Retirement Insurance Benefits: Difference between revisions
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{{Short description|U.S. old age insurance}} |
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'''Retirement Insurance Benefits''' (abbreviated '''RIB'''<ref>[http://www.ssa.gov/glossary.htm#R http://www.ssa.gov/glossary.htm#R]</ref>) or Old-age Insurance Benefits<ref>[http://www.ssa.gov/OP_Home/ssact/title02/0202.htm Social Security Act Title II § 202]</ref> are a form of [[social insurance]] payments made by the [[Social Security Administration]] paid based upon the attainment old age (62 or older). Benefit payments are made on the 3<sup>rd</sup> of the month, or the 2<sup>nd</sup>, 3<sup>rd</sup>, or 4<sup>th</sup> Wednesday of the month, based upon the date of birth and entitlement to other benefits. |
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{{Use mdy dates|date=November 2011}} |
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'''Retirement Insurance Benefits''' (abbreviated '''RIB'''<ref>[http://www.ssa.gov/glossary.htm#R http://www.ssa.gov/glossary.htm#R]</ref>) or old-age insurance benefits<ref name="Social Security Act Title II § 202">[http://www.ssa.gov/OP_Home/ssact/title02/0202.htm Social Security Act Title II § 202]</ref> are a form of [[social insurance]] payments made by the U.S. [[Social Security Administration]] paid based upon the attainment of old age (62 or older). Benefit payments are made on the 3rd of the month, or the 2nd, 3rd, or 4th Wednesday of the month, based upon the date of birth and entitlement to other benefits. |
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== |
==Legal authority== |
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RIB is authorized under Title II of the [[Social Security Act]].<ref name="Social Security Act Title II § 202"/> |
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==Entitlement factors== |
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RIB is authorized under Title II of the [[Social Security Act]]<ref>[http://www.ssa.gov/OP_Home/ssact/title02/0202.htm Social Security Act Title II § 202]</ref>. |
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Certain requirements must be met before a person becomes entitled to RIB. These requirements are based on both age and payments made into the Social Security System through payroll taxes. These are:<ref name="POMS RS 00201.001">[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300201001!opendocument POMS RS 00201.001]</ref> |
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*Be fully insured under the Social Security system |
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*Have obtained the age of 62 by the first of the month. |
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*Have either applied for the benefits ''or'' have been automatically converted from [[Disability Insurance Benefits]] at Full Retirement Age. |
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===Fully insured status=== |
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== Entitlement factors == |
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People attain fully insured status based upon their payments into the Social Security system through payroll taxes and the amount of time they have been working in jobs covered through the Social Security system. This is measured through quarters of coverage.<ref name="POMS RS 00301.105">"[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300301105 POMS RS 00301.105]". ''[[Social Security Administration]]''.</ref> |
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A person earns one quarter of coverage for each $1,410 of earned income in 2020. A person can earn up to four quarters of coverage per year. The amount to earn one quarter of coverage may change from year to year based on the national average wage index.{{efn| For years before 1978, a person received one quarter of coverage for each three-month period during which the person received at least $50 of wages. A self-employed person received four quarters of coverage for each year during which the person received at least $400 of self-employment income. Beginning in 1978, employers were required to report annual wages, rather than quarterly wages. As a result, the rules was changed, so that a person received one quarter of coverage for each $250 of wages or self-employment income earned by a person, up to a maximum of four quarters of coverage per year. For each year after 1978, the quarter of coverage amount is equal to the ratio of the national average wage index for the current to that of 1976, multiplied by the 1978 amount of $250. Amounts are rounded down to the nearest multiple of $10. The quarter of coverage amount for a particular year cannot be less than that of the previous year.<ref name= qofc>"[https://www.ssa.gov/OACT/COLA/QC.html Quarters of Coverage]". ''Social Security Administration''. Retrieved August 12, 2020.</ref> }} |
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Certain requirements must be met before a person becomes entitled to RIB. These requirements are based on both age and payments made into the Social Security System through payroll taxes. These are<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300201001!opendocument POMS RS 00201.001]</ref>: |
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** be fully insured under the Social Security system |
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** have obtained the age of 62 by the first of the month. |
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** have either applied for the benefits ''or'' have been automatically converted from [[Disability Insurance Benefits]] at Full Retirement Age. |
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In order to be considered fully insured, a person must generally have at least 40 quarters of coverage.{{efn| A person with at least 40 quarters of coverage is automatically considered fully insured. Alternatively, a person is considered fully insured if they have at least six quarters of coverage, and the person has at least one quarter of coverage for each calendar year after the later of 1950 or the year they attain the age of 21, and the earlier of the year in which they attain the age of 62 or the year of death. }} Fully insured status is used for other benefits besides RIB.<ref name="POMS RS 00301.105"/> |
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=== Fully insured status === |
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===Age 62=== |
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A person attains fully insured status based upon their payments into the Social Security system through payroll taxes and the amount of time they have been working in a job covered through the Social Security system. This is measured through [[Quarter credits (social security)|quarter credits]] (QCs)<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300301105 POMS RS 00301.105]</ref>. |
