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Discovering Retirement (Back to Contents)

Your Other Benefits:
Social Security and Medicare

Decorative Image"Life begets life. Energy creates energy. It is by spending oneself that one becomes rich."
Sarah Bernhardt

Your Social Security benefit is an important component of your retirement finances. However, the eligibility age for a full Social Security benefit is increasing (see chart). On the plus side, the earnings in retirement limit for those age 65 through 69 has been eliminated. We encourage you to carefully review the annual statement you now receive automatically from the Social Security Administration (SSA). It is in your best interest to stay abreast of modifications to the Social Security program.

Social Security and NYSTRS Benefits

No matter what your tier, there is no Social Security tax on your NYSTRS benefit. Also, for a vast majority of our retirees, NYSTRS benefits and Social Security benefits are completely separate; one does not affect the other.

The lone exception is for Tier 3 members who retire with a Tier 3 (Article 14) benefit. For this group, at age 62, the NYSTRS benefit is reduced by 50 percent of the Social Security benefit accrued while in New York State public employment. To avoid this reduction, most Tier 3 members retire under the provisions of Tier 4 (Article 15).

Getting Information

You can call (800) 772-1213 to speak with a Social Security representative. This person can answer your questions or make an appointment for you at one of the 1,300 local Social Security offices throughout the country.

Social Security also has a comprehensive website at www.ssa.gov with the latest policy changes, proposals for the future and detailed information. Each year you will receive your Social Security Statement about three months before your birthday.

The statement reports the yearly maximum earnings that were subject to Social Security tax and earnings that were taxed each year since you started working (including your summer earnings during college). If you have zeros in years when you had earnings and paid Social Security taxes, or if there are any discrepancies, you should submit copies of your W-2 withholding statements or your tax returns to have your records corrected.

Your estimate will show your monthly benefits if you retire at age 62, at your full retirement age or when you are age 70. Survivor and disability benefits you and your family may be eligible to receive now and in the future are also provided.

You are encouraged to check your records for accuracy to make sure you get all the benefits you are entitled to in retirement.

Benefit Eligibility

As you work and pay taxes, you earn Social Security credits at a rate of four a year. To qualify for a benefit, you need a minimum of 40 credits or 10 years of work. Additional credits will not increase your benefit, but the income you earn may result in a higher benefit.

Calculation of Benefit

Unlike your NYSTRS retirement benefit, which is calculated on a three- or five-year final average salary, your Social Security benefit is based on all or most of your reported earnings throughout your employment history. These earnings are adjusted to reflect changes in average wage levels over the years. If you were born after 1928, your 35 highest years are used to find your average indexed monthly earnings (AIME). The AIME is then multiplied by a percentage in a formula specified by law.

Full or Reduced Benefits

The earliest you can collect Social Security is age 62. The benefit, however, will be smaller than what you would receive at normal retirement age. Normal retirement age for a full benefit is determined by your year of birth as shown below.

Year of Birth

Full Retirement Age

1937 or earlier
65
1938
65 and 2 months
1939
65 and 4 months
1940
65 and 6 months
1941
65 and 8 months
1942
65 and 10 months
1943-54
66
1955
66 and 2 months
1956
66 and 4 months
1957
66 and 6 months
1958
66 and 8 months
1959
66 and 10 months
1960 or later
67

If you are eligible for a full benefit at age 65, you will receive 80% of that benefit if you collect at age 62. As the age for full benefits increases, the percentage of the benefit paid at age 62 decreases. Those born from 1943 to 1954 will receive 75% of full benefits at age 62. Someone eligible for a full benefit at age 67 will receive 70% of that benefit at age 62. About half of those retiring now choose to collect at age 62 rather than at age 65.

Even if you may not need your Social Security benefit right away, a financial planner would probably advise you to take the money as soon as you're eligible and invest it. If you delay collecting your Social Security until you are eligible for full benefits, it will take between 12 and 17 years to recoup the money you could have received.

Family Coverage

Social Security benefits are paid to you for life. A spouse and younger or disabled children can also collect benefits. A spouse can receive either a benefit based on her or his own work record, or a benefit equal to half of the spouse's benefit at age 65 (37.5% at age 62). If both husband and wife have made the maximum contributions to Social Security, both will receive the maximum benefit.

Disability and Survivor Benefits

Social Security also pays disability and survivor benefits. If you become disabled, the disability has lasted or is expected to last for at least 12 months, and you have five years of coverage in the 10 years prior to the disability, you and your dependents can receive Social Security benefits.

Survivor benefits are paid to certain members of the worker's family, and a lump sum payment of $255 is paid to a surviving spouse or entitled child. A surviving spouse is eligible for 100% of the spouse's benefit if it is higher than her/his own benefit.

Applying

Social Security benefits are not paid automatically. You should get updated information in the year before you plan to collect. You can apply in person, by mail, or by telephone, at least three months prior to the date you want benefits to begin. Social Security will tell you what documents you need to establish eligibility.

Taxes

Up to 50% of your benefit may be subject to federal income tax for any year in which the total of your adjusted gross income, non-taxable interest income and one-half of your Social Security benefit exceeds a base amount. The amount is $25,000 for an individual, $32,000 for those married and filing a joint return, or zero for a couple filing separately. If your adjusted gross income exceeds $34,000 for an individual or $44,000 for a couple, up to 85% of your benefit is taxable.

Cost-of-Living Adjustment

Social Security benefits are automatically increased each year based on changes in the Consumer Price Index (CPI).

Social Security Earnings Limits

If you work in retirement and are of full retirement age, your Social Security benefit cannot be diminished no matter how much you earn. However, if you have yet to achieve full retirement age (see chart), SSA uses the following criteria to determine how much your benefit will be reduced:

  • Until the year you reach full retirement age, $1 in benefits will be deducted for each $2 you earn above the annual limit.
  • In the year you reach full retirement age, $1 in benefits will be deducted for each $3 you earn above the established limit only in those months that precede full retirement age. Starting in the month you reach full retirement age, there are no deductions and you can receive full benefits with no limit on your earnings.

It is important to note that unlike your NYSTRS benefit, which is subject to an earnings limit only as it applies to New York State public employment, your Social Security benefits are subject to earnings limits for all employment if you are not of full retirement age. (Items such as pensions, annuities, investment income and interest do not count as employment earnings.) Also note that there are different rules for those receiving Social Security disability benefits. Contact SSA for more information.

Benefits for Divorced People

If you are divorced (even if you have remarried), your ex-spouse can be eligible for Social Security benefits based on your record. In some situations, he or she may get benefits even if you're not receiving them.

In order to qualify, your ex-spouse must:

  • Have been married to you for at least 10 years;
  • Be at least 60 years old;
  • Be unmarried; and,
  • Not be eligible for an equal or higher benefit on his or her own Social Security record, or on someone else's Social Security record.

If your ex-spouse receives a Social Security benefit on your account, it does not affect the amount of any benefits payable to you or your other family members.

Medicare

Medicare is the basic health insurance program for people 65 or older and many other people with disabilities. In 2003, legislation was enacted that overhauled the Medicare program and added a prescription drug benefit for the elderly starting in 2006.

Medicare has two parts:

     Part A is hospital insurance that helps pay for inpatient hospital care and certain follow-up services. It is funded by payroll taxes of 1.45% that all workers pay on their salary. If you are receiving a Social Security benefit, your hospital insurance will start automatically at age 65.

     Part B is medical insurance, an optional program that helps pay doctors' services, outpatient hospital care and other medical expenses. Almost anyone who is eligible for hospital insurance can sign up for medical insurance. It has a monthly premium adjusted each January and is deducted from your Social Security payment.


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