A Factsheet from Social Security _______________________________________________________________ Social Security Administration SSA Publication No. 05-10063 January 1997 (Destroy Prior Editions) Special Payments After Retirement Bonuses, Vacation Pay, Commissions, Sick Pay, Carryover Crops, Royalties, etc. Generally, if you are a Social Security beneficiary under 70 who works and earns over a certain limit, you aren't entitled to your full Social Security benefit. The earnings limits for 1996 and 1997 are: 1996 1997 * Under age 65 $ 8,280 $ 8,640 * Age 65-69 $12,500 $13,500 After you retire, you may receive payments for work you did before you started getting Social Security benefits. Usually, those payments will not affect your Social Security benefit if we know they are compensation for work done before you retired. However, many times we don't know this unless you tell us. This factsheet describes some of the more common types of special payments, helps you to decide if you receive one, and tells you what steps to take if you do. What Qualifies As A Special Payment? If you worked for wages, income received after retirement counts as a special payment if the last thing you did to earn the payment was completed before you stopped working for your employer. Some special payments to employees include: bonuses, accumulated vacation or sick pay, severance pay, back pay, standby pay, sales commissions, payments on account of retirement, or deferred compensation reported on a W-2 form for one year that was earned in a previous year. These amounts MAY be shown on your W-2 in the box labeled "Nonqualified Plan." If you were self-employed, net income received AFTER THE FIRST YEAR YOU RETIRE counts as a special payment if you performed the services to earn the payment before you were entitled to receive Social Security benefits. "Services" are any regular work or other significant activity you do for your business. Some special payments to self-employed people include income derived by an owner of a business who does not perform significant services in that business, farm agricultural program payments, income from carryover crops, or royalties paid to a person over 65 for a copyright or patent created before age 65. If You Think You Received A Special Payment If you are a Social Security beneficiary whose total yearly earnings exceed the limit and these earnings include a special payment, you should contact Social Security. Tell us you think you received a special payment. If we agree, we will not count the amount of the special payment as part of your total earnings for the year. Some Special Payment Situations These examples show how some types of special payments are treated under Social Security rules. Example 1: Mr. De Silva retired at age 65 from his job at Crown Jewelry Company in November 1995 and began to receive Social Security benefits. In January 1996 Mr. De Silva received a check from his employer for $15,000 for vacation time he earned while he worked. Since this amount is over the earnings limit for 1996 ($12,500), Mr. De Silva should contact Social Security and explain that the payment is not earnings for work done in 1996, but vacation pay he accumulated before he retired. Social Security will consider the amount a special payment, and will not count it toward the earnings limit for 1996. Example 2: Ms. Reed wrote a book in 1986. In 1995 at age 65, she began to receive Social Security benefits. In 1996, she received $17,000 in royalties from her book. Since this amount is over the earnings limit for 1996 $12,500), Ms. Reed should contact Social Security to report that the amount she received was royalties, not a payment for work done in 1996. Since Ms. Reed did not perform any services in 1996 to earn the royalties, Social Security will consider them a special payment, and they will not count toward the earnings limit. Insurance Salespeople And Farmers Two specific occupational groups commonly receive earnings that qualify as special payments: * Insurance salespeople who receive renewal or repeat commissions * Farmers who receive income from carryover crops Insurance Salespeople Many insurance salespeople continue to receive commissions after the year they retire for policies they sold prior to retirement. The example below shows how this income is treated. Mr. Hirisk worked as an employee for Safety Net Insurance Company. In 1995 he retired at age 65 and began to collect Social Security benefits. In 1996 he received $8,000 in renewal commissions on life insurance policies he sold before retirement. In addition, he continued to work part time in 1996 as a self-employed contractor for another insurance company. He received $14,000 in net commissions from new policies he sold in 1996 working part time. Because his earnings include a special payment and exceed $12,500 (the earnings limit for 1996), he should contact Social Security. The $8,000 in commissions will not count toward the earnings limit for 1996, because Mr. Hirisk did the work to earn that amount before he retired. However, $14,000 will count as earnings for 1996 because Mr. Hirisk performed the services necessary for the sale of these policies after he began receiving Social Security benefits. Farmers Many farmers harvest and store crops in one year to be sold in another year. The following example shows how income received after retirement for carryover crops is treated. Ms. Barnes retired from full-time farming in October 1995 at age 65 and began to receive Social Security benefits that month. In 1996 she worked part time on her farm and netted $7,000. In addition, in 1996, she sold some grain she had harvested and stored before October 1995, netting $10,000. Since her total earnings were over $12,500 (the limit for 1996) and include a special payment, she should contact Social Security. The $10,000 will be considered a special payment and will not count as earnings for 1996. This is because Ms. Barnes did the work necessary to earn the $10,000 before she began to get Social Security benefits, and then received the $10,000 in a year after she became entitled to Social Security. For More Information Other publications that may help you are "How Work Affects Your Social Security Benefits" (Publication No. 05-10069) and "If You Are Self-Employed" (Publication No. 05-10022). You can get recorded information about Social Security coverage 24 hours a day, including weekends and holidays, by calling Social Security's toll-free number, 1-800-772-1213. You can speak to a service representative between the hours of 7 a.m. and 7 p.m. on business days. Our lines are busiest