2019 Social Security Cheat Sheet

2019


Social Security Cheat Sheet



































































Building Financial Foundations

Fact Sheet






SOCIAL SECURITY

Fact Sheet





SOCIAL SECURITY


































































Source: 2018 SSA Fact Sheet. Social Security Administration.
https://www.ssa.gov/news/press/factsheets/colafacts2019.pdf
Last Accessed October 11, 2018.

2019 REVISED EDITION:
Social Security Cheat Sheet






Annual Trustees Financial Summary




Each year, the Social Security and Medicare Board of Trustees is required to release a

detailed report about the financial condition of each program. Here are some key
financial figures from the latest report. The full summary can be found
at:https://www.ssa.gov/oact/trsum/ (last accessed October 11, 2018).

Qualifying for Social Security Benefits




To become eligible for Social Security, you need a minimum of 6 Quarters of
Coverage (QC) and at least 1 QC each year after age 21. After reaching 40 QC’s,
you become eligible for individual retirement benefits based on your top 35 wage

adjusted earnings years. The QC increased from $1,320 to $1,360 for 2018, an
increase of 3%. In the last 20 years, the QC has increased over 74% from $780 in
2000. No more than 4 QC’s can be attained in each year, regardless of earnings.

Married and Divorced Spouses (married 10 consecutive years) are eligible for
spousal benefits, subject to certain criteria, even if they don’t meet qualifications
for individual benefits.












































Source: Quarter of Coverage. Social Security Administration.
https://www.ssa.gov/OACT/COLA/QC.html. Last Accessed October 11, 2018.

2019 REVISED EDITION:
Social Security Cheat Sheet






Calculating Your Monthly Benefit Amount




The formula is used by Social Security Administration to adjust prior year

earnings based on the Average Wage Index (AWI) to determine Average
Indexed Monthly Earnings (AIME). From AIME, 3 “Bend Points” are applied to
determine the Primary Insurance Amount (PIA), which is the basis for starting

Social Security benefit calculations. These bend points change each year
unless the AWI is flat or negative. For 2019, the formula starts with AIME and

applies 90% of the first $926, plus 32% of the next $4,657, plus 15% of any
additional amount, subject to the maximum taxable wages for each
contribution year. The amounts below provide estimates based on hypothetical

income amounts only and do not include calculations for future value or COLA.
Benefits may be reduced based on a number of factors, including filing age,
government pensions and actual work history.






Estimated Monthly Benefits Based on Filing Age & AIME





$50,000 $75,000 $100,000



Avg. Annual Income Avg. Annual Income Avg. Annual Income





IF AGE 62 IF AGE 62 IF AGE 62
$1,402/mo. $1,817/mo. $2,052/mo.




IF AGE 66 IF AGE 66 IF AGE 66
$1,870/mo. $2,423/mo. $2,736/mo.




IF AGE 70 IF AGE 70 IF AGE 70
$2,468/mo. $3,199/mo. $3,611/mo.

History of PIA Formula Bend Points














































































Source: Benefit Formula Bend Points. Social Security Administration.
https://www.ssa.gov/OACT/COLA/bendpoints.html. Last Accessed October 11, 2018.

2019 REVISED EDITION:
Social Security Cheat Sheet






Cost of Living Adjustments (COLA)




In 1972, Congress enacted the COLA provision, requiring a measure of
inflation to determine the annual increases in Social Security benefits.

Automatic COLA’s began in 1975. Currently, the measure used is the CPI-W,
which is calculated by the Bureau of Labor Statistics based on the Consumer
Price Index for Urban Wage Earners and Clerical Workers.


The COLA for 2019 is 2.8%, up from 2% in 2018. Someone who is collecting $2,000/

mo. will now receive $2,056/mo. This represents the largest single year increase

since 2012.
Average COLA Rates


Since 1975
3.72%






Last 20 Years
2.15%





Last 10 Years
1.77%




















Source: COLA Information for 2019. Social Security Administration.
https://www.ssa.gov/news/cola/. Last Accessed October 11, 2018.

2015 Bipartisan Budget Act Summary











Signed into law in November of 2015, the Bipartisan Budget Act of 2015 made the
most significant changes to Social Security in over 10 years. In an effort to fund
the government and close so-called “Social Security Loopholes”, the controversial

measure passed the House by a vote of 266 to 167 and the Senate by a vote of
64 to 35.



Summary of Important Changes:

• Suspended Debt Ceiling and Spending Caps Until 2017

• Transferred $150 Billion from the Social Security Retirement Trust
(OASI) to the Social Security Disability Trust (DI)

• Phased Out Popular Social Security Filing Strategies

• ”Voluntary Suspension” – Eliminated After 180 Days
• “Restricted Application” – Eliminated After 4 Years

• Additional Details on the Next Page



Retirement Income Starts With Social Security:

Social Security can be a confusing topic for retirees, but provides a significant

source of retirement income and you only get one chance to get it right.
Understanding all the available filing options and how the latest changes impact
your options is the first step towards choosing the right filing age. After all, Social

Security is funded with your tax dollars, so doesn’t it make sense to get the most
benefits possible?








Source: Congress Passes H.R. 1314, the Bipartisan Budget Act of 2015.
Social Security Administration.https://www.ssa.gov/OACT/COLA/QC.html.
Last Accessed October 11, 2018.

