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Social Security Update

Wage earners pay a percentage of their wages into the Social Security system. Those payments become part of the fund that is used to pay for people who have already retired, are disabled, or are survivors or dependents of workers who have died. Any unused portion of such payments become part of the Social Security trust fund. Workers in 2018 pay Social Security tax based on earnings up to $128,400 per year. If you are employed, you pay 6.2% of your earnings and your employer pays 6.2% on what you earn. If you are self-employed, you pay the full 12.4% of what you earn. Out of every $1 paid, 81 cents goes into the trust fund that pays monthly benefits to retirees and their families and to surviving spouses and children of workers who have died. The remaining 19 cents goes to a trust fund that pays benefits to people with disabilities and their families.

There are several ways to contact Social Security. Once connected, some of the things you can do is to verify your earnings, change your direct deposit information, request a replacement medicare card, or you can apply for retirement, disability, and Medicare benefits. It may seem obvious, but it is important that you have a Social Security number before contacting the Social Security Administration. You can connect online, by telephone, or in person. You can contact Social Security online by visiting the web site at www.socialsecurity.gov. Further, at the website there are plenty of publications available that will help you with obtaining answers to your questions. Alternatively, you may choose to telephone the Social Security hotline by calling toll free, 24 hours per day, 7 days a week. The number is 1-800-772-1213 or, for the deaf or hard of hearing it is 1-800-325-0778.

In 2018, you earn 1 Social Security credit for each $1,320 of your earnings, up to a maximum of 4 credits a year. Most people need 40 credits (10 years of work) to qualify for benefits. Your total benefit payment is based upon how much you earned during your working career. Higher earnings result in higher benefits. If there were some years you did not work, your benefit amount may be lower than if you had earned a steady income. If you were born between 1943 and 1960, full retirement benefits gradually increase. For example, if you were born in 1950, your full retirement benefit began in 2015 when you turned 65. Alternatively, if you were born in 1960, your full retirement age begins 2027 when you turn 67. If you choose to delay receiving benefits beyond full retirement age, your monthly benefit will increase from that amount you would have received at full retirement age.

In 2018, you can continue to work and receive Social Security benefits and your earnings in the month you reach full retirement age will not reduce your Social Security benefits. However, if you start receiving Social Security benefits before the year you reach full retirement age you lose $1 in benefits for each $2 in earnings you earn above the annual limit of $17,040. In the year you reach your full retirement age, you lose $1 in benefits for every $3 you earn over $45,360 until you reach full retirement age. Once you reach full retirement age, you can keep working without any reduction in your Social Security benefits no matter how much you earn.

When you die, your family may be able to collect benefits based on your work. Such family members include a widow or widower who is age 60, or 50 and disabled, or any age if they are caring for a child who is younger than 16. Your children can also receive benefits if unmarried, younger than 18, or between 18 and 19 and a full time student. Further, your parents can receive benefits based on your earnings if they were dependent on you for at least half of their support. The amount your spouse will receive will equal the benefit your spouse would be entitled to if you were alive.  If you are receiving widow’s or widower’s benefits, you can switch to your own retirement benefits as early as age 62, assuming your retirement benefit is more than the widow’s or widower’s benefit you receive on your deceased spouse’s earnings. If you are divorced, you may qualify for benefits based on your ex-spouse’s earnings, even when he or she is not receiving them. To qualify, you must have been married for at least 10 years, have been divorced at least 2 years, be at least 62 years old, be unmarried and, finally, not be entitled to or eligible for a benefit on your own work  that is equal to or higher than one-half of the full amount based upon your own earnings.

A beneficiary receiving Social Security may also be eligible for SSI (Supplemental Security Income) payments. The funding for SSI comes from general revenues, not Social Security taxes. For example, SSI makes monthly payments to people who are age 65 or older or who are blind or disabled. When determining whether you qualify for SSI payments, your home and auto are not counted as a resource. You can see if you qualify by calling 1-800-772-1213 to make arrangements for an interview with a representative from your local Social Security office.

All Social Security benefits are paid electronically. Most people choose to receive benefits through direct deposit to their account at a financial institution. If you do not have an account with a financial institution, or if you prefer to receive your benefits on a prepaid debit card, you can sign up for the Direct Express card program. With Direct Express, payments go straight to the card account.

Finally, the Social Security Administration just released 2019 Social Security changes.  Here is a summary of some of the changes you can anticipate.

Another article is forthcoming to provide more detail on these changes:

  • Cost-of-Living Adjustment (COLA) provides beneficiaries a 2.8% increase in benefits
    • All retired workers who receive $1,422 in 2018 can expect to receive $1,461 in 2019 after the new COLA goes into effect, January 1, 2019
    • All disabled workers who receive $1,200 in 2018 can expect to receive $1,234 after the COLA increase on January 1, 2019
    • Couples receiving benefits of $2,381 in 2018 can expect to see $2,448 after COLA increase on January 1, 2019
  • Retirement Earnings Tax Exempt Amounts increase from $17,040 in 2018 to $17,640 per year beginning in January, 2019
  • The Social Security Disability Thresholds will be increasing slightly


Mark A. Krohn, LL.M Taxation, CPA and a partner at J&G, is in charge of the Business Law Team and is also a member of the Trust & Estates Team. He can be reached by phone at our Walden, NY office at 866-303-9595 toll free or 845-764-9656 and by email.

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