05a. Time to Test
Your Social Security Savvy
What you don't know can hurt you
by Armond D. Budish
You've paid into Social Security for years and now you're wondering if it isn't time to
start drawing on those benefits. But if you don't understand all your options under the
complicated system, you could lose out. Take this Social Security quiz to determine what
you know; then read the answers to learn more about your potential benefits.
1. You're 62 and have decided to call it quits and take early retirement.
Your best option is to:
a. Immediately apply for reduced Social Security benefits that will
give you $640/month.
b. Wait until you're 65, when your benefits will be $800/month.
c. Wait until you're 70, when you'll be eligible to receive $980/month.
2. Your husband, who was always the primary income-producer, is 65 and
draws SS benefits. You're 57, have been in and out of the work-force, but
now spend a lot of time caring for your disabled daughter. Your best option
is to:
a. Apply for spousal benefits immediately
b. Wait until you turn 62, then apply for spousal benefits.
c. Wait until you turn 65.
3. You're 62 and your husband is 61. At 65 you'd get full SS retirement
benefits of $200/month based on your work record; at 65 your husband would
get $800/month based on his. Because your husband is not yet 62 he can't
receive benefits so you can't take spousal benefits based on his work record. Your best
option is to:
a. Immediately begin taking reduced benefits of $1 60/month based
on your own work record.
b. Wait until your husband turns 62 and begins drawing benefits,
then take spousal benefits of $333/month.
c. Wait until you turn 65, then take spousal benefits of $400/month.
4. You and your spouse, who file joint tax returns, have a total
annual income of $36,000 made up of $15,000 from pensions, $11,000 from
interest and dividends, and $10,000 from Social Security. How much of your
SS benefits will be taxed?
a. 85 percent
b. 50 percent
c. None
5. You're a 59-year-old widow and about to remarry. Your late husband 5
retirement benefits at 65 would have been $1,000/month; your
husband-to-be will collect benefits of only $500/month at age 65.
Your best option is to:
a. Go ahead with the marriage; after all, money can't buy happiness.
b. Delay the marriage until you turn60.
c. Put it off until you turn 62.
6. You're almost 60, retired, and widowed. Your own retirement benefits
at 65 will be $700/month; your late spouse's benefits at age 65 would have
been $800/month. Your best option is to:
a. Take survivor benefits of $572/month starting at age 60.
b. Start survivor benefits at age 60 but figure your own benefits
yearly so you'll know if and when to switch.
c. Walt until age 65 to take your own benefits of $700/month.
7. Your husband died 18 months ago, before he'd retired. You've heard
about the federal government sending widows $255 to cover death-related
costs but nothing came for you. Your best option is to:
a. Contact the Social Security office nearest you and apply.
b. Do nothing: If you had money coming, they would have sent it.
c. Complain to your local TV station's consumer advocate.
8. You˝e 61, widowed, and not eligible for spousal benefits. Until his
death last year you lived with your son who paid all housing, utility and
food expenses. Your own monthly retirement benefits at 65 will be $437,
your son's would have been $600. Next year, when you turn 62, your best
option will be to:
a. Apply for your own reduced SS benefits of $350/month.
b. Wait until you turn 65 and apply for full benefits of $437/month.
c. Apply for SS survivor benefits based on your late son's earnings
9. Emphysema and a weak heart have forced you to quit work at age 58.
Your full retirement benefits at age 65 will be $800/month. Your best
option is to:
a. Take early retirement benefits of $640/month (80 percent of $800)
when you turn 62.
b. Wait until you turn 65 to get full retirement benefits.
c. Apply immediately for SS disability benefits.
10. You are 55 and want to retire. You could:
a. Spend all your free time babysitting your grandkids.
b. Take up skydiving.
c. Forget about adventure and get a part-time job (besides, you're
afraid of heights).
Answers
1-a. You may be better off taking your benefits as early as possible,
even at the reduced amount, because you'll get three extra years of checks.
(On average, it will take about 17 years to make up this lost income if you wait until
you're 65.)
2-a. You're entitled to Social Security retirement benefits based on
your spouse's record if (a) your spouse is collecting SS retirement or
disability benefits; (b) you are at least 62 or caring for a child who is
under 16 or disabled and is entitled to benefits on your spouse's record;
and (c) you and your spouse have been married for a least a year or had a
child together.