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The United States uses [[English common law]]; because of this a person obtains their age on the day before their birthday.<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300615015!opendocument POMS RS 00615.015]</ref> A person born on the first of the month is considered to obtain their age in the month prior and a person born on January 1 is considered to obtain their age in the prior year. In order for a person to be eligible for RIB in the month of their birth, they must have either been born on the first (where they obtained their age in the prior month) or the second of the month (where they obtained their age on the first of the month). |
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===Application=== |
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In order to be considered fully insured, a person must have at least 1 QC for each calendar year after the later of [[1950]] or the year they obtain the age of 21 and the earlier of the year which they obtain the age of 62 or the year of death. A person also must have at least six total QCs and will not be required to have more than 40 QCs to be fully insured. Fully insured status is used for other benefits besides RIB<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300301105 POMS RS 00301.105]</ref>. |
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Benefit payments vary, in part, based on when a person claims RIB, so not every person will desire to begin collecting their benefits at the same time. As a result, an application must be filed with the Social Security Administration before one can collect RIB. There are several ways to apply for the benefits: |
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* Calling SSA's national toll-free number (1-800-772-1213) or |
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=== Age 62 === |
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* Contacting a local Social Security office<ref>{{Cite web|url=https://secure.ssa.gov/ICON/main.jsp|title=Social Security Office Locator, SSA Office Locator Social Security Office Locator, Social Security}}</ref> or |
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* Submitting an online application<ref>{{Cite web|url=https://www.ssa.gov/benefits/forms/|title = Apply for Social Security Benefits | SSA}}</ref> |
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The [[United States]] uses [[English common law]]; because of this a person obtains their age on the day before their birthday<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300615015!opendocument POMS RS 00615.015]</ref>. A person born on the first of month is considered to obtain their age in the month prior and a person born on [January 1]<sup>st</sup> is considered to obtain their age in the prior year. In order for a person to be eligible for RIB in the month of their birth, they must have either been born on the first (where they obtained their age in the prior month) or the second of the month (where they obtained their age on the first of the month). |
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=== Application === |
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Benefit payments vary, in part, based on when a person claims RIB, so not every person will desire to begin collecting their benefits at the same time. As a result, an application must be filed with the Social Security Administration before one can collect RIB. There are several ways to apply for the benefits<ref>[http://www.ssa.gov/r&m2.htm http://www.ssa.gov/r&m2.htm]</ref>: |
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**applying online |
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**applying at your local social security office |
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**applying with the Immediate Claims Taking Unit at 1-800-772-1213 |
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**applying by mail |
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== Benefit amount == |
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==Benefit amount== |
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The amount of a RIB payment is based upon several factors, including: social security payroll taxes paid into the [[Social Security Trust Fund]], the age at which benefits are claimed, the current earned income of an individual, and military service. |
The amount of a RIB payment is based upon several factors, including: social security payroll taxes paid into the [[Social Security Trust Fund]], the age at which benefits are claimed, the current earned income of an individual, and military service. |
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===Primary insurance amount (PIA)=== |
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{{main|Primary Insurance Amount}} |
{{main|Primary Insurance Amount}} |
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The primary factor in deciding the amount of a RIB payment is the PIA which may be computed in different ways; the highest PIA is used on a person's record. Where a new start method and an old start method come up with the same PIA, it is considered that the new start method is used<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300605001 POMS RS 00605.001]</ref> |
The primary factor in deciding the amount of a RIB payment is the PIA which may be computed in different ways; the highest PIA is used on a person's record. Where a new start method and an old start method come up with the same PIA, it is considered that the new start method is used.<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300605001 POMS RS 00605.001]</ref> |
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===Benefits reduced for age=== |
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RIB benefits can be claimed in any month after the age of 62, subject to certain restrictions<ref |
RIB benefits can be claimed in any month after the age of 62, subject to certain restrictions.<ref name="POMS RS 00201.001"/> However, benefits may be reduced if they are claimed before that person's Full Retirement Age. For each month that the benefit is claimed before the month in which the person attains Full Retirement Age, the benefit is reduced by a certain amount of the PIA. For the first 36 months, the benefit is reduced by 5/9 of 1% of the PIA; for additional months it is reduced by 5/12 of 1%. The aggregate reduction for the first three years is 20%.<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300615101 POMS RS 00615.101]</ref> |
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''For the formulae, RF means Reduction Factor, the number of months RIB is claimed early'' |
''For the formulae, RF means Reduction Factor, the number of months RIB is claimed early'' |
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'''Formula for First 36 Months''': Benefit = PIA × (180 |
'''Formula for First 36 Months''': Benefit = PIA × (180 – RF) /180 |
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'''Formula for Additional Months''': Benefit = PIA × (228 |
'''Formula for Additional Months''': Benefit = PIA × (228 – RF) /240 |
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For example, for an individual whose Full Retirement Age is 66 and 10 months and who has a PIA of $1,000, the benefit, if claimed at 62, would be $708.<ref name="ssa.gov">https://www.ssa.gov/pubs/EN-05-10147.pdf {{Bare URL PDF|date=March 2022}}</ref> |
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=== Delayed Retirement Credits (DRCs) === |
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===Delayed retirement credits (DRCs)=== |
