Bob Carlson - Wheres My Money?: Secrets to Getting the Most out of Your Social Security

Praise for

Wheres My Money?

Bob Carlson is the worlds #1 retirement expert. His new book is a gold mine of information that will save you tons of money and maximize your benefits from Social Security and Medicare. It includes tips and details you will never get from the government. Your spouse and family will forever be grateful!

Mark Skousen, editor of Forecasts & Strategies

Having helped Americans plan their estates for over forty-eight years, I know first hand how confusing Social Security can be. And now, with all the new laws, it is a massive, mysterious maze. Bobs new book, Wheres My Money?, clears up the confusion in an easy-to-understand format. It is, by far, the best work I have ever read on the subject. Considering that longevity risk (people outliving their retirement assets) is a serious problem, there has never been a more crucial time for us to prepare for the long haul. You must have Bobs book on hand to use as your guide, as it was written to help you get the most out of what is rightfully yours. Great job!

David T. Phillips, president of Phillips Financial Services

Bob Carlson is my go-to resource for all things retirement, and especially for confusing topics like Social Security. He has detailed knowledge and presents information in a clear way that helps real folks make important decisions.

Eric Tyson, bestselling author of Personal Finance for Dummies and Investing for Dummies

To all the readers of Retirement Watch who over the years helped me identify the issues they face and develop practical solutions

A s with other government programs, Social Security has its own vocabulary and lingo. Naturally, the words and terms that are unique to Social Security are turned into acronyms. In the book, I try to use the full term in each chapter before resorting to the acronym. But sometimes readers miss the first mention or get lost in frequent use of an acronym.

Theres a more complete list of key Social Security terms and their definitions in the Appendix. But here in the front of the book I list the key acronyms that are used throughout the book so that you can dive in without first reviewing the Appendix and can quickly turn back to this page for a reminder of key acronyms.

Social Security Administration. This is the government agency that administers the Social Security program. It issues Social Security numbers and administers all the different benefits under Social Security: retirement, disability, survivors and Supplemental Security Income. It is considered an independent agency, meaning it is not part of any cabinet department of the U.S. government. Its website is www.socialsecurity.gov. The main toll-free telephone number is 800-772-1213.

Full Retirement Age. This is the age at which you are eligible for full retirement benefits (FRB). FRA is the age at which you are eligible for the standard retirement benefit, without any reductions or additions.

FRA used to be 65 for everyone. But a rewrite of the Social Security law in the 1980s changed the rules. FRA now is between 66 and 67. Your FRA depends on your year of birth. The schedule of FRAs is in chapter 4 in Table 4.1.

Full Retirement Benefit. This is the retirement benefit you receive if you begin claiming benefits at your FRA. The amount depends on your earnings history.

Primary Insurance Amount. This is another term the SSA uses for FRB. The calculation of the PIA, or FRB, is described in chapter 4.

Average Indexed Monthly Earnings. This is a number calculated from your earnings history and used to determine your monthly Social Security benefits. Your annual earnings are adjusted for general wage inflation during your career. Your highest thirty-five years of earnings, after the adjustment, are used to compute the AIME. A formula is applied to the AIME to determine your PIA/FRB. Details of the computations are in chapter 4.

Cost of Living Adjustment. Social Security benefits are adjusted, or indexed, for inflation each year. The Consumer Price Index is used to make the adjustment. Late each year the SSA announces what the COLA will be for the next year. Benefit payments for January are adjusted for the COLA.

Delayed Retirement Credits. When you delay the beginning of Social Security retirement benefits until after your FRA, the benefits are increased for each month of delay. A full year of DRCs increases your FRB by 8 percent. Further details are in chapter 4.

K ey parts of Social Security are adjusted for inflation late each year. These adjustments affect the taxes that workers and employers pay and the amounts beneficiaries receive. To ensure you have the latest data, I include the latest updates on this page. Compare any amounts listed in the book to the latest data here.

Cost of Living Adjustment (COLA)

1.3 percent

The 7.65 percent tax rate includes both Social Security and Medicare taxes. The Social Security portion, also known as OASDI or FICA, is 6.20 percent on earnings up to the maximum taxable earnings, or wage base, (listed below). Employers pay a rate matching the employee tax rate. The Medicare portion, also known as HI, is 1.45 percent on all earnings. Individuals with earned income of more than $200,000 ($250,000 for married couples filing jointly) pay an additional 0.9 percent in Medicare taxes.

Maximum Taxable Earnings for Social Security

$142,800

Earnings for a Credit toward Coverage

$1,470

Maximum Initial Social Security Benefit at Full Retirement Age

$3,148 per month

The bend points are used in the SSAs formula for computing PIA, or FRB. The bend points ensure that the computation of Social Security benefits is progressive, meaning that workers with lower lifetime incomes receive a higher percentage of their average incomes in benefits than do workers with higher lifetime incomes.