3-a. Believe it or not, you're actually better off taking your own
retirement benefits of $160/month even though they're lower than what
you'd receive in spousal benefits. But as soon as your husband turns 62
and begins to receive benefits you'll want to switch to spousal benefits
of $320/month (reduced from $333 because when you start with your own
benefits, then switch, a complicated formula is used to determine spousal
benefits). Why not just wait a year until your husband retires and start
spousal benefits? Because by taking your own benefits at age 62, you could
get12 extra benefit checks of $160 each.
4-c. None of your Social Security benefits will be taxed because only
half ($5,000) are included in your provisional income. That means you and
your spouse are below the $32,000 threshold ($25,000 for singles) at which up to 50
percent of benefits are taxed; and well below the new $44,000 threshold ($34,000 for
singles) at which up to 85 percent of benefits are taxed.
5-b. If you wait to remarry until age 60, you'll qualify for 55 survivor
benefits of $715/month that will continue even after your marriage. If you marry before
age 60, you'll lose your widow's benefits; instead you'll be eligible for only $187/ month
based on your new spouse's earnings-and not until you're 62.
6-b. At 60 you'd get survivor benefits of $572 (71.5 percent of $800),
but take the time to figure out and compare your own retirement benefits.
At 62 you would be eligible for retirement benefits of only $560/month (80 percent of
$700); at 63 you'd get $606/month (86.7 percent of $700), so you could switch from
survivor benefits to your own For Further Information
benefits then and get $34 extra per month. (You can actually switch benefits at any time,
not just on your birthday. But don't expect Uncle Sam to let you know the best time;
compare benefits with the help of your local Social Security office, then tell the
government when you want to switch.)
7-a. Many widows and widowers are eligible for a one4ime death benefit
of $255. If you were entitled to SS spousal benefits when your husband died, the
government should send the check automatically after notification of his death; in other
situations you must apply within two years.
8-c. If you were a dependent parent of a child who died, you may be
entitled to survivor benefits of 82.5 percent of the child's age-65
retirement benefit. You're entitled to benefits if you (a) are at
least 62 when you apply (although you may have been younger when the child
died); (b) received at least half your sup-port from the child; (c) can
provide proof of support (canceled checks, tax returns, etc.) to the Social Security
Administration within two years of the death; and (d) have not married since the child
died.
9-c. Many people who retire because their health is bad don't consider
themselves disabled because their problems did not occur suddenly but
worsened gradually, over time. If you qualify for disability benefits, you
will not only get 100 percent of your full Social Security benefits, you
will also be eligible for Medicare coverage after two years.
10-c. It often makes sense to keep working part-time because it can help
maintain your Social Security disability coverage. To qualify for Social Security
disability at your age you must have earned the same number of work credits needed for
retirement and acquired 20 of those credits in the ten years preceding 4he disability.
(You can earn a maximum of four credits per year.) So if you retired at 55, then suffered
a disabling illness at 61, you wouldn't qualify for disability benefits unless you'd taken
that part time job.
Scoring guide: There's a lot to learn about Social Security and this is
just a start, but with at least nine correct answers you should feel fairly "socially
secure." If you answered six to eight correctly, you're not doing badly. If you got
fewer than six correct, you may be missing out on an important benefit.
Armond D. Budish is an attorney and co-author of Golden Opportunities:
Hundreds of Money-Making, Money-Saving Gems for Anyone Over Fifty
(Henry Holt, 1994).
You can get the following Social Security publications, plus others,
from your local 55 office or by calling 800-772-1213. TDD users call 800-325-0778 between
7 A.M and 7 RM. weekdays.
Understanding Social Security, 651-0024
Retirement, 05-10035
Survivors, 05-10084
Disability, 05-10029
Supplemental Security Income, 05-11000
When You Get Social Security Retirement or Survivors Benefits
What You Need to Know, 05-10077
The Appeals Process, 05-10041
How Work Affects Your Social Security Benefits, 05-10069
Commerce Clearing House publishes a 48-page. booklet that provides brief
but clear information. You can order 1994 Social Security Benefits
Including Medicare (5335) by sending a $5 check or money order (includes
postage and handling) to Commerce Clearing House, Inc., Cash
Item Dept. 3376, 4025 W Peterson Ave., Chicago, IL 60646; or call
800-248-3248.
AARP offers The Social Security Book: What Every Woman Absolutely
Needs to Know (Dl 4117). For a free copy address a postcard to the title
and number, AARP Fulfillment (EE0589), P0 Box 22796, Long Beach, CA
90801-5796. Allow four to six weeks.