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DRCs are accrued in any month between the month in which a person attains Full Retirement Age and the month they attain the age of 70 and they postpone claiming RIB. A person who is already claiming RIB may also voluntarily decide to stop receiving their payments temporarily to accrue DRCs beginning at their Full Retirement Age<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300615690!opendocument POMS RS 00615.690]</ref>. |
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DRCs are accrued in any month between the month in which a person attains Full Retirement Age and the month they attain the age of 70 and they postpone claiming RIB. A person who is already claiming RIB may also voluntarily decide to stop receiving their payments temporarily to accrue DRCs beginning at their Full Retirement Age.<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300615690!opendocument POMS RS 00615.690]</ref> |
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The value of DRCs is 2/3% a month or 8 percent per year for postponement of claiming RIB. For example, if the person's full retirement age is 66 and 10 months and the PIA is $1,000, the benefit if claimed at 66 and 10 months would be $1,000 but would be $1,253 (plus any cost of living adjustment) if claimed at age 70.<ref name="ssa.gov"/> |
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The value of DRCs varies based on the date of birth of an individual, being worth 1/12 % a month for those born before [[January 2]], [[1917]] and 2/3 % a month for those born after [[January 1]], [[1943]]<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300615692!opendocument POMS RS 00615.692]</ref>. ([https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300615692!opendocument See SSA's chart]) |
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===Earnings tests=== |
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An earnings test has been part of the calculation of retirement benefits since the Social Security Act was signed in 1935.<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302501001!opendocument POMS RS 02501.001]</ref> There are two earnings tests applied to beneficiaries who are under Full Retirement Age, the Annual Earnings Test (AET) and Monthly Earnings Test (MET). The [[Senior Citizen's Freedom to Work Act of 2000]], signed into law April 7, 2000, eliminated the use of these tests for beneficiaries who have attained their Full Retirement Age.<ref>{{Cite web|url=http://www.ssa.gov/legislation/legis_bulletin_040700.html|title=The President Signs the "Senior Citizens' Freedom to Work Act of 2000"}}</ref> |
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====Annual earnings test==== |
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An earnings test has been part of the calculation of retirement benefits since the Social Security Act was signed in [[1935]]<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302501001!opendocument POMS RS 02501.001]</ref>. There are two earnings tests applied to beneficiaries who are under Full Retirement Age, the Annual Earnings Test (AET) and Monthly Earnings Test (MET). The [[Senior Citizen's Right to Work Act of 2000]], signed into law [[April 7]], [[2000]], eliminated the use of these tests for beneficiaries who have attained their Full Retirement Age<ref>[http://www.ssa.gov/legislation/legis_bulletin_040700.html http://www.ssa.gov/legislation/legis_bulletin_040700.html]</ref>. |
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The AET is used as the primary earnings test for RIB. The test applies only to earned income and has a two tier system in calculating deductions. The first tier, for those who are not reaching Full Retirement Age in the current year, reduces the benefits for the year by $1 for every full $2 the beneficiary earns over the annual exempt amount. The second tier, for those who are reaching their full retirement age, reduces the benefits for the year by $1 for every full $3 the beneficiary earns over the second tier annual exempt amount.<ref name="POMS RS 02501.021">[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302501021!opendocument POMS RS 02501.021]</ref> The first tier annual exempt amount is $18,960 and the second tier annual exempt amount is $50,520 for the year 2021.<ref>{{Cite web|url=https://www.ssa.gov/oact/cola/rtea.html|title=Exempt Amounts Under the Earnings Test}}</ref> When possible, all benefits deducted are deducted at the beginning of the year before any benefits are paid.<ref name="ReferenceA">https://www.ssa.gov/pubs/EN-05-10069.pdf {{Bare URL PDF|date=March 2022}}</ref> |
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The earnings test does not reduce lifetime Social Security benefits, on average.<ref name="ssa.gov"/> This is because any benefits lost to the earnings test lead to increased monthly benefit amounts when an individual reaches the full retirement age. For example, if an individual claims benefits at 62 in 2021 and receives $920 a month, but then returns to work for a year and has 12 months of benefits withheld, SSA would recompute the benefit at the person's full retirement age and pay $985 a month (in today's dollars{{when|date=July 2022}}) going forward.<ref name="ReferenceA"/> Thus, the earnings test shifts Social Security benefits from a time when a person is working to a time when they are more likely to be retired. |
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==== AET ==== |
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====Monthly earnings test==== |
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The AET is used as the primary earnings test for RIB. The test applies only to earned income and has a two tier system in calculating deductions. The first tier, for those who are not reaching Full Retirement Age in the current year, reduces the benefits for the year by $1 for every full $2 the beneficiary earns over the annual exempt amount. The second tier, for those who are reaching their full retirement age, reduces the benefits for the year by $1 for every full $3 the beneficiary earns over the second tier annual exempt amount<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302501021!opendocument POMS RS 02501.021]</ref>. The first tier annual exempt amount is $13,560 and the second tier annual exempt amount is $36,120 for the year [[2008]]<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302501025#d POMS RS 02501.025]</ref>. When possible, all benefits deducted are deducted at the beginning of the year before any benefits are paid<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302501095!opendocument POMS RS 02501.095]</ref>. |
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The MET can be used only in certain years, under certain conditions. In order for the MET to be applied to any given year, that year must first be considered a grace year,<ref name="POMS RS 02501.021"/> which requires that it either be the first year in which the beneficiary is entitled to benefits under Title II of the Social Security Act, during a year in which there was at least one month in which the beneficiary was not entitled to Title II benefits, or a year in which the beneficiaries entitlement to Title II benefits was terminated for reasons other than death. The grace year must also include at least one non-service month, which is any month in which the beneficiary neither earns wages over the monthly exempt amount nor performs substantial services in self-employment.<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302501030 POMS RS 02501.030]</ref> Services are considered substantial in self-employment if they consist of over 45 hours in a single month or 15 hours if it is a "highly skilled occupation."<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302505065 POMS RS 02505.065]</ref> |