early in the week and early in the month so, if your business can wait, it's best to call at other times. Whenever you call, have your Social Security number handy. People who are deaf or hard of hearing may call our toll-free TTY number, 1-800-325-0778, between 7 a.m. and 7 p.m. on business days. You can also reach us on the Internet. Type http://www.ssa.gov to access Social Security information. The Social Security Administration treats all calls confidentially--whether they're made to our toll-free numbers or to one of our local offices. We also want to ensure that you receive accurate and courteous service. That is why we have a second Social Security representative monitor some incoming and outgoing telephone calls. ---------- Social Security Administration How Work Affects Your Benefits SSA Publication No. 05-10069 January 1997 ----------------------------------------------------------------- Introduction If you receive Social Security retirement or survivors benefits and you're still working, you can earn a substantial amount of money while receiving some benefits. However, your benefits will be reduced if you earn over certain limits. This leaflet explains how this works, what counts as "earnings," and how to report earnings to Social Security. It also explains a special rule that usually applies to the first year you start getting Social Security benefits. Note: A different set of rules applies to people receiving Social Security disability benefits or Supplemental Security Income (SSI) payments. They should report all earnings to Social Security. Also, a different set of rules applies to most work performed outside the United States. Contact Social Security if you are working (or plan to work) outside the U.S. What Are The 1997 Earnings Limits? If you are under 65, you can earn up to $8,640 with no reduction in your Social Security benefits. If you earn more than that, $1 in benefits is withheld for every $2 you earn over $8,640. If you are 65 through 69, you can earn up to $13,500 with no reduction in your Social Security benefits. If you earn more than that, $1 in benefits is withheld for every $3 you earn over $13,500. If you're 70 or older, the earnings limits no longer apply. Are You Better Off Keeping Your Earnings Under The Limits? Whether or not you want to work and how much you want to earn are your decisions. But you shouldn't necessarily keep your earnings under Social Security's limits because you think you'll lose too much money. These examples explain why: Although Mr. Green receives all his Social Security benefits while Ms. Gomez has $3,000 in benefits withheld, Ms. Gomez comes out substantially ahead in overall income because of her higher earnings. There's another way Ms. Gomez may come out ahead. When you work, you pay Social Security taxes. And because you pay these taxes, Social Security refigures your benefits to take into account your extra earnings. The higher your earnings, the more your refigured benefit might be. Because Ms. Gomez's earnings are higher, she will probably get a greater increase in her Social Security benefits than Mr. Green. Your Earnings And Your Benefits–– How Much Will You Get? If Your Monthly Social Security And You You Will Receive Yearly Benefits $400 $8,640 or less $4,800 600 600 $8,640 or less 15,000 7,200 4,020 800 800 $8,640 or less 15,000 9,600 6,420 If Your Monthly Social Security And You You Will Receive Yearly Benefits $400 $13,500 or less $4,800 600 600 $13,500 or less 7,200 5,033 800 800 $13,500 or less 20,000 9,600 7,433 What Income Counts ...And When Do We Count It? If you work for someone else, only your wages count toward Social Security's earnings limits. If you're self-employed, we count only your net earnings from self--employment. In either case, we do not count non--work income such as investment earnings, interest, pensions, annuities, capital gains, and other government benefits. If you work for wages, income counts when it is earned, not when it is paid. If you have income that you earned in one year but the payment was deferred to the following year, it should not be counted as earnings for the year you receive it. Some examples of deferred income include accumulated sick or vacation pay and bonuses. If you're self--employed, income counts when you receive it––not when you earn it––except if it is paid in a year after you become entitled to Social Security and was earned before you became entitled to Social Security. For example, if you start getting Social Security in June 1997 and you receive some money in February 1998 for work you did before June, it will not count against your 1998 earnings limit. However, if the money you receive in February 1998 was for work you did after June, it will count against your 1998 earnings limit. A Special Rule For The First Year You Retire Sometimes, people who retire in mid--year have already earned more than the yearly earnings limit before they retire. That's why there's a special rule that applies to earnings for one year, usually the first year of retirement. Under this rule, you can receive a full Social Security check for any whole month you are "retired," regardless of your yearly earnings. In 1997, a person is considered retired if monthly earnings are limited to $720 for people under 65 or $1,125 for people 65 through 69. For example, John Smith retires at age 62 on August 30, 1997. He will make $45,000 through August. He takes a part--time job beginning in September earning $500 per month. Although his earnings for the year substantially exceed the 1997 limit ($8,640), he will receive a Social Security check for September through December because his earnings in those months are under $720, the special "first year of retirement" monthly limit for people under age 65. If John earns more than $720 in any one of those months (September through December), he will not receive a benefit for the month(s) he goes over the limit. Beginning in 1998, only the yearly limits will apply to John because he will be beyond his first year of retirement. If you're self--employed, we also consider whether you perform substantial services in your business to help us decide if you are retired. One measure of your service is the amount of time you spend working. In general, if you work more than 45 hours a month in self--employment, you are not retired; if you work less than 15 hours a month, you are retired. Work between 15 and 45 hours a month may be considered substantial if you work in an occupation that requires a lot of skill or you are managing a sizeable business. For detailed information about how we figure the amount