2019 REVISED EDITION:
Social Security Cheat Sheet






2015 Bipartisan Budget Act Changes




Elimination of the “Voluntary Suspension”

This strategy, commonly referred to as “File & Suspend”, was seen as a loophole

allowing higher income earning couples to receive additional benefits by
collecting spousal benefits without collecting individual benefits. As of April 30,
2016, voluntary suspension was eliminated for all new filers.


Changes to the “Restricted Application”

This strategy involves “electing” a spousal benefit and still allowing your

individual to continue to accrue delayed retirement credits. Qualifying married
and divorced filers that are eligible for an individual benefit and a spousal
benefit “restrict” filing to only the spousal benefit at Full Retirement Age (FRA)

until a maximum of age 70, while still accumulating 8% per year delayed
retirement credits for their individual benefit. As a result of the budget act, this
strategy is phased out based on current age. For filers who are age 62 or older

as of the end of 2015, the strategy will be available and remain unchanged. For
those turning 62 after January 1, 2016, the strategy will no longer be available.


Important Notes & Additional Information

As of the writing of this publication, these changes impact individual and spousal

benefits only, and do not include widow(er) benefits. The statements above
represent a summary of the changes and do not include all filers. Always confirm

the availability of filing strategies based on your age and specific situation prior to
making a filing decision.



*The article is not intended to be tax or legal advice. Clients should seek guidance from the
Social Security Administration regarding their particular situation. Social Security payout rates
can and will change at the sole discretion of the Social Security Administration. For more
information, please contact your local Social Security Administrative office, or visitwww.ssa.gov.

Calculating Social Security Taxes







Current Social Security taxes total 12.4%, with 6.2% paid by the employee and

employer through matching payroll taxes. The tax rate remains unchanged from
2018. If you are self employed, both portions are paid on “Schedule SE”. For 2019,

total earnings subject to Social Security taxes will increase from $128,400 to
$132,900. For the 2019 tax year, the maximum Social Security tax paid per
individual is $8,240, paid by both employee and employer. Here is a historical

comparison of maximum taxable earnings.

















2018 Max:
$128,400





2019 Max:
$132,900





















Source: Benefits Planner: Maximum Taxable Earnings. Social Security Administration.
https://www.ssa.gov/planners/maxtax.html. Last Accessed October, 2018.

2019 REVISED EDITION:
Social Security Cheat Sheet






Collecting Benefits While Still Working





If you are planning to work and collect Social Security benefits, it is important to
know the 2019 earnings limit that applies both before and during the year you
reach Full Retirement Age (FRA). Prior to FRA, If you earn over $17,640 (up from

$17,040), $1 in benefits will be deducted for every $2 in earnings. During the year
you reach FRA, the limit increases to $46,920 (up from $45,360) and $1 in benefits

is deducted for every $3 in earnings. The amount is calculated monthly and based
on individual earnings, even if you are married filing jointly. Earnings after you turn
FRA (Age 66-67) do not count against you. Earned income only includes earnings

from your job and not additional income such as pension payments, retirement
account distributions or interest income. Social Security taxes, income taxes and
additional penalties may also apply in addition to any assessed work penalty.










Example #1: Under FRA Example #2: Turning FRA

Income Taxes on Social Security Benefits










Social Security benefits are funded using current payroll taxes and then used
for income in retirement, similar to a company pension plan or annuity contract.
Starting in 1984, all current recipients are subject to income limitations, based

on modified adjusted gross income (MAGI), before benefits are subject to
federal income taxes. When collecting benefits, up to 85% of benefits may be

taxable based on your total MAGI. MAGI includes income from most sources,
including W-2 earnings, 1099 earnings, taxable distributions from traditional
retirement accounts (IRA/401k) and even some government bonds that are

typically nontaxable. Here are the current income limits and effective
percentage of benefits that become taxable.








































Source: Income Taxes on Social Security Benefits. Social Security Administration.
https://www.ssa.gov/policy/docs/issuepapers/ip2015-02.html.
Last Accessed October 11, 2018.

2019 REVISED EDITION:
Social Security Cheat Sheet






Benefit Reductions For Government Pensions




Government Pension Offset (GPO)

The Government Pension Offset can affect some or all of your spousal and

survivor benefits entitlement if you are collecting a government pension
based on earnings that were not subject to Social Security taxes. This offset

will reduce the amount of your benefit by 2/3 the amount of your pension. For
example, if you are a civil service employee and have a $600/mo. pension, the
reduction of spousal benefit will be $400/mo. There are exemptions for some

civil service or federal employees who paid Social Security taxes on pension
eligible wages.


To access the SSA.gov GPO Calculator, visit:
www.ssa.gov/planners/retire/gpo-calc.html




Windfall Elimination Provision (WEP)

The Windfall Elimination Provision can affect how much Social Security
retirement and/or disability benefit you receive based on the number of years

of “substantial earnings” you have on your individual record and whether or
not you had earnings that were not subject to Social Security taxes. The

amount of the reduction could be up to 50% of the first “Bend Point” based on
the number of years you paid into Social Security and could reduce your
benefit by as much as $463/mo. in 2019. To qualify for individual benefits,

even if reduced due to government pension(s), you still need at least 10
quarters of coverage (QC).


To access the SSA.gov WEP Calculator, visit:
www.ssa.gov/planners/retire/anyPiaWepjs04.html