20192021 SocialSocial Security Security ReferenceReference Guide Guide mfs.commfs.com SOCIAL SECURITY REFERENCE GUIDE Table of contents Divorcee benefits 11 Requirements to receive a divorcee benefit Important ages 12 Remarriage (applicable for divorcees and widow(er)s) 1 Full Retirement Age (FRA) Government employees 1 Milestone ages 13 Windfall Elimination Provision and Government Pension Offset Years of substantial earnings for Windfall Elimination Provision Retirement benefits 14 15 Federal retirement plans 2 Requirements to qualify for Social Security retirement benefits 16 Military and railroad retirement plans 2 Retirement benefit increases and decreases 3 Primary insurance amount Disability benefits 17 Recent work test Average and maximum benefits 17 Required work credits for disability benefits 4 Earnings test 18 Social Security Disability Insurance (SSDI) versus Supplemental Social Insurance (SSI) 4 Cost of living numbers for 2021 Spouse and survivor comparisons Family benefits Eligibility for family benefits 5 Spousal percentages and key facts 19 19 Maximum family benefits 6 Survivors percentages and key facts 7 Length-of-marriage requirements Deferred and executive compensation Nonqualified deferred compensation and executive compensation 7 Key facts comparison 20 Spousal benefits Taxes Determining the taxable portion of Social Security 8 Coordinating spousal and retirement benefits 21 22 Combined income 8 Requirements to restrict application to spousal benefits only 22 FICA taxes Survivors benefits Medicare Widow(er) limit 9 23 Medicare taxes on earnings Widow(er) switch-up options 9 23 Medicare, Social Security and HSA nuances 10 Types of widow(er) benefits 24 Medicare Part B and D premiums for 2021 IMPORTANT AGES Full Retirement Age (FRA) RETIREMENT AND SPOUSAL BENEFITS 66 YEARS 66 YRS + 2 MOS 66 YRS + 4 MOS 66 YRS + 6 MOS 66 YRS + 8 MOS 66 YRS + 10 MOS 67 YEARS YEAR OF BIRTH 1943–1954 1955 1956 1957 1958 1959 1960+ Milestone ages Catch-up contributions for IRA, 401(k), 403(b) and other Medicare begins 50 65 employer sponsored retirement plans HSA penalty-free withdrawals for nonqualified medical Penalty-free withdrawals from governmental retirement plans expenses* (qualified medical expenses are tax free) for public safety employees who are separated from service Full Retirement Age for retirees born 1943–1954 66 Disabled spouse eligible for Social Security survivors benefit Maximum spousal benefits for spouses born 1943–1954 Penalty-free withdrawals from 401(k) if separated from service Maximum survivors benefits for survivors born 1945–1956 55 Additional contributions for Health Savings Accounts 67 Full Retirement Age for retirees born 1960 or later Maximum spousal benefits for spouses born 1960 or later Penalty-free withdrawals from IRA and retirement plans 5 9 1/2 Maximum survivors benefits for survivors born 1962 or later In-service distribution if plan permits 70 Maximum Social Security retirement benefit 60 Minimum Social Security survivors benefits Minimum Social Security retirement benefits 72 Required minimum distributions for traditional IRAs and 62 Minimum Social Security spousal benefits some retirement plans** * Please contact a tax advisor for information on qualified medical expenses. ** The SECURE Act changed the required beginning date of RMDs for those who attain age Sources: Social Security Administration, IRS. 70½ in 2020 or later to age 72. 1 SOCIAL SECURITY REFERENCE GUIDE RETIREMENT BENEFITS Requirements to qualify for Social Security retirement benefits You must work for at least 40 quarters to be Your Social Security retirement benefits are 40 eligible for Social Security retirement benefits 35 averaged over your 35 highest-earning years Retirement benefit increases and decreases Full Retirement Age 66 32.0% Full Retirement Age 67 24.0% 24.0% 16.0% 16.0% 8.0% 8.0% 0.0% 0.0% 62 63 64 65 66 67 68 69 70 62 63 64 65 66 67 68 69 70 YEARS YEARS YEARS YEARS YEARS YEARS YEARS YEARS YEARS YEARS YEARS YEARS YEARS YEARS YEARS YEARS YEARS YEARS -6.7% -6.7% -13.3% -13.3% -20.0% -20.0% -25.0% -25.0% -30.0% Source: Social Security Administration. 