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The monthly exempt amount is 1/12 of the yearly exempt amount for that year. For first tier beneficiaries, the monthly exempt amount is $1,130 and $3,010 for second tier beneficiaries for 2008.<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302501025!opendocument POMS RS 02501.025]</ref> |
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==== MET ==== |
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The MET can be used only in certain years, under certain conditions. In order for the MET to be applied to any given year, that year must first be considered a grace year<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302501021!opendocument POMS RS 02501.021]</ref>, which requires that it either be the first year in which the beneficiary is entitled to benefits under Title II of the Social Security Act, during a year in which there was at least one month in which the beneficiary was not entitled to Title II benefits, or a year in which the beneficiaries entitlement to Title II benefits was terminated for reasons other than death. The grace year must also include at least one non-service month, which is any month in which the beneficiary neither earns wages over the monthly exempt amount nor performs substantial services in self-employment<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302501030 POMS RS 02501.030]</ref>. Services are considered substantial in self-employment if they consist of over 45 hours in a single month or 15 hours if it is a "highly skilled occupation<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302505065 POMS RS 02505.065]</ref>." |
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The monthly exempt amount is 1/12 of the yearly exempt amount for that year. For first tier beneficiaries, the monthly exempt amount is $1,130 and $3,010 for second tier beneficiaries for 2008<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0302501025!opendocument POMS RS 02501.025]</ref>. |
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The MET is helpful for beneficiaries who retire in the middle of the year and who would be penalized for earlier earnings under the AET. |
The MET is helpful for beneficiaries who retire in the middle of the year and who would be penalized for earlier earnings under the AET. |
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===Windfall elimination provision (WEP)=== |
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{{main|Windfall Elimination Provision}} |
{{main|Windfall Elimination Provision}} |
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The Social Security Amendments of |
The Social Security Amendments of 1983 (Public Law 98-21) created the WEP. Beneficiaries who have been employed in work that does not pay into the Social Security Trust Fund and who receive a pension from that employment based upon earnings which were not covered by Social Security may see their benefits partially offset by the WEP. The WEP applies once the beneficiary is both entitled to RIB and is entitled to the pension or meets all the requirements except for stopping work or filing an application.<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300605360!opendocument POMS RS 00605.360]</ref> |
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There is a possibility that with enough [[Years of |
There is a possibility that with enough [[Years of coverage (social security)|years of coverage (YOC)]] that the WEP may be either reduced or waived. Anyone with 30 or more YOCs is exempt from the WEP. Beneficiaries with between 21 and 29 YOCs will have the effect of the WEP reduced.<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300605362!opendocument POMS RS 00605.362]</ref> |
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The WEP may reduce the benefit in various ways, taking various rules and computation methods into account (see main article). The WEP was |
The WEP may reduce the benefit in various ways, taking various rules and computation methods into account (see main article). The WEP was developed as the result of the progressive method in which the PIA is computed. Since those with less earnings on the record receive a comparatively larger percentage of their average income, under normal computations a beneficiary who paid in little to the Social Security system and who is drawing a separate pension may have what is perceived as an unfair advantage in their benefits. |
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==Full retirement age== |
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Originally, all RIB beneficiaries reached their Full Retirement Age at the age of 65. Changes in the Full Retirement Age have been enacted, based upon the birthdate of the beneficiary as follows:<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300615003 POMS RS 00615.003]</ref> |
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*Prior to January 2, 1938: 65 years |
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*January 2, 1938 – January 1, 1939: 65 years and 2 months |
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*January 2, 1939 – January 1, 1940: 65 years and 4 months |
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*January 2, 1940 – January 1, 1941: 65 years and 6 months |
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*January 2, 1941 – January 1, 1942: 65 years and 8 months |
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*January 2, 1942 – January 1, 1943: 65 years and 10 months |
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*January 2, 1943 – January 1, 1955: 66 years |
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*January 2, 1955 – January 1, 1956: 66 years and 2 months |
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*January 2, 1956 – January 1, 1957: 66 years and 4 months |
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*January 2, 1957 – January 1, 1958: 66 years and 6 months |
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*January 2, 1958 – January 1, 1959: 66 years and 8 months |
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*January 2, 1959 – January 1, 1960: 66 years and 10 months |
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*After January 1, 1960: 67 years |
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==Time of payment== |
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Originally, all RIB beneficiaries reached their Full Retirement Age at the age of 65. Changes in the Full Retirement Age have been enacted, based upon the birthdate of the beneficiary as follows<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300615003 POMS RS 00615.003]</ref>: |
