Retirement Insurance

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History - Social Securitys Programs
1935 Retirement Insurance
1956 Disability Insurance
1939 Survivors Insurance
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Other Programs
1965 Medicare
1972 Supplemental Security Income
2003 Medicare Part D
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A Foundation for Planning Your Future
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3-Legged Stool of Retirement Security
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Who Gets Benefits from Social Security?
48 Million People
4.8 million Widows/ Widowers
6.4 million Disabled Workers, 1.7
million Dependents
30.2 million Retired Workers 3 million Dependents
1.9 million Children
6/30/2005
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Who Pays for Social Security?
Payments to Beneficiaries
Workers Employers
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U.S. Birth Rate 1920-2020
Children Per Woman
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Why Are Changes Needed?
The Number of Workers Per Beneficiary Is
Decreasing 5 3 2 1960 2006 2030
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America Is Getting Older U.S. Population Age 65
Older
69 Million 2030 (20 of
total population)
36 Million 2006 (13 of total population)
11 Million 1946 (8 of total population)
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Life Expectancy for Those Age 65 Today
Men Women U.S. Population 82 84 White 80 84 Afric
an Americans 79 83 Hispanic 84 88 Asian 84 88 Amer
ican Indians 83 88
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Social Security Cost-of-Living Adjustments
Effective Date Amount June 1975 8 June
1976 6.4 June 1977 5.9 June 1978 6.5 June
1979 9.9 June 1980 14.3 June 1981 11.2 June
1982 7.4 Dec 1983 3.5 Dec 1984 3.5 Dec
1985 3.1 Dec 1986 1.3 Dec 1987 4.2 Dec
1988 4 Dec 1989 4.7 Dec 1990 5.4
Effective Date Amount Dec 1991 3.7 Dec
1992 3 Dec 1993 2.6 Dec 1994 2.8 Dec
1995 2.6 Dec 1996 2.9 Dec 1997 2.1 Dec
1998 1.3 Dec 1999 2.5 Dec 2000 3.5 Dec
2001 2.6 Dec 2002 1.4 Dec 2003 2.1 Dec
2004 2.7 Dec 2005 4.1
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Value of Inflation Protection
Example Average worker with pre-retirement
income of 30,000 1st Year of Retirement Pension
12,000/ 57 Social Security 9,000/43 Inflatio
n 3 per year
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Value of Inflation Protection
5th Year of Retirement Pension 12,000/54 Socia
l Security 10,130/46 10th Year of
Retirement Pension 12,000/51 Social
Security 11,744/49 20th Year of
Retirement Pension 12,000/43 Social
Security 15,783/56
example continued Average worker with
pre-retirement income of 30,000
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How Are Social Security Taxes Spent?
Payments to Todays Beneficiaries
23.7
Reserve for Future Beneficiaries
75.6
Administrative Costs
0.7
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Where Does the Money Come From?
Social Security Trust Fund 2005
Payroll Tax 84 Trust Fund Interest 14 Taxation
of Benefits 2
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In 2017, Social Security Will Begin Paying More
in Benefits Than is Collected in Taxes
2027
2017
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In 2017, Social Security Will Begin Paying More
in Benefits Than is Collected in Taxes
2017
After 2040, only about 74 of benefits could be
paid with the taxes from workers
2040
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You Need to Work to Earn Social Security Credits

• Each 970 in earnings
• gives you one credit
• You can earn a maximum
• of 4 credits per year
• Example To earn 4 credits in 2006, you must earn
  at least 3,880. Earning 40 credits throughout
  your working life will qualify you for a
  retirement benefit.

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Your Age When You Retire Affects Your Benefits

• If Youre A Worker and Retire
• At age 62, you get less money permanently
• At your full retirement age, you get your
• full benefit
• You get even more money if you work past
• your full retirement age

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In Addition to the Retiree, Who Else Can Get
Benefits?

