-Savings and Investments  (discussed later).

 -Employer programs (discussed in the next section).

 -Government programs, considered in two groupings:

  1- Those which supply an income, such as   Social Security or Civil Service.
  2- Those which help reduce a retiree's expenses, directly or indirectly, such as Medicare.

 One of the overlooked sources to help reduce expenses is the:
Senior Citizen Centers
  A place for seniors to congregate and share common backgrounds, they also are mandated by law to be the Senior's resource to all other government programs.  This "information and referral service" may include:
- Quality Aging Program                                 -Transportation Program
- Nutrition programs, both congregate and Meals on Wheels
- Activities and socials                                   -Senior Companion Program
- Homemakers Home Health Aid Program        -Hospice Program
- Foster Grandparent Program                        -Telephone Reassurance
- Alternative Program                                     -Senior Employment Program
- Retired Senior Volunteer Program                 -Legal Services
- Health Screening Center

 Many of the ideas presented at these centers have given retirees the feeling of worth and self respect.  That in return, has improved their health and life satisfaction.

 Social Insurance has its modern beginnings in 1889 Germany, where Chancellor Otto von Bismarck introduced the first old age insurance program.  This laid the foundation for the introduction of various old-age assistance programs throughout Europe by the onset of World War I.  In 1920, the United States government followed their lead by instituting the Federal Employees Retirement program.  Several states soon followed with assorted plans of their own, so that by 1935, all except two states (Georgia and South Carolina) had programs that provided funding to widows and children.
 With the coming of the Great Depression came also the desire by many to have some type of assistance, so Franklin Roosevelt advocated a government assistance program which would cover both unemployed and retired workers.  The result of his efforts was the Social Security Act of 1935, which established the basic framework for our social welfare state today.

 With Social Insurance, people pay to insure themselves against loss, and do not receive benefits unless they have paid into the fund.  Key Social Insurance programs include OASDHI (often referred to as Social Security), Unemployment Insurance, and Worker's Compensation.

 In the case of Public Assistance, or Income Maintenance Programs, aid to the needy is financed from taxes and is not based on a previous record of productivity, but is instead based on need, and is therefore means tested. Recipients of Public Assistance are often stigmatized as lazy.  Some examples of Public Assistance include AFDC (Aid to Families with Dependent Children); SSI (Supplemental Security Income; and GA (General Assistance)

 Some of the major social policies in the United States affecting the welfare of individuals with special needs include:

SOCIAL SECURITY ADMINISTRATION - SSA
When: 1935 - Franklin D. Roosevelt's "New Deal"
What  Social Insurance (also called transfer income)
Who:  Elderly, vocational rehabilitation and unemployment. Originally covered elderly, survivors, and disabled.
Why:  Move elderly out of the workforce; make jobs for younger people.
How:  FICA - Federal Income Contributory Act  (Originally, 1/2 of 1% of the first $3,000 earned. 

The First benefit ever paid was to Ida Fuller in 1940 ($22/month)

When: Passed 1972; implemented 1974
What: Income floor for the worthy poor; is means tested
Who:  Aged (65+), blind (vision 20/200), disabled of any age
Why:  Provide cash assistance
How:  General revenues

 

When: 1965 - Lyndon B. Johnson's "War on Poverty"
What: Health Insurance  (When started, 80% received, currently only 41% receive)
Who:  Aged (65+), disabled (must be on Social Security for 2 years to qualify), those on kidney dialysis
Why:  Provide humane care to the worthy poor
How:  Part A (Universal) - payroll taxes, FICA
  Part B (Optional) - individual pays part (withheld from Social Security check); general revenues (taxes) pays part

MEDICAID - Title 19  "The tail that wags the (Medicare) dog"

When: 1965
What: Medical Assistance - means test required
Who:  Elderly, recipients of AFDC and SSI, low income
Why:  Provide humane care to the worthy poor
How:  State (25%) and Federal (75%) funds

OLDER AMERICANS ACT - OAA "Cornerstone of SOCIAL aid for the elderly in America"
When: 1965
What: Community services for older Americans
Who:  Older Americans (60+)
Why:  Services, advocacy, politics
How:  General revenues; "contributions" (the law prohibits means testing or charging of fees for services for older Americans, so the elderly are encouraged to "contribute".  Many contribute because they want to pay for what they get.)

 

 Of the government programs which supply an income, the most widely relied upon is social security. Starting in 1935, Social Security (or FICA) required an employee contribution of 1/2% on the first $3,000 of earnings. Today (1999), the employee's contribution is 7.65% on the first $72,600 in earnings (1999 had a 1.3% COLA).   The employer, of course, also pays an equal amount for the employee into the system. (Self-employed people pay 15.3%). In 1991 an expansion of the Medicare Tax portion of the FICA withheld from employees and employers started. In the past the 1.45% of the withholding (for each of the employer and employee) for the Medicare portion stopped at the same level as did the rest of the FICA, but now it continues; it is unlimited.
 Although the system is ordinarily a "pass through" conveyance (the money collected from today's workers is passed to beneficiaries as it is received) the current balance in the OASDI trust funds is in excess of $4 trillion.  This is in anticipation of the large baby boom generation who will begin to retire around the year 2010.
 The average monthly benefit (as of Jan. 1998) for a all retired workers is $765, for a couple (both receiving benefits), $1,288, and a widow(er), $731. The maximum benefit for a worker retiring at age 65 in 1998 is $1,342. The benefits are adjusted automatically with the Governments' announcement of the  inflation rate (CPI 2.1% for 1997) each year. The first beneficiary, Ida Fuller,  in 1940 was paid $22 a month!
 Since it's inception, many changes have altered Social Security, with not the least being in 1965 with Medicare.  Health issues and medicare will be discussed in Chapter 7, "Managing  Economic Risks of Life." But it is important to know that Social Security pays monthly into Medicare a "premium" for each of the Medicare beneficiaries (in 1988 the premium was $234 per month). Those who were NOT eligible for Medicare may "buy-in" to the system by paying that same monthly premium.