of time you spend in your business and whether your work is substantial, call or visit us. Reporting Changes In Your Earnings We calculated your benefit payments based on the earnings estimate you gave us when you applied for Social Security or your most recent estimate of earnings annual report. At any time during the year, if you see that your earnings will be different from what you had estimated, you should call us to revise your estimate. This will help us keep the amount of your Social Security benefits correct. If other family members get benefits on your Social Security record, the total family benefits may be affected by your earnings. This means we may withhold not only your benefits, but those payable to your family as well. But, if you get benefits as a family member, your earnings affect only your own benefits. If you need help in figuring your earnings, contact us at 1--800--772--1213. When you call, have your Social Security number handy.Social Security information also is available to users of the Internet. Type http://www.ssa.gov to access Social Security information on the Internet. ---------- Social Security Administration Retirement Benefits SSA Publication No. 05-10035 February 1997 ICN 457500 ----------------------------------------------------------------- Who Should Read This Booklet? If you are thinking about retiring, you should read this booklet. The decisions you make about your retirement will be some of the most important decisions you'll ever make. And because Social Security is part of the retirement plans of almost every worker in the United States, you will find information in this booklet to help you plan for those years. You'll find explanations of how to qualify for Social Security benefits, how your earnings and age affect your benefits, and how to choose your retirement date. You'll also find information about Social Security's future and where your Social Security tax dollars go. Your monthly benefits are only one part of your retirement. When you retire, your lifestyle will probably change. You may be faced with decisions about such things as planning additional leisure time or making a residence change. If you want help with other aspects of retirement, you may want to contact your local Area Agency on Aging. You'll find the number in your telephone directory. Please Note: This booklet provides a general overview of Social Security retirement benefits. The information it contains is not intended to cover all provisions of the law. For specific information about your case, contact Social Security. Although this booklet contains information about retirement benefits, there's more to Social Security than retirement. It's a comprehensive package of protection that also provides benefits to workers and their dependent family members if they become disabled or die. To learn more about the other benefits Social Security provides, call and ask for a copy of Social Security Understanding The Benefits (Publication No. 05-10024). Social Security's Future...And Yours! Many people wonder where their Social Security tax dollars go. Generally, out of every dollar you pay in Social Security taxes: ----------------------------------------------------------------- * 70 cents goes to a trust fund that pays monthly benefits to retirees and their families and to widows, widowers, and children of workers who have died; ----------------------------------------------------------------- * 19 cents goes to a trust fund that pays for the health care of all Medicare beneficiaries; and ----------------------------------------------------------------- * 11 cents goes to a trust fund that pays benefits to people with disabilities and their families. Your Social Security taxes also pay for administering Social Security. The administrative costs are paid from the trust funds described above and are less than one cent of every Social Security tax dollar collected. Money not used to pay benefits and administrative expenses is invested in U.S. government bonds, generally considered the safest of all investments. The government uses the money it has borrowed from Social Security—just as it uses money you may have invested in savings bonds—to pay for all the services and projects it provides for our citizens. And just as the government pays you interest on your bonds, so will it make good on its obligations to Social Security. You also need to know about Social Security's financial stability. Each year, Social Security's Board of Trustees reports on the financial status of the Social Security program. These reports are valuable tools for evaluating and ensuring the economic health of the Social Security system. The latest report indicates that the Social Security system, as currently structured, will be able to pay benefits well into the next century. This means Congress has the time it needs to make changes to safeguard the program's financial future. You can count on Social Security being there when you need it. What's Inside Part 1—About Your Retirement Benefits How Do You Qualify For Retirement Benefits? How Much Will Your Retirement Benefit Be? Full Retirement Age Early Retirement Delayed Retirement Choosing Your Retirement Date Retirement Benefits For Widow(er)s ----------------------------------------------------------------- Part 2—About Family Benefits Benefits For Family Members Spouse's Benefits Maximum Family Benefits Benefits For A Divorced Spouse ----------------------------------------------------------------- Part 3—What You Need To Know WhenYou're Eligible For Retirement Benefits How Do You Sign Up For Social Security? Right To Appeal If You Work And Get Social Security At The Same Time Your Benefits May Be Taxable Pensions From Work Not Covered By Social Security Leaving The United States A Word About Medicare ----------------------------------------------------------------- For More Information ----------------------------------------------------------------- Other Booklets Available ----------------------------------------------------------------- Part 1—About Your Retirement Benefits How Do You Qualify For Retirement Benefits? ----------------------------------------------------------------- When you work and pay Social Security taxes (called FICA on some pay stubs), you earn Social Security credits. Most people earn the maximum of four credits per year. The number of credits you need to get retirement benefits depends on your date of birth. If you were born in 1929 or later, you need 40 credits (10 years of work). People born before 1929 need fewer than 40 credits (39 credits if born in 1928; 38 credits