Social Security cards from Woolworth's?

You may think that identity theft involving social security numbers is a new phenomenon. Actually, the worst case involving misuse of a single SSN began in 1938 when a wallet manufacturer decided to include an image of an employee's real social security card (minus the name) to demonstrate how the new cards could be carried in their wallets. These wallets were sold in Woolworth's and several other stores all over the country.

In 1938, the idea of a unique number to keep track of workers' earnings for the Social Security program was still new to Americans and apparently many thought this "sample" card that came with the purchase of a wallet actually belonged to them. By 1943, the Social Security Administration had identified 5,755 workers using this same number. Over the years, over 40,000 people had worked using the SSN issued to Hilda Schrader Whitcher, some as recently as 1977!

When asked about the widespread misuse of her SSN, Mrs. Whitcher was quoted as saying, "They started using the number. They thought it was their own. I can't understand how people can be so stupid. I can't understand that." I have to agree! Here is the wallet sample from Woolworth's that caused all the problem:

After Social Security discovered the mass identity theft, they issued Mrs. Whitcher a new number which I presume she kept safe at home and did not carry in her wallet!

And that is good advice for all of us. Keep your social security card in a safe place and do not carry it with you routinely. If you are asked for your number, ask why it is needed and how it will be protected from unauthorized use. And be particularly careful with your child's SSN. A child's identity is easier to assume because they have no established credit history and often the theft is not discovered until the child is an adult.

Do I have to stop work to get retirement benefits?

If you want to receive benefits for any months between age 62 and the month before you reach your Full Retirement Age (FRA), your earnings from work (wages or self-employment) must be below certain limits. Once you reach your FRA, there are no limits to what you can earn and still receive your full Social Security retirement benefit.

Simple, right? Well, there are really two different annual earnings limits based on age and one monthly limit that applies only the first year benefits are paid.

First, the annual earnings limit for people who are at least age 62 but will not reach their FRA during the calendar year. For 2009, this limit is $14,160 in gross wages or net self-employment. Any current year earnings over that limit would cause a reduction of $1 in benefits for every $2 over the limit.

Example: John is 63 years old when he decides to reduce his earnings by switching to part-time work in March 2009. He estimates his gross wages for the year will be about $22,160 ($8,000 more than the earnings limit).

If John applies for benefits in January 2009, Social Security will withhold $4,000 (1/2 of $8,000) from his benefits beginning in January before any benefits will be paid to him. If his benefit rate is $1,000/month, he will get full benefits for May-December 2009.

The alternate monthly limit applies only the first year benefits are paid and is $1,180/month in 2009. Since John plans to reduce his monthly earnings in March, he could receive full benefits for March and April if he keeps his gross monthly wages to $1,180 or less each month beginning with March. Social Security applies either the annual or monthly test, whichever pays the most money for the year!

If John keeps his annual gross wages at or below the $14,160 for 2009, he can receive full benefits for the entire year regardless of when he earns the money. He could earn the entire amount in one month or spread out over several months and still receive all his benefits.

All clear? Well what if John will reach his FRA in July 2009? OK, let's assume he will earn $200,000 during the year. We know that there is no earnings limit beginning with his FRA month, but what about the months before his FRA?

The 2009 earnings limit for people who reach their FRA anytime during the year is $37,680. As long as John does not earn more than $37,680 for months before his FRA (January through June), he can claim benefits beginning January. He can earn as much as he wants July on.

These limits change every year so be sure to check the Social Security Online web site before you retire to see what limits will apply to you.

Remember: If you receive a check for a month before your FRA month, your benefits will be permanently reduced by a certain percentage. The most important decision you will make when you apply for Social Security benefits is when to start your benefits. Do your research before you apply!

Fact or Myth? The Answer

Yesterday I posed a question I have heard often over the years, usually preceded by the phrase "If Social Security is so good".........


"Why don't federal officials like U.S. Congressmen and Senators pay Social Security taxes on their salaries? And what about the President and the Vice-President? They don't pay into Social Security either!"


The Answer: This is a myth.

The President and Vice-President of the United States as well as most executive-level political appointees, and all U.S. Congressman and Senators pay Social Security taxes on their salaries up to the annual maximum ($106,800 in 2009) just like private sector employees. In addition career federal employees hired after January 1, 1984, also pay into the Social Security trust fund.

According to the Social Security Administration, about 94% of employees and self-employed individuals in the United States are covered by Social Security. The most notable exception are some state and local government employees who only pay Medicare taxes because they are covered by a government retirement plan. In Texas, the majority of these individuals work for school districts who have chosen not to cover their employees.

Social Security Fact or Myth?

Have you heard this one?

