How does the substantial earnings years of credit work for Windfall Elimination Provision?
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Social Security Benefits After First Spouse Dies
When your spouse dies there are a few things that happen to your Social Security benefits that you need to be aware of. These things will affect your benefits significantly if your own benefit is less than that of your late spouse’s benefit (or Primary Insurance Amount). These changes to available benefits could also result in increased benefits if your own benefit is the larger of the two. These same impacts are apparent for ex-spouses as well. While reading the below, just replace “your spouse” with “ex-spouse” and all provisions are the same. Spousal Benefits cease When your spouse dies, the spousal benefits that you may have been receiving will cease. This means that your own benefit is the only retirement benefit that you will receive at this point. For example, Jane and John, both age 64, have been receiving Social Security benefits for a couple of years. Jane’s PIA […]
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Social Security Bend Points for 2016
When the Social Security Administration recently announced that the maximum wage base and the Cost-of-Living Adjustment (COLA) would remain unchanged for 2016, they also announced the bend points that are used to calculate both the Primary Insurance Amount (PIA) for Social Security benefits. In addition, the Family Maximum Benefit (FMax) bend points for 2016 were also announced. Wait a second! You may be wondering just why the bend points are changing when there was no increase to the COLA? Excellent question, as it shows you’ve been paying attention. This is because the bend points are based upon the Average Wage Index, which adjusts annually regardless of whether the numbers go up or down, whereas the COLA and the maximum wage base only goes up. Bend points can go down from one year to the next – it’s only happened once, in 2009, but it could happen again. For more on […]
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No Social Security COLA for 2016; Wage Base Unchanged as Well
Recently the Social Security Administration announced that there would be no Cost of Living Adjustment (COLA) to recipients’ benefits for 2016. This is the third time in 7 years that there has been no adjustment. In 2010 and 2011 we saw the first ever zero COLA years since the automatic adjustment was first put in place in 1972. That dark period of time actually resulted in two years in a row with zero COLAs, after 38 years of increasing adjustments. Why? The Cost of Living Adjustment (COLA) is based upon the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. If this factor increases year-over-year, then a COLA can be applied to Social Security benefits. This is an automatic adjustment, no action is required of Congress to produce the increase when there is one. See How Social Security COLAs Are Calculated for details on the calculations. When […]
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Social Security Substantial Earnings Table
According to the Social Security Administration, substantial earnings is defined as an amount equal or above the amounts shown in the table below. This only applies to potential elimination or reduction of Windfall Elimination Provision (WEP) impact if you are receiving a pension from non-SS-covered work. See this article about the Windfall Elimination Provision for more details. Year Substantial Earnings (18.57%) 1937-1954 $900 1955-1958 $1,050 1959-1965 $1,200 1966-1967 $1,650 1968-1971 $1,950 1972 $2,250 1973 $2,700 1974 $3,300 1975 $3,525 1976 $3,825 1977 $4,125 1978 $4,425 1979 $4,725 1980 $5,100 1981 $5,550 1982 $6,075 1983 $6,675 1984 $7,050 1985 $7,425 1986 $7,825 1987 $8,175 1988 $8,400 1989 $8,925 1990 $9,525 1991 $9,900 1992 $10,350 1993 $10,725 1994 $11,250 1995 $11,325 1996 $11,625 1997 $12,150 1998 $12,675 1999 $13,425 2000 $14,175 2001 $14,925 2002 $15,750 2003 $16,125 2004 $16,275 2005 $16,725 2006 $17,475 2007 $18,150 2008 $18,975 2009-2011 $19,800 2012 $20,475 2013 […]
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Windfall Elimination Provision May Impact Spousal Benefits but not Survivor Benefits
When your Social Security retirement benefit is subject to the Windfall Elimination Provision (WEP), you’re likely painfully aware of the reduction to your own benefit by this provision. What you may not be aware of is that the effect goes beyond your own benefit – your spouse’s and other dependents’ benefits are also impacted by this provision. However, the impact of WEP does not continue after your death.