if born in 1927; etc.). If you stop working before you have enough credits to qualify for benefits, your credits will remain on your Social Security record. If you return to work later on, you can add more credits so that you qualify. No retirement benefits can be paid until you have the required number of credits. If you're like most people, you will earn many more credits than you need to qualify for Social Security. These extra credits do not increase your Social Security benefit. However, the income you earn while working will increase your benefit, as you will learn in the next section. How Much Will Your Retirement Benefit Be? ----------------------------------------------------------------- Your benefit amount is based on your earnings averaged over most of your working career. Higher lifetime earnings result in higher benefits. If you have some years of no earnings or low earnings, your benefit amount may be lower than if you had worked steadily. Your benefit amount also is affected by your age at the time you start receiving benefits. If you start your retirement benefits at age 62 (the earliest possible retirement age), your benefit will be lower than if you waited until a later age. Here's An Important Point: Social Security will give you a personalized benefit estimate at your request. Call our toll-free telephone number, 1-800-772-1213, to ask for a Request for Earnings Benefit Estimate Statement We will send you a simple form to complete and return. When you return this form, we will mail back your complete earnings history along with estimates of your benefits for early retirement, full retirement, and age 70. We'll also give you an estimate of the disability benefits you could receive as well as the amount of benefits payable to your spouse and children due to your retirement, disability, or death. If you are age 60 or older, you can get an estimate of your retirement benefits by telephone. Social Security law provides for automatic cost-of-living increases. Once you start receiving benefits, the amount will go up automatically if the cost of living rises. Full Retirement Age ----------------------------------------------------------------- The usual retirement age for people retiring now is age 65. Social Security calls this "full retirement age,'' and the benefit amount that is payable is considered the full retirement benefit. Because of longer life expectancies, the full retirement age will be increased in gradual steps until it reaches age 67. This change starts in the year 2003, and it affects people born in 1938 and later. Look at the table on Page 5 to find your full retirement age. Early Retirement ----------------------------------------------------------------- You can start your Social Security benefits as early as age 62, but the benefit amount you receive will be less than your full retirement benefit. If you take early retirement, your benefits will be permanently reduced based on the number of months you will receive checks before you reach full retirement age. If your full retirement age is 65, the reduction for starting your Social Security at age 62 is about 20 percent; at age 63, it is about 13 percent; and at age 64, it is about 6 percent. ----------------------------------------------------------------- Age To Receive Full Social Security Benefits ----------------------------------------------------------------- +-----------------+---------------------+ Year Of Birth Full Retirement Age +-----------------+---------------------+ 1937 or earlier 65 +-----------------+---------------------+ 1938 65 and 2 months +-----------------+---------------------+ 1939 65 and 4 months +-----------------+---------------------+ 1949 65 and 6 months +-----------------+---------------------+ 1941 65 and 8 months +-----------------+---------------------+ 1942 65 and 10 months +-----------------+---------------------+ 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 +-----------------+---------------------+ ----------------------------------------------------------------- If your full retirement age is older than 65 (that is, you were born after 1937), you still will be able to take your retirement benefits at age 62, but the reduction in your benefit amount will be greater than it is for people retiring now. For example, John is retiring this year when he turns 62 and he will receive monthly benefits equal to about 80 percent of the benefit amount he would have received had he waited until age 65 to retire. His son, James, was born in 1962 and, based on the revised retirement age schedule, he would be eligible for full retirement benefits at age 67. If James takes early retirement benefits at age 62 like his father, his monthly check will be about 70 percent of the full benefit he would receive if he waited until age 67 to retire. As a general rule, early retirement will give you about the same total Social Security benefits over your lifetime, but in smaller amounts to take account of the longer period you will receive them. Some people stop working before they reach age 62. In that case, it's important to remember that during years with no earnings, you miss the opportunity to increase your benefit amount by replacing lower earnings years with higher earnings years. Here's An Important Point: Sometimes poor health forces people to retire early. If you are unable to continue working because of poor health, you should consider applying for Social Security disability benefits. The amount of the disability benefit is the same as a full, unreduced retirement benefit. For more information, call us to ask for a copy of the booklet Disability Benefits (Publication No. 05-10029). Delayed Retirement ----------------------------------------------------------------- Not everyone retires at full retirement age. You may decide to continue working full time beyond that time. In that case, you can increase your Social Security benefit in two ways: * Each additional year you work adds another year of earnings to your Social Security record. Higher lifetime earnings may result in higher benefits when you retire. * In addition, your benefit will be increased by a certain percentage if you delay retirement. These increases will be added in automatically from the time you reach your full retirement age until you start taking your benefits, or you reach age 70. The percentage varies depending on your year of birth. See the chart below for the increase that will apply to you. For example, if you were born in 1943 or later, we will add eight percent per year ( of one percent per month) to your benefit for each year you delay signing