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Session 2 Fundamentals of Social Security

CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAM Retirement Planning & Employee Benefits. Session 2 Fundamentals of Social Security. Session Details. OASDI. Old Age, Survivors, and Disability Insurance has three main components: Retirement (old age)

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Session 2 Fundamentals of Social Security

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  1. CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMRetirement Planning & Employee Benefits Session 2Fundamentals of Social Security

  2. Session Details

  3. OASDI Old Age, Survivors, and Disability Insurance has three main components: • Retirement (old age) • Disability (disability of wage earner) • Survivorship (death of wage earner)

  4. Key Terms in OASDI Programs • Quarter of coverage ($1,200 in 2014) • Currently insured/Fully insured • Average Indexed Monthly Earnings (AIME) • Full retirement age (FRA) • Primary Insurance Amount (PIA) • Spousal benefit • Benefit reductions due to age • Benefit reductions due to earnings • Events that trigger the end of benefits • Divorced spouse coverage (married 10 years)

  5. Full Retirement Age

  6. Benefit Reductions Due to Earnings

  7. Retirement Earnings Test Example

  8. Qualifying for Social Security Disability Benefits • Disabled worker must be fully insured (at least 40 quarters) and • Have worked for at least 20 of the last 40 quarters

  9. Qualifying for Social Security Survivor Benefits • Deceased worker must have been either fully insured (40 quarters) or • Currently insured (at least 6 of last 13 quarters)

  10. Social Security Benefit Review

  11. Johnson Family Example • Robert Johnson died at age 35. Survivors are: • Wife, Jane (age 35). • Daughter, Juli (age 6). • Son, Bobby (age 3). • His PIA is $1,200. • Maximum family benefit is $2,250.

  12. Family Limits 35 40 45 47 48 55 60 65 66 50 Jane’s Age *If widow(er) is disabled within seven years of spouse’s death. Social Security payments may begin at age 50. † If benefits begin at 60. 71.5% PIA; at 62.75% PIA: at 65, 100% PIA.

  13. Income Tax on Social Security Benefits

  14. Income Tax on Social Security Benefits Thresholds are arrived at by using “provisional income.” The main components of provisional income are: • AGI • Tax-exempt interest income (muni bonds) • One-half of OASDI benefits

  15. CERTIFIED FINANCIAL PLANNER CERTIFICATION PROFESSIONAL EDUCATION PROGRAMRetirement Planning & Employee Benefits Session 2End of Slides

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