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RIB payments, like all benefits paid under Title II of the Social Security Act, are generally paid on one of the following days depending on the beneficiary's payment cycle:<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0202401001!opendocument POMS GN 02401.001]</ref> |
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**Prior to 1/2/[[1938]] - 65 years |
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*Cycle 1: 3rd day of the month |
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**1/2/1938 through 1/1/[[1939]] - 65 years and 2 months |
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*Cycle 2: 2nd Wednesday of the month |
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**1/2/1939 through 1/1/[[1940]] - 65 years and 4 months |
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*Cycle 3: 3rd Wednesday of the month |
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**1/2/1940 through 1/1/[[1941]] - 65 years and 6 months |
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*Cycle 4: 4th Wednesday of the month |
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**1/2/1941 through 1/1/[[1942]] - 65 years and 8 months |
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**1/2/1942 through 1/1/[[1943]] - 65 years and 10 months |
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**1/2/1943 through 1/1/[[1955]] - 66 years |
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**1/2/1955 through 1/1/[[1956]] - 66 years and 2 months |
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**1/2/1956 through 1/1/[[1957]] - 66 years and 4 months |
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**1/2/1957 through 1/1/[[1958]] - 66 years and 6 months |
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**1/2/1958 through 1/1/[[1959]] - 66 years and 8 months |
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**1/2/1959 through 1/1/[[1960]] - 66 years and 10 months |
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**After 1/1/1960 - 67 years |
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For Cycle 1 beneficiaries, payment is moved to the preceding Friday if the 3rd day of the month falls on Saturday or Sunday. Similarly, if a payment date falls on a federal holiday—which can only happen for Cycle 2 beneficiaries on Veterans Day and Cycle 4 beneficiaries on Christmas—payment is moved to the preceding day. |
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== Time of payment == |
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Cycling the benefits onto four different payment days began in 1997 as the result of unequal workloads in the beginning of the month which made it difficult for all beneficiaries to have easy access to the Administration. At this time, over 50 million checks were issued by the Administration within the first three days of the month with an expectation that the workload would be over 70 million within the first three days by 2020 with the [[baby boomers]] retired. |
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RIB payments, like all benefits paid under Title II of the Social Security Act, are generally paid on one of the following days depending on the beneficiary's payment cycle<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0202401001!opendocument POMS GN 02401.001]</ref>: |
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**Cycle 1: 3<sup>rd</sup> day of the month |
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**Cycle 2: 2<sup>nd</sup> Wednesday of the month |
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**Cycle 3: 3<sup>rd</sup> Wednesday of the month |
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**Cycle 4: 4<sup>th</sup> Wednesday of the month |
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Beneficiaries who are already receiving benefits on the 3rd of the month continue receiving them on that date, unless they volunteer for cycling. New beneficiaries who were born between the 1st and 10th of the month are in Payment Cycle 2; those born between the 11th and 20th are in Payment Cycle 3; and those born later in the month are in Payment Cycle 4. However, certain individuals will still be placed into Payment Cycle 1:<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0202407005 POMS GN 02407.005]</ref> |
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Cycling the benefits onto four different payment days began in [[1997]] as the result of unequal workloads in the beginning of the month which made it difficult for all beneficiaries to have easy access to the Administration. At this time, over 50 million checks were issued by the Administration within the first three days of the month with an expectation that the workload would be over 70 million within the first three days by [[2020]] with the [[baby boomers]] retired. |
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*Beneficiaries who receive [[Supplemental Security Income]] (SSI) |
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*Beneficiaries whose income is [[Supplemental Security Income#Deeming income|deemed]], in part, to an SSI recipient |
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Beneficiaries who are already receiving benefits on the 3<sup>rd</sup> of the month continue receiving them on that date, unless they volunteer for cycling. New beneficiaries who were born between the 1<sup>st</sup> and 10<sup>th</sup> of the month are in Payment Cycle 2; those born between the 11<sup>th</sup> and 20<sup>th</sup> are in Payment Cycle 3; and those born later in the month are in Payment Cycle 4. However, certain individuals will still be placed into Payment Cycle 1<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0202407005 POMS GN 02407.005]</ref>: |
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*Beneficiaries for whom the State pays their [[Medicare (United States)|Medicare]] premiums through the Qualified Medicare Beneficiaries program |
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**beneficiaries who receive [[Supplemental Security Income]] (SSI) |
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*Beneficiaries who become entitled on a new record and who were receiving benefits on the 3rd of the month on another record, without a break in entitlement |
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**beneficiaries whose income is [[Supplemental Security Income#Deeming Income|deemed]], in part, to a SSI recipient |
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*Beneficiaries who receive any payments from the [[Railroad Retirement Board]], and |
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**beneficiaries for whom the State pays their [[Medicare]] premiums through the Qualified Medicare Beneficiaries program |
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*Beneficiaries whose checks are garnished by court-ordered child support, alimony, or tax levy |
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**beneficiaries who become entitled on a new record and who were receiving benefits on the 3<sup>rd</sup> of the month on another record, without a break in entitlement |
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**beneficiaries who receive any payments from the [[Railroad Retirement Board]], and |
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**beneficiaries whose checks are garnished by court-ordered child support, alimony, or tax levy |