• Your Spouse
• At age 62
• At any age if caring for child under 16 or
  disabled
• Divorced spouses may qualify
• Your Child
• Not married under 18
• (under 19 if still in high school)
• Not married and disabled before age 22

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Full Retirement Age
Year of Birth Full Retirement Age 1937 65 1938
65 2 months 1939 65 4 months 1940 65 6
months 1941 65 8 months 1942 65 10
months 1943 1954 66 1955 66 2
months 1956 66 4 months 1957 66 6
months 1958 66 8 months 1959 66 10
months 1960 later 67
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How Social Security Determines Your Benefit
Social Security benefits are based on
earnings Step 1 Your wages are adjusted for
inflation Step 2 Find the average of your 35
highest earnings years Step 3 Result is average
indexed monthly earnings
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Retirement Benefit Computation Example
If your average monthly earnings
are 4,200 Then your benefit would
be 1,681 Average Monthly Earnings 4,200 90
of First 656 590 32 of the
Next 3,299 1055 15 of the Remainder 245 3
6 4,200 1,681
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What Youll Get at Full Retirement Age
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of earnings
Low Earner
Average Earner
High Earner
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Windfall Elimination Provision
If any part of your government pension is based
on work not covered by Social Security, you may
be affected by the Windfall Elimination Provision.
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Windfall Elimination Provision (WEP) - 2006
Normal Computation WEP Computation 90 of the
First 656 40 of the First 656 32 of the Next
3,299 32 of the Next 3,299 15 of the
Remainder 15 of the Remainder
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Exception to the Windfall Elimination Provision
of First Factor Years of Coverage in Benefit
Formula 30 or more 90 29 85 28 80 27 75 26 70
25 65 24 60 23 55 22 50 21 45 20 or
less 40
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Government Pension Offset (GPO)
If you receive a government pension based on work
not covered by Social Security, your Social
Security spouses or widow(er)s benefits may be
reduced.
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Government Pension Offset (GPO)
Spouses Benefits Only 2/3 of amount of
Government pension will be used to reduce the
Social Security spouses benefit
Example 900 of government pension
2/3 600 Social Security Spouse
Benefits 500 No cash
benefit payable by Social Security
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You Can Work Still Receive Benefits
You Can If You Make More, If You Are Make Up
To Some Benefits Will Be Withheld Under
Full Retirement Age 12,480 (1040/mo.) 1 for
every 2 The Year Full Retirement Age is
Reached 33,240(2770/mo.) 1 for every 3 Month
of Full Retirement Age and Above No
Limit No Limit
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What Will You Need When Applying for Your Social
Security Benefits?

• Social Security number for each applicant
• Proof of age (birth certificate)
• Latest W-2 or self-employment tax return
• Earnings estimate
• Bank information for direct deposit
• Information about marriages/divorces
• Information about military or railroad service

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Who Can Get Survivors Benefits?

• Widow or Widower
• Reduced benefits at age 60
• If disabled as early as age 50
• At any age if caring for child under 16 or
  disabled
• Divorced widows/widowers may qualify
• Your Child if
• Not married under age 18 (under 19 if still in
  high school)
• Not married and disabled before age 22

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Other Survivors Benefits

• Parents
• Age 62 and was receiving at
• least one-half support from
• deceased worker
• Lump Sum Death Payment (255)
• Most spouses or children

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Social Securitys Disability Definition
A medical condition preventing substantial work
for at least 12 months, or expected to result in
death. The determination also considers age,
education work experience.
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Who Can Get Disability Benefits?

• Worker
• Must have paid into Social Security five out of
  last 10 years
• Spouse
• At age 62
• At any age if caring for child
• under 16 or disabled
• Divorced spouses may qualify

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Who Can Get Disability Benefits?

• Child
• Not married under 18
• (under 19 if still in high school)
• Not married and disabled
• before age 22

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Who Can Get Medicare?
65 older -or- Receiving Social Security
disability benefits at least 24
months -or- Permanent kidney failure -or- Amyotrop
hic Lateral Sclerosis (ALS)
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When Can I Sign Up for Medicare?

• Medicare Enrollment Periods
• Initial - at age 65
• Special - if still working
• General - January-March

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Medicare Coverage

• Part A Hospital Insurance
• Covers most inpatient hospital expenses.
• 2006 Deductible 952
• Part B Supplementary Medical Insurance
• Covers 80 doctor bills other outpatient
  medical expenses after 1st 124 in approved
  charges.
• 2006 Monthly Premium 88.50
• Part D Medicare Prescription Drug Plan
• Covers a major portion of prescription drug costs
• for Medicare beneficiaries.
• 2006 average Monthly Premium 32

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How Will the Prescription Drug Plan Affect You?