2 RETIREMENT BENEFITS Primary insurance amount (PIA) PIA is the Social Security retirement benefit at Full Retirement Age (FRA). It is the sum of three separate percentages of average indexed monthly earnings (AIME). For 2021, the percentages (bend points) are shown below. BEND POINT 1 BEND POINT 2 BEND POINT 3 n 90% of the first $996 of AIME + n 32% of AIME over $996 + n 15% of AIME over $6,002 and through $6,002 $3,500 First bend point begins at $0 100% $3,000 90% 80% $2,500 $2,000 60% Second bend point $1,500 begins at AIME $996 40% 32% $1,000 Third bend point PIA Amount begins at AIME $6,002 20% $500 15% Replacement Rate and Bendpoint % $0 0% $0 $2,500 $5,000 $7,500 $10,000 PIA (primary insurance amount retirement benefits at Full Retirement Age) AIME Replacement rate Bend point percentage of AIME 3 SOCIAL SECURITY REFERENCE GUIDE AVERAGE AND MAXIMUM BENEFITS Cost of living numbers for 2021 Earnings requirement to qualify Work and Social Security (earnings test)* for Social Security credits Applies to any Social Security benefit received before Full Retirement Age AGE 2021 EARNINGS LIMITS WITHHOLDING EMPLOYEE: SELF-EMPLOYED: $1,470 $5,880 Through the year Withheld by $1 for per quarter per calendar year before turning Full $18,960 every $2 of earnings Retirement Age ($1,580 per month)** above the limit Maximum taxable earnings In year of Withheld by $1 for SOCIAL SECURITY: MEDICARE: turning Full $50,520 every $3 of earnings $142,800 NO LIMIT Retirement Age ($4,210 per month)** above the limit Average and maximum monthly benefits (2021) MAXIMUM MONTHLY AVERAGE MONTHLY AVERAGE MONTHLY AVERAGE MONTHLY BENEFIT RETIREMENT BENEFIT BENEFIT FOR RETIRED WIDOW(ER) FOR RETIRED COUPLE AT FULL RETIREMENT AGE WORKER BENEFIT WHO BOTH WORKED $3,148 $1,543 $1,453 $2,596 *Earnings test applies to any benefit (retirement, spousal, survivors, divorcée) received before Full Retirement Age. If married, Social Security looks at the wages of the spouse receiving Social Security benefit (not their joint income). Social Security only considers wages earned after you start Social Security. Earnings test is based on earned income only. Dividend, capital gains, rental income, distributions from IRAs and workplace retirement plans, etc. may not be counted as earned income. Severance pay is counted as earned income, unemployment benefits are an entitlement benefit and not counted as earned income. Please contact a qualified tax advisor for more information on earned income. **Special earnings monthly limit may apply the first calendar year. 4 SPOUSE AND SURVIVOR COMPARISONS Spousal percentages Full Retirement Age 66 Full Retirement Age 67 FRA for spousal bene- 50.0% 50.0% 45.8% 45.8% fits is age 66 for anyone 41.7% 41.7% 35.0% 37.5% 37.5% born 1943 to 1954. It 32.5% 35.0% increases by two months for every year from 1955 to 1959. FRA is age 67 for anyone born 1960+. 62 YEARS 63 YEARS 64 YEARS 65 YEARS 66 YEARS 67 YEARS Age when you claim the spousal benefit Spousal benefits key facts REQUIREMENTS TO RECEIVE A SPOUSAL BENEFIT SPOUSAL BENEFIT CALCULATION n Must be currently married to your spouse for one year (ten years n Amount is based on your spouse’s benefit at their Full if divorced) Retirement Age (regardless of how old they were when they claimed their Social Security benefit) n Your spouse must be receiving their retirement or disability benefit n Percent is based on your age when you apply n Available even if you didn’t work IF BOTH SPOUSES WORKED CLAIMING BEFORE FULL RETIREMENT AGE (FRA) n If your spouse claims before/ after FRA it doesn’t impact how n Generally receive greater of your retirement or spousal benefit (possible exception if born on or before 1/1/1954, see page 8) much you receive as a spousal benefit n If you claim before FRA, it reduces your spousal benefit n Only one spouse can receive a spousal benefit Source: Social Security Administration 5 SOCIAL SECURITY REFERENCE GUIDE SPOUSE AND SURVIVOR COMPARISONS Survivors percentages Full Retirement Age 66 Full Retirement Age 67 FRA for survivors benefits 100% 100% 95.3% 91.9% 95.9% 85.8% 90.5% 87.8% is age 66 for anyone born 81.0% 79.6% 83.7% 76.3% 75.6% 1945 to 1956. It increases 71.5% 71.5% by two months for every year from 1957 to 1961. FRA is age 67 for anyone born 1962+. 60 YEARS 61 YEARS 62 YEARS 63 YEARS 64 YEARS 65 YEARS 66 YEARS 67 YEARS Age when you claim the survivors benefit Survivors benefits key facts REQUIREMENTS TO RECEIVE A SURVIVORS BENEFIT EVENTS BEFORE FULL RETIREMENT AGE n Must be married to your spouse for nine months (ten years if divorced) n If you claimed your retirement or spousal benefit before FRA, you are still eligible for the maximum survivors benefit if you n Must be age 60 or older (50 if you are disabled) or have a “child-in- care” (see page 19) are FRA or older when you apply for the survivors benefit. n If the deceased passed away before FRA without claiming, the SURVIVORS BENEFIT CALCULATION survivors benefit is based on what the deceased would have n Amount is based on benefit deceased spouse was receiving. (See page received at his/her FRA. 9 for more information). n If widow is between ages 60 and 70, widow may be eligible n Percent is based on how old you are when you apply for the survivors to start with one benefit and switch to the other. (See page 9).