up for Social Security beyond your full retirement age. ----------------------------------------------------------------- Increases For Delayed Retirement ----------------------------------------------------------------- +---------------+-------------------------+ Year of Birth Yearly Rate of Increase +---------------+-------------------------+ 1917—1924 3% +---------------+-------------------------+ 1925—1926 3.5% +---------------+-------------------------+ 1927—1928 4% +---------------+-------------------------+ 1929—1930 4.5% +---------------+-------------------------+ 1931—1932 5% +---------------+-------------------------+ 1933—1934 5.5% +---------------+-------------------------+ 1935—1936 6% +---------------+-------------------------+ 1937—1938 6.5% +---------------+-------------------------+ 1939—1940 7% +---------------+-------------------------+ 1941—1942 7.5% +---------------+-------------------------+ 1943 or later 8% +---------------+-------------------------+ ----------------------------------------------------------------- Here's An Important Point: If you decide to delay your retirement, be sure to sign up for Medicare at age 65 . In some circumstances, medical insurance costs more if you delay applying for it. Choosing Your Retirement Date ----------------------------------------------------------------- If you plan to start your retirement benefits after age 62, it is a good idea to contact Social Security in advance to see which month is best to claim benefits. In some cases, your choice of a retirement month could mean additional benefits for you and your family. It may be to your advantage to have your Social Security benefits start in January, even if you don't plan to retire until later in the year. Depending on your earnings and your benefit amount, it may be possible for you to start collecting benefits even though you continue to work. Under current rules, many people can receive the most benefits possible with an application that is effective in January. If you are not working, or your annual earnings are under the earnings limits explained on Page 12, or you plan to start collecting your Social Security when you turn 62, you should apply for benefits three months before the date you want your benefits to start. Because the rules are complicated, we urge you to discuss your plans with a Social Security claims representative in the year before the year you plan to retire. Retirement Benefits For Widow(er)s ----------------------------------------------------------------- Widow(er)s can begin receiving benefits at age 60 or age 50 if disabled. If you are receiving widows or widowers (including divorced widows or widowers) benefits, you can switch to your own retirement benefits (assuming you're eligible and your retirement rate is higher than your widow(er)'s rate) as early as age 62. In many cases, a widow(er) can begin receiving one benefit at a reduced rate and then switch to the other benefit at an unreduced rate at age 65. The rules vary depending on the situation, so you should talk to a Social Security representative about the options available to you. Part 2—About Family Benefits Benefits For Family Members ----------------------------------------------------------------- If you're receiving retirement benefits, some members of your family also can receive benefits. Here's a list of those who can: * Your wife or husband age 62 or older; * Your wife or husband under age 62, if she or he is taking care of your child who is under age 16 or disabled; * Your former wife or husband age 62 or older (see "Benefits For A Divorced Spouse"); * Children up to age 18; * Children age 18-19, if they are full-time students through grade 12; * Children over age 18, if they are disabled. Spouse's Benefits ----------------------------------------------------------------- A spouse receives one-half of the retired worker's full benefit unless the spouse begins collecting benefits before age 65. In that case, the amount of the spouse's benefit is permanently reduced by a percentage based on the number of months before she or he reaches 65. For example, if your spouse begins collecting benefits at 64, the benefit amount would be about 46 percent of your full benefit. At age 63, it would be about 42 percent, and 37.5 percent at age 62. However, if your spouse is taking care of a child who is under age 16 or disabled and receiving Social Security benefits, your spouse gets full benefits, regardless of age. If you're eligible for both your own retirement benefits and for benefits as a spouse, we always pay your own benefit first. If your benefit as a spouse is higher than your retirement benefit, you'll get a combination of benefits equaling the higher spouse benefit. Here's an example: Mary Ann qualifies for a retirement benefit of $250 and a wife's benefit of $400. At age 65, she will receive her own $250 retirement benefit and we will add to this $150 from her wife's benefit, for a total of $400. If she takes her retirement benefit at any time before she turns 65, they will be reduced. Maximum Family Benefits ----------------------------------------------------------------- If you have children eligible for Social Security, each will receive up to one-half of your full benefit. But there is a limit to the amount of money that can be paid to a family. If the total benefits due your spouse and children exceed this limit, their benefits will be reduced proportionately. Your benefit will not be affected. Benefits For A Divorced Spouse ----------------------------------------------------------------- A divorced spouse can get benefits on a former husband's or wife's Social Security record if the marriage lasted at least 10 years. The divorced spouse must be 62 or older and unmarried. If the spouse has been divorced at least two years, he or she can get benefits, even if the worker is not retired. However, the worker must have enough credits to qualify for benefits and be age 62 or older. The amount of benefits a divorced spouse gets has no effect on the amount of benefits a current spouse can get. Part 3—What You Need To Know When You're Eligible For Retirement Benefits How Do You Sign Up For Social Security? ----------------------------------------------------------------- You can call our toll-free number, 1-800-772-1213 to apply for benefits or to make an appointment to visit any Social Security office to apply in person. Depending on your circumstances, you will need some or all of the documents listed below. But don't delay applying for benefits because you don't have all the information. If you don't have a document you