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Title II payments a beneficiary is entitled to for any given month will be paid in the following month. (ex. if a beneficiary is entitled to a payment in August, they will receive that payment in September) |
Title II payments a beneficiary is entitled to for any given month will be paid in the following month. (ex. if a beneficiary is entitled to a payment in August, they will receive that payment in September) |
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== |
==Termination of benefits== |
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The last month of entitlement to RIB is the month before the month in which the beneficiary dies.<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300201002!opendocument POMS RS 00201.002]</ref> |
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==See also== |
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The last month of entitlement to RIB is the month before the month in which the beneficiary dies<ref>[https://s044a90.ssa.gov/apps10/poms.nsf/lnx/0300201002!opendocument POMS RS 00201.002]</ref>. |
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*[[Disability Insurance Benefits]] |
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*[[Social Security Administration]] |
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*[[Social Security (United States)]] |
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*[[Supplemental Security Income]] |
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*[[The Peoples Plan - Social Security]] |
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== |
==Notes== |
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{{notelist}} |
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==References== |
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{{reflist|2}} |
{{reflist|2}} |
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== |
==Sources== |
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*''Social Security Online''. Social Security Administration. [http://www.ssa.gov www.ssa.gov]. |
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''Social Security |
*''Social Security Program Operations Manual System''. Social Security Administration. [https://web.archive.org/web/20070610231614/https://s044a90.ssa.gov/apps10/poms.nsf/partlist!OpenView https://web.archive.org/web/20070610231614/https://s044a90.ssa.gov/apps10/poms.nsf/partlist!OpenView]. |
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''Social Security Program Operations Manual System''. Social Security Administration. [https://s044a90.ssa.gov/apps10/poms.nsf/partlist!OpenView https://s044a90.ssa.gov/apps10/poms.nsf/partlist!OpenView]. |
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== See also == |
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*[[Children's Benefits]] |
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*[[Disability Insurance Benefits]] |
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*[[Spouse's Benefits]] |
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*[[Social Security Administration]] |
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*[[Social Security (United States)]] |
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*[[Supplemental Security Income]] |
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*[[Widow's and Widower's Benefits]] |
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== |
==External links== |
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*[http://www.ssa.gov Social Security Administration website] |
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*[https://secure.ssa.gov/apps6z/ISBA/main.html Apply for RIB Online] |
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{{ssusa}} |
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* [http://www.ssa.gov Social Security Administration website] |
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* [https://secure.ssa.gov/apps6z/ISBA/main.html Apply for RIB Online] |
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[[Category: |
[[Category:Social security in the United States]] |
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[[Category: |
[[Category:Federal assistance in the United States]] |
Latest revision as of 23:43, 21 December 2023
Retirement Insurance Benefits (abbreviated RIB[1]) or old-age insurance benefits[2] are a form of social insurance payments made by the U.S. Social Security Administration paid based upon the attainment of old age (62 or older). Benefit payments are made on the 3rd of the month, or the 2nd, 3rd, or 4th Wednesday of the month, based upon the date of birth and entitlement to other benefits.
Legal authority
[edit]RIB is authorized under Title II of the Social Security Act.[2]
Entitlement factors
[edit]Certain requirements must be met before a person becomes entitled to RIB. These requirements are based on both age and payments made into the Social Security System through payroll taxes. These are:[3]
- Be fully insured under the Social Security system
- Have obtained the age of 62 by the first of the month.
- Have either applied for the benefits or have been automatically converted from Disability Insurance Benefits at Full Retirement Age.
Fully insured status
[edit]People attain fully insured status based upon their payments into the Social Security system through payroll taxes and the amount of time they have been working in jobs covered through the Social Security system. This is measured through quarters of coverage.[4]
A person earns one quarter of coverage for each $1,410 of earned income in 2020. A person can earn up to four quarters of coverage per year. The amount to earn one quarter of coverage may change from year to year based on the national average wage index.[a]
In order to be considered fully insured, a person must generally have at least 40 quarters of coverage.[b] Fully insured status is used for other benefits besides RIB.[4]
Age 62
[edit]The United States uses English common law; because of this a person obtains their age on the day before their birthday.[6] A person born on the first of the month is considered to obtain their age in the month prior and a person born on January 1 is considered to obtain their age in the prior year. In order for a person to be eligible for RIB in the month of their birth, they must have either been born on the first (where they obtained their age in the prior month) or the second of the month (where they obtained their age on the first of the month).
Application
[edit]Benefit payments vary, in part, based on when a person claims RIB, so not every person will desire to begin collecting their benefits at the same time. As a result, an application must be filed with the Social Security Administration before one can collect RIB. There are several ways to apply for the benefits:
- Calling SSA's national toll-free number (1-800-772-1213) or
- Contacting a local Social Security office[7] or
- Submitting an online application[8]
Benefit amount
[edit]The amount of a RIB payment is based upon several factors, including: social security payroll taxes paid into the Social Security Trust Fund, the age at which benefits are claimed, the current earned income of an individual, and military service.
