation of earnings. Mistakes are bound to happen. So, what’s a hard working person to do? For starters, you can make sure you’re getting the proper credit for your account by receiving a copy of your Social Security earnings record periodically.
The Social Security Administrative headquarters located in Baltimore, Maryland has a special mailer of your recorded earnings that it will send automatically to you three months before your birthday. If you request it, they will furnish you with a statement that includes all covered earnings credited to your account from 1937 through present. There is a posting time lag of six months to one year at the SSA. Depending on your age, your statements will be broken down as follows:
Earnings for each recent year postings have been completed; total earnings from 1952 to present; and total earnings from 1937 to 1951.
When you receive the statement, be sure to compare the figures against copies of your old W-2 forms or income tax returns. Remember, only earnings that were subject to Social Security tax will appear on this record. If you worked for a non-profit organization that did not participate in Social Security, those earnings will not appear. For example, if your earnings totaled $95,000 in 2004, the statement will show only $87,900 because earnings more than that, were not subject to the FICA tax that year. If your records do not agree with the SSA, contact your local office as soon as possible. Disability benefits require that the disabled person have a minimum number of quarters of coverage as a contributor to Social Security. This is very critical factor for people who have long periods of unemployment or those who have periodic employment in the non-profit sector or abroad.
Quarters of Coverage, or what are now called Credits, are also detailed on the Social Security Statement sent to you before your birthday or on request. This aspect of coverage is very critical for people who are close to, but may not have met or exceeded the minimum requirement. It might make it practical for you to consider part-time employment in a FICA covered firm. If a former employer has failed to report your earnings, or perhaps the record was never posted to your account, it will take a long time to have your records revised. The time to be doing this is when you are well, and there is no pressure. For this reason, we strongly encourage you to audit all adult accounts every three years. Be sure to ask for both the amount of coverage as well as the quarters of coverage.
SO, HOW MUCH WILL I RECEIVE?
Your retirement benefits are based on your average wages, price indexed to reflect the income level and purchasing power they represented when earned. The government will eliminate several years of low earnings and average out the rest. There is a special formula applied to ‘average earnings’ to calculate your basic benefit amount.
The basic benefit amount is used to figure the actual monthly amount you receive. The payment can be more or less than the basic benefit, depending on your full retirement age (FRA). The benefit payments are geared toward the normal retirement age of 65 if you were born prior to 1938. This normal age will gradually be increased to 67. Eventually, all people retiring before age 67 will receive reduced benefits.
Age 62 is the earliest retirement age to receive retirement benefits. However, electing to begin benefits at this age will reduce your basic benefit permanently. How much your benefit will be reduced for early retirement depends on your age when the benefit begins and how many months younger you are than your full retirement age. For example, for persons born 1943 – 1954 the full retirement age is 66 and the reduced benefit is 75%. For persons born after 1959, the full retirement age is 67 and the reduced benefit is 70%.
FULL RETIREMENT AGE
Year of Birth FRA
1938 65 & 2 months
1939 65 & 4 months
1940 65 & 6 months
1941 65 & 8 months
1942 65 & 10 months
1943 – 1954 66
1955 66 & 2 months
1956 66 & 4 months
1957 66 & 6 months
1958 66 & 8 months
1959 66 & 10 months
1960 & later 67
In addition to receiving retirement benefits yourself, your spouse and children may qualify to receive payments. The monthly payments they receive will be based on your full basic benefit. A spouse must meet one of the following conditions to receive payments. Spouse is 62 or older when you retire (Or the spouse must be at least 60 at your death.). Or your spouse is caring for a child receiving benefits. This child must either be under 16 or, if disabled, up to age 22.
The amount of benefits received by your spouse will vary depending on certain conditions, such as age and prior employment. If you plan to retire soon and have always earned the maximum covered earnings, the estimated monthly benefits you and your spouse will receive depends on inflation and the increase in average wages. These benefits may increase yearly. However, the automatic escalation of benefits is subject to review by Congress. If there is sufficient pressure, this increase may be delayed, reduced or eliminated. It is best to plan assuming a level benefit.
If eligible for two, one receives the larger benefit. However, a person may not receive both. For example, a wife who has worked will be eligible for a spouse’s benefit as well as the benefit accumulated on her own work record. However, she will receive only the larger amount.
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