need, we can help you get it. Information Needed * Your Social Security number; * Your birth certificate; * Your W--2 forms or self-employment tax return for last year; * Your military discharge papers if you had military service; * Your spouse's birth certificate and Social Security number if he or she is applying for benefits; * Children's birth certificates and Social Security numbers, if applying for children's benefits; * Proof of U.S. citizenship or lawful alien status if you (or a spouse or child is applying for benefits) were not born in the U.S.; and * The name of your bank and your account number so your benefits can be directly deposited into your account. You will need to submit original documents or copies certified by the issuing office. You can mail or bring them to Social Security. We will make photocopies and return your documents. Right To Appeal ----------------------------------------------------------------- If you disagree with a decision made on your claim, you can appeal it. The steps you can take are explained in the factsheet The Appeals Process (Publication No. 05-10041), which is available from Social Security. You have the right to be represented by an attorney or other qualified person of your choice. More information is in the factsheet Your Right To Representation (Publication No. 05-10075), which is also available from Social Security. If You Work And Get Social Security At The Same Time ----------------------------------------------------------------- You can continue to work and still get retirement benefits. Earnings in, or after, the month you reach age 70 won't affect your Social Security benefits. However, before age 70, your benefits will be reduced if your earnings exceed certain limits. * If you are under 65, $1 in benefits will be deducted for each $2 in earnings above the limit. * If you are 65 through 69, $1 in benefits will be deducted for each $3 in earnings above the limit. These limits increase each year as average wages increase. For the current amounts, contact Social Security to ask for the leaflet How Work Affects Your Benefits (Publication No. 05-10069). If other family members receive benefits on your Social Security record,the total family benefits will be affected by your earnings. This means we will offset not only your benefits, but those payable to your family as well. If a family member works, however, the family member's earnings affect only his or her benefits. If during the year, your earnings are higher or lower than you estimated, let us know as soon as possible so we can adjust your benefits. A Special Monthly Rule A special rule applies to your earnings for one year, usually your first year of retirement. Under this rule, you can receive a full Social Security check for any month you are "retired,'' regardless of your yearly earnings. Your earnings must be under a monthly limit. If you're self-employed, the services you perform in your business are taken into consideration as well. If you want more information on how earnings affect your retirement benefit, call us to ask for a copy of the leaflet How Work Affects Your Benefits (Publication No. 05-10069). This leaflet has the figures for the current annual and monthly earnings limits. Your Benefits May Be Taxable ----------------------------------------------------------------- About 20 percent of people who get Social Security have to pay taxes on their benefits. This provision affects only people who have substantial income in addition to their Social Security. At the end of each year, you will receive a Social Security Benefit Statement (Form SSA-1099) in the mail showing the amount of benefits you received. You can use this statement when you are completing your federal income tax return to find out if any of your benefits are subject to tax. For more information, call the Internal Revenue Service's toll-free telephone number, 1-800-829-3676, to ask for Publication 554, Tax Information for Older Americans, and Publication 915, Social Security Benefits and Equivalent Railroad Retirement Benefits. Pensions From Work Not Covered By Social Security ----------------------------------------------------------------- If you get a pension from work where you paid Social Security taxes, it will not affect your Social Security benefits. However, if you get a pension from work that was not covered by Social Security—for example, the federal civil service, some state or local government employment, or work in a foreign country—your Social Security benefit may be lowered or offset. For more information, call Social Security to ask for the factsheets Government Pension Offset —for government workers who may be eligible for Social Security benefits on the record of a husband or wife (Publication No. 05-10007) and A Pension From Work Not Covered By Social Security —for people who worked in another country or for government workers who also are eligible for their own Social Security benefits (Publication No. 05-10045). Leaving The United States ----------------------------------------------------------------- If you are a United States citizen, you can travel or live in most foreign countries without affecting your eligibility for Social Security benefits. However, there are a few countries—Cambodia, Cuba, North Korea, Vietnam, and many of the former U.S.S.R. republics (except Estonia, Latvia, Lithuania, and Russia)—where we cannot send Social Security checks. If you work outside the United States, different rules apply in determining if you can get your benefit checks. Most people who are neither U.S. residents nor U.S. citizens will have 25.5 percent of their benefits withheld for Federal income tax. For more information, call us to ask for a copy of the booklet Your Social Security Payments While You Are Outside the United States (Publication No. 05-10137). A Word About Medicare ----------------------------------------------------------------- Medicare is a health insurance plan for people who are 65 or older. People who are disabled or have permanent kidney failure can get Medicare at any age. Medicare has two parts—hospital insurance and medical insurance. Most people have both parts. Hospital insurance, sometimes called Part A, covers inpatient hospital care and certain follow-up care. You have already paid for it as part of your Social Security taxes while you were working. Medical insurance, sometimes called Part B, pays for physicians' services and some other services not covered by hospital insurance. Medical insurance is optional, and a premium is charged. If you're already getting Social Security benefits when you