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Social Security and the Non-Citizen Spouse
With our increasingly global society today, many married couples are made up of a US citizen and a non-citizen. In some cases, the non-citizen spouse has never been covered by the US Social Security system – he or she may have been covered by another system in his or her home country. In other cases, the non-citizen spouse may have worked in a Social Security-covered job while living in the US, and so may have generated a Social Security earnings record of his or her own. At any rate, it is important to know that your lawful spouse who is a non-citizen may be eligible for Social Security benefits based on your earnings. As long as other qualifications are met (length of marriage, age of the spouse, and your filing status with Social Security), your non-citizen spouse may qualify for Spousal Benefits based upon your record. By the same token, your […]
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Social Security Spousal Benefits versus Survivor Benefits
I’ve written a lot about Social Security Spousal Benefits and Survivor Benefits on these pages, but oftentimes there is confusion about how they are applied. There are things about them that are common, but for the most part there are some real differences that you need to understand as you make decisions about applying for one or the other of these benefits. For one thing – Survivor Benefits and Spousal Benefits are benefits that you may be entitled to that are based on someone else’s record: your spouse (or ex-spouse) to be exact. No matter what your own Social Security benefit might be, you have access to the Spousal Benefit and Survivor Benefit, if, of course, you have or had a spouse with a Social Security retirement benefit available on his or her record. In addition, it is important to note that Spousal Benefits and Survivor Benefits are mutually exclusive. […]
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Social Security Bend Points for 2014
When the Social Security Administration announced the Cost of Living Adjustment (COLA) for 2014, this also allowed for calculation of the bend points for 2014. Bend points are the portions of your average income (Average Indexed Monthly Earnings – AIME) in specific dollar amounts that are indexed each year, based upon an obscure table called the Average Wage Index (AWI) Series. They’re called bend points because they represent points on a graph of your AIME graphed by inclusion in calculating the PIA. If you’re interested in how Bend Points are used, you can see the article on Primary Insurance Amount, or PIA. Here, however, we’ll go over how Bend Points are calculated each year. To understand this calculation, you need to go back to 1979, the year of the Three Mile Island disaster, the introduction of the compact disc and the Iranian hostage crisis. According to the AWI Series, in […]
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Computing Your Social Security Monthly Benefit
When planning for Social Security retirement benefits, it is important to know how to compute the amount of your benefit at various ages. The amount of your benefit will be different depending upon your age when you begin drawing the benefit, as well as your record of earnings over time. Below are the factors that are needed in order to determine the amount of your Social Security benefit: Your Primary Insurance Amount, or PIA Your Full Retirement Age, or FRA, which is determined by your year of birth Your age when you will begin drawing benefits Whether or not the Windfall Elimination Provision (WEP) applies to your benefits This earlier article has information about the PIA, and you can find your PIA on your Social Security statement. Your FRA, if you were born between 1943 and 1954, is 66. If you were born in 1955 or after, FRA gradually increases […]
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Notify Social Security of Major Changes in Your Life
You know how, after you’ve put your kids through college and they go off on their own, sometimes you don’t hear from them as often as you’d like? Major things occur in your kids’ lives and you don’t know about them until after the fact, possibly long after. So you get onto them about it, and ask the kids to call more often (or you call them more often) so that you can keep up with what’s going on… It’s kinda like that with the Social Security. They want to know when major changes occur in your life, as soon as possible. This is primarily due to the fact that, quite often, these changes will result in adjustment to your Social Security benefits. The first one that comes to mind is the death of a Social Security recipient. Naturally you need to notify the Social Security Administration as soon as […]
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How to Reduce or Eliminate Windfall Elimination Provision Impact to Your Social Security Benefit
In prior articles we have discussed the Windfall Elimination Provision (WEP) which has the effect of reducing a portion of your Social Security retirement benefit if you’ve worked in a job that was not covered by Social Security which also provides a pension. This article deals with two ways that you can remove the impact of the WEP from your benefit – neither of which is simple, and neither of which can be done after you’ve retired. The two methods are: Add years of “substantial earnings” to your record Take a lump sum distribution from your pension before you are eligible to receive the pension. Adding Substantial Earnings Years If you have the opportunity to work in a job that is covered by Social Security withholding and you have “substantial earnings” from that job, each year that you work in this SS-covered job adds to your ability to begin eliminating […]
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Calculating the PIA
WOMEN’S HISTORY MONTH (Photo credit: mademoiselle louise) In determining your retirement benefits from Social Security, as well as those of any dependents who may claim benefits based upon your record, the Primary Insurance Amount, or PIA, is an important factor. The PIA is the amount of benefit that you would receive if you began receiving benefits at exactly your Full Retirement Age, or FRA. (see this article for information about determining your FRA). The PIA is only one of the factors used in determining the actual amount of your retirement benefit – the other factor being the date (or rather your age) when you elect to begin receiving retirement benefits. So, how is PIA calculated? There are several factors that go into the calculation of the PIA. You start off with your Average Indexed Monthly Earnings (AIME – which we defined in this article about the AIME). Then, we take […]
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The Social Security Spousal Benefit – Further Explanation
Image via Wikipedia Note: with the passage of the Bipartisan Budget Act of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details. Following up my article which provided several brief examples of the Social Security Spousal Benefit, I thought I’d provide some further explanation and background for the provision. It appears from some of the feedback I have received that there is a great deal of confusion over this provision, so hopefully the further background explanation that I’m providing here will be of help. I have listed below several additional background details about how the Social Security System works, in order to help you better understand the […]
Sterling Raskie, MSFS, CFP®, ChFC®
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