FFA offers:
* A free appointment.
* Free presentations to groups about Socially Responsible Investing.
Please contact us for a free meeting with no obligation.
Financial Freedom Associates, LLC
2531 E Richards Place
Tucson, AZ 85716
Email: info@ffafinancial.com
Phone: (520) 325-0769
Newsletter
Social Security
Eligibility
Over 90% of U.S. workers are covered by Social Security and are eligible to receive both retirement and disability benefits.
Eligibility for Social Security benefits is determined based on a credit system. To earn one credit, a worker must earn $1,050 in wages or self-employment income. A worker can earn a maximum of 4 credits per year. To be eligible for Social Security retirement benefits a worker needs to have earned 40 credits (10 years of work). Earnings not subject to self-employment or FICA withholding do not count towards credits.
Benefit Amount
Monthly benefits received depends on: the level of earnings during a client’s working life, age the benefits start, and assumptions regarding inflation and average wage increases.
The worker’s average indexed monthly earnings is calculated based on the earnings for all of the years the worker was subject to FICA. The highest 35 years of earnings are indexed for inflation and averaged. The maximum to be considered for any given year is $106,800 (2009). The average is then multiplied by a reduced percentage to determine the benefit or Primary Insurance Amount (PIA)
Normal Retirement
If a worker retires at the normal (or full) retirement age, (s)he will receive the full PIA. The PIA is adjusted each year for changes in the Consumer Price Index. Normal retirement was 65 for years but is increasing. Currently, normal retirement age for those born after 1960 is 67 years old (but there is pressure to increase this age). For those before 1937, the full retirement age is 65. For those born between 1937 and 1960, the full retirement age born is between 65 and 67 years old.
Early Retirement
Retirement benefits can begin as early as age 62, no matter what a worker’s normal retirement age. Benefits are reduced by 5/9 of one percent for every month that a worker begins receiving benefits before full retirement age for the first 36 months. The benefits are reduced by 5/12 of one percent for every month (after the first 36 months) that a worker begins receiving benefits.
So a worker whose full retirement age is 65 who elects to begin benefits at age 62, will receive 80% of their PIA (36 x 5/9 = 20%) for the first 36 months and 85% of their PIA after the first 36 months (5/12 x 36 = 15%).
Delayed Retirement
Delaying retirement past a worker’s full retirement age will increase the benefit. For workers born in 1943 and after the increase is 8% per year. For workers born before 1943 the increase is less per year (6% if born in 1935 and 1936, 7% if born in 1939 and 1940).
Disability Benefit
Social Security provides workers (with at least 40 credits) with long-term disability coverage, although the definition of disability is narrow. Benefits are only available if the worker is unable to do work of any kind for wish (s)he is suited and the disability will last more than one year.
Family Benefit
A spouse who is age 62 or older may receive 50% of the retirement benefit of the employee who is covered by Social Security (whether or not the spouse had any Social Security earnings). The benefit is reduced by 25/36 of 1% for the first 36 months and 5/12 of 1% for each additional month by which the spouse receives benefits before the normal retirement age.
Beginning at age 62, a divorced spouse is entitled to 50% of a worker’s PIA when the marriage lasted for at least 10 years and the divorced spouse has not remarried.
Widows of Social Security participants may begin at age 60. The widow may switch to benefits calculated on their own earnings at full retirement age.
Children under 18 or who are disabled are entitled to half of the benefit paid to the covered parent. There is a maximum family benefit which is usually between 1.4 and 1.8 times the PIA.
Working After Retirement
For those who have reached full retirement age, no amount of earned income will reduce the Social Security benefit.
For workers under full retirement age, benefits will be reduced by $1 for every $2 by which earned income exceeds $14,160 (in 2009).
If a worker reaches full retirement age during the year, benefits will be reduced by $1 for every $3 that earnings exceed $37,680 for the months before full retirement age.
Taxation of Social Security Benefit
Currently, up to 85% of the benefits received under Social Security are subject to tax, depending on the other sources of income available to the worker.
Social Security On-line is at www.ssa.gov
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How Can We Serve You Better?
We welcome your calls and emails between our meetings, to answer questions and/or hear about changes in your life. We do offer a monthly market report—we would be glad to send you an email when it is uploaded to our website. We would also be glad to provide you with a monthly performance summary of your holdings. Please let us know if there is anything else you would be interested for us to provide.
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At this time of year I reflect on the past year as well as look at directions for the year to come. I was given a gift that said, “Be the change you wish to see in the world,” Mahatma Gandhi. That really helped me focus for the coming year. I have become aware of how much care-giving I have done rather than truly knowing everyone has their path and mine is to be present to others, not a caregiver. The movie, “The Soloist” also helped bring that home as well as Aman Motwane’s book, Yes, You Can Change the World.
So in my personal life, my desire is to be available, be present, to live in peace, love, and joy and to have an abundance of creative playful experiences.
And my desire for you is that your life be enriched in ways that bring you joy. Happy 2010!
Sylvia
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