turn 65, your Medicare (Part A) starts automatically. If you're not getting Social Security, you should sign up for Medicare close to your 65th birthday, even if you aren't ready to retire. For more information, call us to ask for the booklet Medicare (Publication No. 05-10043). Help for Low-Income Medicare Beneficiaries If you have a low income and few resources, your state may pay your Medicare premiums and, in some cases, other "out-of-pocket" Medicare expenses such as deductibles and coinsurance. Only your state can decide if you qualify for help under this program. If you think you may qualify, contact your state or local medical assistance (Medicaid) agency, social service office, or welfare office. For more information, contact Social Security to request a copy of the leaflet Medicare Savings For Qualified Beneficiaries (HCFA Publication No. 02184). For More Information You can get more information 24 hours a day by calling Social Security's toll-free number, 1-800-772-1213 . You can call for an appointment or to speak to a service representative between the hours of 7 a.m. and 7 p.m. on business days. Our lines are busiest early in the week and early in the month so, if your business can wait, it's best to call at other times. Whenever you call, have your Social Security number handy. Recorded information and services are available 24 hours a day, including weekends and holidays. You can also reach us on the Internet. Type http://www.ssa.gov to access Social Security information. People who are deaf or hard of hearing may call our toll-free "TTY" number, 1-800-325-0778, between 7 a.m. and 7 p.m. on business days. The Social Security Administration treats all calls confidentially—whether they're made to our toll-free numbers or to one of our local offices. We also want to make sure that you receive accurate and courteous service. That's why we have a second Social Security representative monitor some incoming and outgoing telephone calls. Other Booklets Available Social Security has a number of publications that contain information about other Social Security programs. Contact Social Security to get a free copy of any of these publications. They include: * Social Security—Understanding The Benefits (Publication No. 05-10024)—Comprehensive explanation of all the Social Security programs. * Social Security—Disability Benefits (Publication No. 05-10029)—Explains Social Security disability benefits. * Medicare (Publication No. 05-10043)—Explains Medicare hospital insurance and medical insurance. * Social Security—Survivors Benefits (Publication No. 05-10084)—Explains Social Security survivors benefits. * Social Security—Supplemental Security Income (Publication No. 05-11000) — Explains this program which provides a basic income to people 65 or older, disabled, or blind who have limited income and resources. ---------- Social Security SSA Publication No. 05-10070 March 1997 (Destroy prior editions) +------------------------------+ ----------------------------------------------------------------- How Your Retirement Benefit Is Figured +---------------------+-------------+--------------+--------+----------+ As you make plans for your future, one of the questions you'll probably ask is, "How much will I get from Social Security?" There are several ways you can find out. Social Security can give you a free estimate of what your retirement benefit will be. You can obtain the request form by calling Social Security and asking for a Request for Earnings and Benefit Estimate Statement. If you have access to the Internet, you can obtain the request form, an online estimate, or calculate your own retirement benefit using the Internet program ANYPIA. These services are available at the address, http://www.ssa.gov. Even with an estimate, many people still wonder exactly how their benefit is figured. Social Security benefits are based on earnings averaged over most of a worker's lifetime. Your actual earnings are first adjusted or "indexed" to account for changes in average wages since the year the earnings were received. Then we calculate your average monthly indexed earnings during the 35 years in which you earned the most. We apply a formula to these earnings and arrive at your basic benefit, or "Primary Insurance Amount" (PIA). This is the amount you would receive at age 65. Factors That Can Raise or Lower Your Retirement Benefit The monthly benefit you receive from Social Security may not be the basic benefit. Your actual benefit may be higher or lower than that amount if any of the following is true: You receive benefits before age 65 You can begin to receive Social Security benefits at age 62, but at a reduced rate. Your benefit is reduced by five-ninths of one percent for each month you get benefits before age 65. This amounts to approximately a 20% reduction at age 62. The closer you are to age 65 when benefits start, the smaller the reduction. For example, the reduction is 13-1/3 percent at age 63 and 6-2/3 percent at age 64. You receive cost-of-living increases You are eligible for cost-of-living benefit increases starting with the year you become 62. This is true even if you don't get benefits until 65 or even 70. Cost-of-living increases are added to your benefit beginning with the year you reach 62 up to the year you start getting benefits. You delay your retirement past age 65 A person may continue working past age 65 and not begin to receive Social Security benefits. If you choose to do this, your benefit amount will be increased by a certain percent for every month that you are past age 65 but not receiving benefits. These increases are automatically added to your benefit until you reach age 70. You are a government worker with a pension If you also get or are eligible for a pension from work where you didn't pay Social Security taxes, usually a government job, a different formula is applied to your average monthly earnings. To find out how your benefit is figured, contact Social Security and ask for a copy of A Pension From Work Not Covered By Social Security (Publication No. 05-10045). Any Questions? You can get recorded information or a benefit estimate request form 24 hours a day, including weekends and holidays, by calling Social Security's toll-free number, 1-800-772-1213. You can speak to a service representative between the hours of 7 a.m. and 7 p.m. on business days. Whenever you call, have your Social Security number handy. People who are deaf or hard of hearing may call our toll-free "TTY" number, 1-800-325-0778, between 7 a.m. and 7 p.m. on business days. You can also reach us on the Internet. Type http://www.ssa.gov