Primary insurance amount (PIA)
[edit]The primary factor in deciding the amount of a RIB payment is the PIA which may be computed in different ways; the highest PIA is used on a person's record. Where a new start method and an old start method come up with the same PIA, it is considered that the new start method is used.[9]
Benefits reduced for age
[edit]RIB benefits can be claimed in any month after the age of 62, subject to certain restrictions.[3] However, benefits may be reduced if they are claimed before that person's Full Retirement Age. For each month that the benefit is claimed before the month in which the person attains Full Retirement Age, the benefit is reduced by a certain amount of the PIA. For the first 36 months, the benefit is reduced by 5/9 of 1% of the PIA; for additional months it is reduced by 5/12 of 1%. The aggregate reduction for the first three years is 20%.[10]
For the formulae, RF means Reduction Factor, the number of months RIB is claimed early
Formula for First 36 Months: Benefit = PIA × (180 – RF) /180
Formula for Additional Months: Benefit = PIA × (228 – RF) /240
For example, for an individual whose Full Retirement Age is 66 and 10 months and who has a PIA of $1,000, the benefit, if claimed at 62, would be $708.[11]
Delayed retirement credits (DRCs)
[edit]DRCs are accrued in any month between the month in which a person attains Full Retirement Age and the month they attain the age of 70 and they postpone claiming RIB. A person who is already claiming RIB may also voluntarily decide to stop receiving their payments temporarily to accrue DRCs beginning at their Full Retirement Age.[12]
The value of DRCs is 2/3% a month or 8 percent per year for postponement of claiming RIB. For example, if the person's full retirement age is 66 and 10 months and the PIA is $1,000, the benefit if claimed at 66 and 10 months would be $1,000 but would be $1,253 (plus any cost of living adjustment) if claimed at age 70.[11]
Earnings tests
[edit]An earnings test has been part of the calculation of retirement benefits since the Social Security Act was signed in 1935.[13] There are two earnings tests applied to beneficiaries who are under Full Retirement Age, the Annual Earnings Test (AET) and Monthly Earnings Test (MET). The Senior Citizen's Freedom to Work Act of 2000, signed into law April 7, 2000, eliminated the use of these tests for beneficiaries who have attained their Full Retirement Age.[14]
Annual earnings test
[edit]The AET is used as the primary earnings test for RIB. The test applies only to earned income and has a two tier system in calculating deductions. The first tier, for those who are not reaching Full Retirement Age in the current year, reduces the benefits for the year by $1 for every full $2 the beneficiary earns over the annual exempt amount. The second tier, for those who are reaching their full retirement age, reduces the benefits for the year by $1 for every full $3 the beneficiary earns over the second tier annual exempt amount.[15] The first tier annual exempt amount is $18,960 and the second tier annual exempt amount is $50,520 for the year 2021.[16] When possible, all benefits deducted are deducted at the beginning of the year before any benefits are paid.[17]
The earnings test does not reduce lifetime Social Security benefits, on average.[11] This is because any benefits lost to the earnings test lead to increased monthly benefit amounts when an individual reaches the full retirement age. For example, if an individual claims benefits at 62 in 2021 and receives $920 a month, but then returns to work for a year and has 12 months of benefits withheld, SSA would recompute the benefit at the person's full retirement age and pay $985 a month (in today's dollars[when?]) going forward.[17] Thus, the earnings test shifts Social Security benefits from a time when a person is working to a time when they are more likely to be retired.
Monthly earnings test
[edit]The MET can be used only in certain years, under certain conditions. In order for the MET to be applied to any given year, that year must first be considered a grace year,[15] which requires that it either be the first year in which the beneficiary is entitled to benefits under Title II of the Social Security Act, during a year in which there was at least one month in which the beneficiary was not entitled to Title II benefits, or a year in which the beneficiaries entitlement to Title II benefits was terminated for reasons other than death. The grace year must also include at least one non-service month, which is any month in which the beneficiary neither earns wages over the monthly exempt amount nor performs substantial services in self-employment.[18] Services are considered substantial in self-employment if they consist of over 45 hours in a single month or 15 hours if it is a "highly skilled occupation."[19]
The monthly exempt amount is 1/12 of the yearly exempt amount for that year. For first tier beneficiaries, the monthly exempt amount is $1,130 and $3,010 for second tier beneficiaries for 2008.[20]
The MET is helpful for beneficiaries who retire in the middle of the year and who would be penalized for earlier earnings under the AET.
Windfall elimination provision (WEP)
[edit]The Social Security Amendments of 1983 (Public Law 98-21) created the WEP. Beneficiaries who have been employed in work that does not pay into the Social Security Trust Fund and who receive a pension from that employment based upon earnings which were not covered by Social Security may see their benefits partially offset by the WEP. The WEP applies once the beneficiary is both entitled to RIB and is entitled to the pension or meets all the requirements except for stopping work or filing an application.[21]
There is a possibility that with enough years of coverage (YOC) that the WEP may be either reduced or waived. Anyone with 30 or more YOCs is exempt from the WEP. Beneficiaries with between 21 and 29 YOCs will have the effect of the WEP reduced.[22]
The WEP may reduce the benefit in various ways, taking various rules and computation methods into account (see main article). The WEP was developed as the result of the progressive method in which the PIA is computed. Since those with less earnings on the record receive a comparatively larger percentage of their average income, under normal computations a beneficiary who paid in little to the Social Security system and who is drawing a separate pension may have what is perceived as an unfair advantage in their benefits.
