10 things to know about Social Security

December 14, 2009

Social Security is a lot like the ozone layer - we all know it's there now and we count on it being there in the future. Yet some people may not know much more about it than that.

Here's a short list of interesting facts about Social Security:

Social Security benefits do not automatically start coming in the mail the first day you retire. They must be applied for. The easiest way is to set up an appointment with the local Social Security office or call (800) 772-1213.

To get an official statement of all the earnings recorded in your Social Security account, an estimate of your current disability and death benefits, and an estimate of future retirement benefits, fill out a Form 7004 Request for Social Security Statement, obtainable at your local office.

If you do not find and correct errors in your Social Security record within three years, they become part of your permanent record. So, you might want to check on them every three years or so.

You can work during retirement, but if you earn too much it will reduce the size of the benefits you are receiving from age 62 up to your normal retirement age. The limits on such earnings are currently $14,160 for 2009. Benefits are reduced by $1 for every $2 that you earn over this amount. Though, the amount of Social Security one "forfeits" because of "excess earnings" does get re-paid to you upon reaching full retirement age via an increase in your monthly payment. After you attain your normal retirement age, you may work as much as you want with no reduction in benefits, although they may become taxable if you earn too much.

You can increase the size of your retirement benefit by delaying collecting your benefits and by remaining on the job past full retirement age. This higher benefit comes from extra earnings toward your account and a credit awarded for this patience, ranging from 3 percent to 8 percent of your benefit depending on your date of birth.

For people born after 1937, normal retirement age has increased. For example, if you were born in 1940, full retirement age is 65 and six months; born in 1950, it is 66. Anybody born in 1960 or later will be eligible at age 67.

Social Security disability benefits do not continue past normal retirement age. The month before you attain normal retirement age, the disability benefits are automatically converted to retirement benefits.

There is a limit to the amount of benefits that can be paid on each Social Security record called the maximum family benefit, generally around 150 to 180 percent of the worker's benefit. If this limit is exceeded, the family benefits are reduced.

Ex-spouses, widows and divorced widows may all be eligible for benefits on a spouse's record. Provided the requirements are met, they may even all be collecting on the same worker's record.

There are two Social Security trust funds: one used to finance retirement and survivors benefits and the other used to finance the disability program. Money not used to pay current benefits, by law, is invested only in U.S. Government Treasury bonds.

Social Security is a significant resource for many retired individuals. Spend some time with your financial planner learning about what part these benefits should play in your retirement planning future.

Michael T. Ohlman, a certified financial planner and a senior vice president, financial planning and wealth management specialist

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