• Available January 2006
• You will pay the first 250 (called a
  deductible)
• Medicare will pay 75 of costs between 250
  2,250 in drug spending. You will pay only
  25 of these costs.
• You will pay 100 of the drug costs above 2,250
  until you reach 3,600 in out-of-pocket
  spending
• Medicare will pay about 95 of the costs after
  you have spent 3,600
• Extra help is available through Social Security
  for
• low-income beneficiaries to meet premium,
  deductibles
• and copayment costs of program

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For More Information
1-800-MEDICARE www.medicare.gov
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Supplemental Security Income

• Who Can Get SSI?
• Age 65 or older
• Blind - any age
• Disabled - any age
• Limited income
• Limited resources

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What Should You Do toPrepare for Your Retirement?
Call the year BEFORE you retire All
information can be obtained by phone
1-800-772-1213 TTY 1-800-325-0778
www.socialsecurity.gov
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Find Out About Your Social Security
Request Your Social Security Statement
for Estimates of benefits at different
retirement ages Different wage estimates www.socia
lsecurity.gov
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Social Securitys Online Services

• Retirement Disability Applications
• Retirement/Survivors/Disability Planner
• Medicare Card Replacements
• Request a Statement
• Request a Benefit Verification Letter
• Change of Address

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Visit Our Website or Call! www.socialsecurity.gov
-or- 1-800-772-1213 TTY 1-800-325-0778
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Importance of Social Security to African Americans
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Importance of Social Security to African Americans

• Fewer covered by pensions
• Benefits continue for life
• Benefits tied to inflation

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Life Expectancy for Those Age 65 Today
Men Women U.S. Population 82 84 White 80 84 Afric
an Americans 79 83 Hispanic 84 88 Asian 84 88 Amer
ican Indians 83 88
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Importance of Social Security to American Indians
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Importance of Social Security to American Indians

• Fewer covered by pensions
• Benefits continue for life
• Benefits tied to inflation

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Life Expectancy for Those Age 65 Today
Men Women U.S. Population 82 84 White 80 84 Afric
an American 79 83 Hispanic 84 88 Asian 84 88 Ameri
can Indians 83 88
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Importance of Social Security to Asians Pacific
Islanders
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Importance of Social Securityto Asians Pacific
Islanders

• Longer life expectancy
• Benefits tied to inflation
• Benefits continue for life

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Life Expectancy for Those Age 65 Today
Men Women U.S. Population 82 84 White 80 84 Afric
an American 79 83 Hispanic 84 88 Asian 84 88 Ameri
can Indians 83 88
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Importance of Social Security to Hispanics
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Importance of Social Security to Hispanics

• Fewer covered by pensions
• Benefits tied to inflation
• Benefits continue for life

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Life Expectancy for Those Age 65 Today
Men Women U.S. Population 82 84 White 80 84 Afric
an American 79 83 Hispanic 84 88 Asian 84 88 Ameri
can Indians 83 88
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Projected Growth of Hispanic Community

• 2000 13 of total population
• 2050 24 of total population
• 350,000 net immigrants/year

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Importance of Social Security to Women
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Importance of Social Security to Women

• 58 of all aged beneficiaries
• 71 of all aged beneficiaries over age 85
• 92 of beneficiaries with minor children

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Importance of Social Security to Women

• Fewer covered by pensions
• Benefits tied to inflation
• Continue for life

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Women and Social Security

• 74 of unmarried elderly women
• Social Security represents at least ½ of their
  total income
• 29 of unmarried elderly women
• Social Security is their only source of income

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Women Social Security
Average Monthly Benefits (1/04) Women Men Retirem
ent 798 1,039 Disability 735 966
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Life Expectancy for Those Age 65 Today
Men Women U.S. Population 82 84 White 80 84 Afric
an American 79 83 Hispanic 84 88 Asian 84 88 Ameri
can Indians 83 88
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Importance of Social Security to Young Americans
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Importance of Social Security to Young Americans

• Almost 3 in 10 of todays 20-year-olds will
• become disabled before reaching age 67
• About one in seven of todays 20-year-olds
• will die prior to age 67

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How Social Security Protects You with Disability
Survivors Insurance
Under age 31 - Must have paid Social Security
taxes for half the elapsed time since turning age
21 Age S.S. TaxesEXAMPLE 24
1-1/2 Yrs. 29 4 Yrs.
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Social Security and Young Beneficiaries
More than three million young people under age 18
were receiving Social Security benefits at the
end of 2003. The average monthly benefit was
411.
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The Social Security Statement
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The Social Security Statement

• The Statement provides you with estimates of
  monthly Social Security retirement, disability
  and survivors benefits
• The Statement allows you to check your earnings
  history for accuracy

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The Social Security Statement