Authored by Sheri Lewis, a tax accountant in the Salt Lake office of Cook Martin Poulson, PC. Sheri joined the Cook Martin Poulson team in November 2011 after completing her Master of Accounting degree with a tax emphasis at the University of Utah.
Listed below are five basic questions that everyone should know about Social Security Benefits.
1. What is your Full Retirement Age (FRA)? Your FRA doesn’t mean age 65. It depends on when you were born.
* 1943-1954 Age 66
* 1955-1959 Age 66 + 2 months for every year after 1954
* 1960 & After Age 67
2. Does everyone receive Social Security Benefits? The answer is no. You have to work to earn the benefits. Once you qualify for benefits, your family can also receive benefits based on your earnings. To qualify for Social Security Benefits you must earn 40 credits.
* 1 credit $1200 in wages or self-employment income per quarter (based on 2014 figures)
* 4 credits Maximum earned per year
* 10 years Minimum requirement to qualify
3. Does the age you start receiving benefits affect how much you will receive? Yes, you can start receiving benefits before your FRA, at your FRA and after your FRA. Assuming your FRA is 67, the below table outlines benefits at various ages.
* 62 70% of potential benefits
* 67 (Full Retirement Age) 100% of potential benefits
* 70 132% of potential benefits
4. Does everyone receive the same amount of Social Security Benefits? No, the benefits are based on a percentage of your lifetime earnings. There is also a cap or maximum amount of benefits that can be received. The current cap is based on a maximum of $117,000 annual income, which results in annual benefits of $31,338. The amount of benefit you received is based on the following:
• A three part calculation and average of the best 35 years of your earnings
• Can increase based on cost of living adjustments (an average of 2.5% over the last 10 years)
• Can be reduced if you are still working or entitled to a government pension
• Up to 85% of your benefit may be subject to income tax
5. Is my spouse eligible for my benefit? Yes, individual earners can extend benefits to his or her spouse. How much each spouse earned will influence how and when to start receiving Social Security Benefits. See www.socialsecurity.gov for more detailed information.
Understanding how your Social Security Benefits work plays a vital role in planning for your retirement. It is not intended to replace your current earnings but should be a part in your overall strategy. Contact a CPA at Cook Martin Poulson for more information.