to access Social Security information. ------------------- Estimating Your Social Security Retirement Benefit This worksheet shows how to estimate the Social Security monthly retirement benefit you would be eligible for at age 62 if you were born in 1935. It also allows you to estimate what you would receive at age 65, excluding any cost-of-living adjustments for which you may be eligible. If you continue working until age 65, your additional earnings could increase your benefit amount. How To Estimate Your Benefit +---------------------+-------------+--------------+--------+----------+ Step 1: Enter your actual earnings in Column B, but not more than the amount shown in Column A. +---------------------+-------------+--------------+--------+----------+ Step 2: Multiply $___________ the amounts in Column B by the "index factors" in Column C, and enter the results in Column D. This gives you your indexed earnings, or the approximate value of your earnings in current dollars. +---------------------+-------------+--------------+--------+----------+ Step 3: Choose $___________ from Column D the 35 years with the highest amounts. Add these amounts. +---------------------+-------------+--------------+--------+----------+ Step 4: Divide the $___________ result from Step 3 by 420 (the number of months in 35 years). This will give you your average indexed monthly earnings. +---------------------+-------------+--------------+--------+----------+ Step 5: a. $___________ Multiply the first $455 in Step 4 by 90%. +---------------------+-------------+--------------+--------+----------+ b. $___________ Multiply any amount between $456 and $2,741 by 32%. +---------------------+-------------+--------------+--------+----------+ c. $___________ Multiply any amount over $2,741 by 15%. +---------------------+-------------+--------------+--------+----------+ Step 6: Add a, b, $___________ and c from Step 5. Round down to the whole dollar. This is your estimated monthly retirement benefit at age 65. +---------------------+-------------+--------------+--------+----------+ Step 7: Multiply $___________ the amount in Step 6 by 80%. This is your estimated monthly retirement benefit at age 62. +---------------------+-------------+--------------+--------+----------+ Year A. B. C. D. Maximum Actual Index Indexed Earnings Earnings Factor Earnings +---------------------+-------------+--------------+--------+----------+ 1951 3,600 $ 8.83 $ +---------------------+-------------+--------------+--------+----------+ 1952 3,600 $ 8.31 $ +---------------------+-------------+--------------+--------+----------+ 1953 3,600 $ 7.87 $ +---------------------+-------------+--------------+--------+----------+ 1954 3,600 $ 7.83 $ +---------------------+-------------+--------------+--------+----------+ 1955 4,200 $ 7.48 $ +---------------------+-------------+--------------+--------+----------+ 1956 4,200 $ 6.99 $ +---------------------+-------------+--------------+--------+----------+ 1957 4,200 $ 6.78 $ +---------------------+-------------+--------------+--------+----------+ 1958 4,200 $ 6.72 $ +---------------------+-------------+--------------+--------+----------+ 1959 4,800 $ 6.41 $ +---------------------+-------------+--------------+--------+----------+ 1960 4,800 $ 6.17 $ +---------------------+-------------+--------------+--------+----------+ 1961 4,800 $ 6.05 $ +---------------------+-------------+--------------+--------+----------+ 1962 4,800 $ 5.76 $ +---------------------+-------------+--------------+--------+----------+ 1963 4,800 $ 5.62 $ +---------------------+-------------+--------------+--------+----------+ 1964 4,800 $ 5.40 $ +---------------------+-------------+--------------+--------+----------+ 1965 4,800 $ 5.30 $ +---------------------+-------------+--------------+--------+----------+ 1966 6,600 $ 5.00 $ +---------------------+-------------+--------------+--------+----------+ 1967 6,600 $ 4.74 $ +---------------------+-------------+--------------+--------+----------+ 1968 7,800 $ 4.43 $ +---------------------+-------------+--------------+--------+----------+ 1969 7,800 $ 4.19 $ +---------------------+-------------+--------------+--------+----------+ 1970 7,800 $ 3.99 $ +---------------------+-------------+--------------+--------+----------+ 1971 7,800 $ 3.80 $ +---------------------+-------------+--------------+--------+----------+ 1972 9,000 $ 3.46 $ +---------------------+-------------+--------------+--------+----------+ 1973 10,800 $ 3.26 $ +---------------------+-------------+--------------+--------+----------+ 1974 13,200 $ 3.08 $ +---------------------+-------------+--------------+--------+----------+ 1975 14,100 $ 2.86 $ +---------------------+-------------+--------------+--------+----------+ 1976 15,300 $ 2.68 $ +---------------------+-------------+--------------+--------+----------+ 1977 16,500 $ 2.53 $ +---------------------+-------------+--------------+--------+----------+ 1978 17,700 $ 2.34 $ +---------------------+-------------+--------------+--------+----------+ 1979 22,900 $ 2.15 $ +---------------------+-------------+--------------+--------+----------+ 1980 25,900 $ 1.97 $ +---------------------+-------------+--------------+--------+----------+ 1981 29,700 $ 1.79 $ +---------------------+-------------+--------------+--------+----------+ 1982 32,400 $ 1.70 $ +---------------------+-------------+--------------+--------+----------+ 1983 35,700 $ 1.62 $ +---------------------+-------------+--------------+--------+----------+ 1984 37,800 $ 1.53 $ +---------------------+-------------+--------------+--------+----------+ 1985 39,600 $ 1.47 $ +---------------------+-------------+--------------+--------+----------+ 1986 42,000 $ 1.43 $ +---------------------+-------------+--------------+--------+----------+ 1987 43,800 $ 1.34 $ +---------------------+-------------+--------------+--------+----------+ 1988 45,000 $ 1.28 $ +---------------------+-------------+--------------+--------+----------+ 1989 48,000 $ 1.23 $ +---------------------+-------------+--------------+--------+----------+ 1990 51,300 $ 1.17 $ +---------------------+-------------+--------------+--------+----------+ 1991 53,400 $ 1.13 $ +---------------------+-------------+--------------+--------+----------+ 1992 55,500 $ 1.08 $ +---------------------+-------------+--------------+--------+----------+ 1993 57,600 $ 1.07 $ +---------------------+-------------+--------------+--------+----------+ 1994 60,600 $ 1.04 $ +---------------------+-------------+--------------+--------+----------+ 1995 61,200 $ 1.00 $ +---------------------+-------------+--------------+--------+----------+ 1996 62,700 $ 1.0