Full retirement age
[edit]Originally, all RIB beneficiaries reached their Full Retirement Age at the age of 65. Changes in the Full Retirement Age have been enacted, based upon the birthdate of the beneficiary as follows:[23]
- Prior to January 2, 1938: 65 years
- January 2, 1938 – January 1, 1939: 65 years and 2 months
- January 2, 1939 – January 1, 1940: 65 years and 4 months
- January 2, 1940 – January 1, 1941: 65 years and 6 months
- January 2, 1941 – January 1, 1942: 65 years and 8 months
- January 2, 1942 – January 1, 1943: 65 years and 10 months
- January 2, 1943 – January 1, 1955: 66 years
- January 2, 1955 – January 1, 1956: 66 years and 2 months
- January 2, 1956 – January 1, 1957: 66 years and 4 months
- January 2, 1957 – January 1, 1958: 66 years and 6 months
- January 2, 1958 – January 1, 1959: 66 years and 8 months
- January 2, 1959 – January 1, 1960: 66 years and 10 months
- After January 1, 1960: 67 years
Time of payment
[edit]RIB payments, like all benefits paid under Title II of the Social Security Act, are generally paid on one of the following days depending on the beneficiary's payment cycle:[24]
- Cycle 1: 3rd day of the month
- Cycle 2: 2nd Wednesday of the month
- Cycle 3: 3rd Wednesday of the month
- Cycle 4: 4th Wednesday of the month
For Cycle 1 beneficiaries, payment is moved to the preceding Friday if the 3rd day of the month falls on Saturday or Sunday. Similarly, if a payment date falls on a federal holiday—which can only happen for Cycle 2 beneficiaries on Veterans Day and Cycle 4 beneficiaries on Christmas—payment is moved to the preceding day.
Cycling the benefits onto four different payment days began in 1997 as the result of unequal workloads in the beginning of the month which made it difficult for all beneficiaries to have easy access to the Administration. At this time, over 50 million checks were issued by the Administration within the first three days of the month with an expectation that the workload would be over 70 million within the first three days by 2020 with the baby boomers retired.
Beneficiaries who are already receiving benefits on the 3rd of the month continue receiving them on that date, unless they volunteer for cycling. New beneficiaries who were born between the 1st and 10th of the month are in Payment Cycle 2; those born between the 11th and 20th are in Payment Cycle 3; and those born later in the month are in Payment Cycle 4. However, certain individuals will still be placed into Payment Cycle 1:[25]
- Beneficiaries who receive Supplemental Security Income (SSI)
- Beneficiaries whose income is deemed, in part, to an SSI recipient
- Beneficiaries for whom the State pays their Medicare premiums through the Qualified Medicare Beneficiaries program
- Beneficiaries who become entitled on a new record and who were receiving benefits on the 3rd of the month on another record, without a break in entitlement
- Beneficiaries who receive any payments from the Railroad Retirement Board, and
- Beneficiaries whose checks are garnished by court-ordered child support, alimony, or tax levy
Title II payments a beneficiary is entitled to for any given month will be paid in the following month. (ex. if a beneficiary is entitled to a payment in August, they will receive that payment in September)
Termination of benefits
[edit]The last month of entitlement to RIB is the month before the month in which the beneficiary dies.[26]
See also
[edit]- Disability Insurance Benefits
- Social Security Administration
- Social Security (United States)
- Supplemental Security Income
- The Peoples Plan - Social Security
Notes
[edit]- ^ For years before 1978, a person received one quarter of coverage for each three-month period during which the person received at least $50 of wages. A self-employed person received four quarters of coverage for each year during which the person received at least $400 of self-employment income. Beginning in 1978, employers were required to report annual wages, rather than quarterly wages. As a result, the rules was changed, so that a person received one quarter of coverage for each $250 of wages or self-employment income earned by a person, up to a maximum of four quarters of coverage per year. For each year after 1978, the quarter of coverage amount is equal to the ratio of the national average wage index for the current to that of 1976, multiplied by the 1978 amount of $250. Amounts are rounded down to the nearest multiple of $10. The quarter of coverage amount for a particular year cannot be less than that of the previous year.[5]
- ^ A person with at least 40 quarters of coverage is automatically considered fully insured. Alternatively, a person is considered fully insured if they have at least six quarters of coverage, and the person has at least one quarter of coverage for each calendar year after the later of 1950 or the year they attain the age of 21, and the earlier of the year in which they attain the age of 62 or the year of death.
References
[edit]- ^ http://www.ssa.gov/glossary.htm#R
- ^ a b Social Security Act Title II § 202
- ^ a b POMS RS 00201.001
- ^ a b "POMS RS 00301.105". Social Security Administration.
- ^ "Quarters of Coverage". Social Security Administration. Retrieved August 12, 2020.
- ^ POMS RS 00615.015
- ^ "Social Security Office Locator, SSA Office Locator Social Security Office Locator, Social Security".
- ^ "Apply for Social Security Benefits | SSA".
- ^ POMS RS 00605.001
- ^ POMS RS 00615.101
- ^ a b c https://www.ssa.gov/pubs/EN-05-10147.pdf [bare URL PDF]
- ^ POMS RS 00615.690
- ^ POMS RS 02501.001
- ^ "The President Signs the "Senior Citizens' Freedom to Work Act of 2000"".
- ^ a b POMS RS 02501.021
- ^ "Exempt Amounts Under the Earnings Test".
- ^ a b https://www.ssa.gov/pubs/EN-05-10069.pdf [bare URL PDF]
- ^ POMS RS 02501.030
- ^ POMS RS 02505.065
- ^ POMS RS 02501.025
- ^ POMS RS 00605.360
- ^ POMS RS 00605.362
- ^ POMS RS 00615.003
- ^ POMS GN 02401.001
- ^ POMS GN 02407.005
- ^ POMS RS 00201.002
Sources
[edit]- Social Security Online. Social Security Administration. www.ssa.gov.
- Social Security Program Operations Manual System. Social Security Administration. https://web.archive.org/web/20070610231614/https://s044a90.ssa.gov/apps10/poms.nsf/partlist!OpenView.