"Why don't federal officials like U.S. Congressmen and Senators pay Social Security taxes on their salaries? And what about the President and the Vice-President? They don't pay into Social Security either!"

What do you think? Fact or Myth?

Check this blog tomorrow for the correct answer!

Can a woman draw retirement benefits on her own work record and on her husband's?

The answer to this question is a definite maybe!

A woman who has worked under Social Security and earned the minimum 40 credits can apply for retirement benefits as early as age 62. If she is married and her husband has already applied for benefits, she may be able to receive a higher benefit based on his Social Security record.

The best way to explain how this works is to give an example: Mary was born between 1943 & 1954 so her Full Retirement Age (FRA) is age 66.

• Her unreduced benefit at 66 would be $1000.
• If her husband Joe already gets benefits, the maximum spouse's benefit she could get is 50% of his unreduced benefit ($1600), in this case $800.

Mary can apply as early as age 62 but her retirement benefits will be permanently reduced by 25% to $750 if she does. She cannot receive benefits as Joe's wife because at 62 the spouse's benefit is reduced by 30% to $560. Her own retirement benefit is higher so that is all she will receive.

The same would apply if Mary had been divorced from Joe after at least 10 years of marriage and remained single when she applied for retirement. She can only draw benefits as a divorced spouse if those benefits are higher than her own.

There is a way Mary can get both benefits, but to do so she would have to wait until her FRA (age 66) to apply. Then she can choose between applying for her own retirement or benefits as a spouse (or ex-spouse).

In this example, Mary could get unreduced wife's benefits of $800 per month from age 66 through 69, then at age 70 apply for delayed retirement at a higher rate of $1320 per month.

Confusing? Maybe a little, but remember that applying for a lower spouse's benefit at your FRA and then switching to a higher retirement benefit at age 70 is a good way to maximize your Social Security income as you age.

Why are retirement benefits reduced at age 62?

First, a little history - When Social Security started, the only benefits payable were for retired workers who had reached age 65.

The first monthly payment was issued in January 1940 to a retired legal secretary named Ida May Fuller. She worked 3 years under Social Security before retiring at age 65. Her first check was $22.54 and she continued to receive benefits until she died at 100 years of age.

Miss Fuller's longevity was very unusual at the time, but is much more common now. According to the Social Security Administration's 2007 Annual Statistical Supplement, there were 43,100 centenarians receiving benefits in 2006.

In 1956, the law was changed to allow women to receive early retirement at age 62 and this was extended to men in 1961. Since these early retirees could be expected to receive benefits over a longer period of time than someone who first applied at age 65, the monthly rate was actuarily reduced to ensure that on average the lifetime benefits paid would be about the same.

Of course, no one knows how long they will live and taking early retirement at 62 will result in permanent reduction of your benefits ranging from 25% to 30% depending on your year of birth (see chart). So deciding whether to retire early or wait until your full retirement age (FRA) or later is probably the most important decision you will make to ensure an adequate income in your later years!

Some things to consider:

• Women live about 3 years longer than men
• Your health and family history may affect your longevity
• The value of your other retirement income may not keep pace with inflation and you may be more dependent on Social Security income as you age
• Health care expenses tend to rise as you age

If you live longer than the average life expectancy for your age group, you will receive a higher monthly benefit and more benefits over your lifetime if you wait until your FRA or later to start your Social Security checks.

If you take reduced early retirement benefits, the benefits payable to your widow or widower when you die may be less than if you had waited until your FRA or later to start your Social Securty checks.

Can I still start my Social Security at 62?

Maybe you have heard that the retirement age is going up. That is true but only for full (unreduced) retirement benefits and only for people born after 1937. You can still start your Social Security benefits at age 62 if you meet all requirements, but the amount of your monthly benefit will be reduced permanently if you choose to start before your Full Retirement Age.

The longer you wait to start your benefits, the higher your monthly benefit will be. So the first thing you need to know is what your full retirement age (FRA) is and how much your benefits will be reduced if you retire at 62:

For birth years 1943-1954, FRA is 66 and reduction at age 62 is 25%

For birth year 1955, FRA is 66 plus 2 months and reduction at 62 is 25.83%

For birth year 1956, FRA is 66 plus 4 months and reduction at 62 is 26.67%

For birth year 1957, FRA is 66 plus 6 months and reduction at 62 is 27.50%

For birth year 1958, FRA is 66 plus 8 months and reduction at 62 is 28.33%

For birth year 1959, FRA is 66 plus 10 months and reduction at 62 is 29.17%

For birth years 1960 and later, FRA is 67 and reduction at 62 is 30%

You can start your benefits with any month after age 62. The longer you wait the less the reduction will be. If you delay past your full retirement age, your benefit will even higher, but more on that later!