Social Security Notes
 The social security law includes the following provisions:
 --A tax on a portion of the Social Security benefits of some retirees (whose adjusted gross income exceeds specified levels).
 --The requirement that newly hired Federal workers and tax exempt organizations and their employees join the Social Security system.
 --A phase-in increase in the age at which full retirement benefits will be payable.  The current age is 65; by 2027 it will be 67. The following table shows the phase-in:
Year of birth    Normal Retirement Age
1937                    65 years old
1938                    65 years 2 months
1939                    65 years 4 months
1940                    65 years 6 months
1941                    65 years 8 months
1942                    65 years 10 months
1943-1954           66 years
1955                   66 years 2 months
1956                   66 years 4 months
1957                   66 years 6 months
1958                   66 years 8 months
1959                   66 years 10 months
1960 and later     67 years

 

 --Increases in the rates of federal Insurance Contribution Act (FICA) tax payable by employers and employees.
 --Increases in the benefits you may receive by delaying your receipt of retirement benefits past your normal retirement date. Each month counts between your normal retirement age and age 70. This increase could range
from 1-8%.
 --Increases may be possible in the size of benefit for working past your
normal retirement date whether you are receiving benefits or not. This may be possible due to higher earnings history that may result.
 --A special rule allowing people who retire during the calendar year to receive benefits from the remainder of the year regardless of annual earnings (as long as they stop working during months of the receipt of benefits).
 --A new reporting system which allows persons to "audit" their account easier and gain an estimate of benefits that are accruing.
 --"Fully Insured" status is permanent and allows participation in all parts of the program:

Credits Needed to be Fully Insured When age 62
Reached age 62 in:         Credits Needed:
 1986                                      35
 1987                                      36
 1988                                      37
 1989                                      38
 1990                                      39
 1991 or later                           40

 

 --You can earn up to 4 credits per year. In 1996, you earned one credit for each $640 of income in a quarter but earning $2,560 anytime in '96 would result in four "credits" (quarters) of coverage.

 

   In event of death, Survivor benefits are paid in this manner:
 --Surviving Spouse's Child Care Benefit.  The surviving spouse will receive child care benefits for each child (up to 2 children) until the youngest child reaches age 16.  After that, this benefit is lost.

 --Children's Benefits. The surviving children will receive benefits until age 18 or upon completion of  high school, which ever is first.  The maximum level  of payment is again reached at 2 children.
 --Surviving Spouse's Retirement Benefit.  This may be elected instead of the spouse's own social security retirement amount that he/she separately may have earned through employment.  The amount is based on the decedent's work history.

 In the event of disability: (Prior to retirement)
 --Disability payments may be applied for after 5 continuous months of "total" disability due to illness  or accident if it appears that the disability is either fatal or will last at least 12 months.
 --If you qualify, payments may continue until 1) death, or 2) age 65, or 3) you are no longer "disabled" in the eyes of Social Security, whichever comes first.  At age 65, the disability benefits  convert to a retirement benefit.
 --The actual amount paid under disability is determined by the number and ages of minors, your earnings history (called "AIME"), and your spouse's  income.  Basically, it works out to the amount that  you would have received at normal retirement.

Audit your Account (before retirement)
 Since your records may not agree with the Social Security Administration's records, it is wise to "audit" your account about every two years.  If a mistake has been made, it may only be corrected if it goes back less than 3 years, 3 months, and 15 days.  After that time, it is unalterable for any reason.  You may "audit" your account by filling out form OAR-7004 "Request for statement of Earnings" that can be obtained at any district office of the Social Security Administration. You may also call the Social Security Administration's phone: 1-800-SSA-1213.

Dealing with Social Security
 While death and disability benefits should be filed for immediately upon the event, retirement benefits must be filed for "within 3 months of retirement."  Since Social Security pays into Medicare (which is handled by the Health Care Financing Administration) for each beneficiary who signs up, the window to sign up with Medicare is 3 months before age 65 through 4 months after. It does not matter if a person is actually taking Social Security or not. A penalty follows those who sign up for Medicare "late" due to the loss to that program of the premium that Social Security would have been paying to Medicare had the beneficiary signed up "on time."
 Under the 1986 Tax Reform Act, Social Security numbers are required to be able to claim an exemption for dependent children over 1 year of age.  Also, for the purposes of being able to make claim to the Social Security Administration, social security numbers on the dependents are required. For both of these reasons, it is suggested that you obtain social security numbers for any children soon after birth.
 Parents may obtain Social Security Cards for their young child by filling out the Administration's form (obtainable by mail) and submitting two forms of identification on the child (they will return the items to you).  Often used I.D includes:
  -- Birth Certificate
  -- Blessing/Christening Certificate

Social Security Retirement Benefits-Taxed?
 Since 1984, some retirees have seen their social security retirement benefits taxed.  Up to one-half of the benefits may be added to your taxable income.  However, retired persons living on little more than social security are usually not subject to this taxation:
 Social security benefits are not taxed under a "base amount" of $25,000 for singles and $32,000 for married filing jointly.  Married filing separately has a zero base amount.  To calculate this "base amount" add up all of the following:
  1- Adjusted gross income from the regular 1040 form.
  2- One-half of the social security benefits as reported to you (this includes Medicare benefits also).
  3- All tax-exempt interest (usually from municipal bonds).
  4- Exclusion taken for foreign earned income and   U.S. possession source income (if applicable to you).
 If the "base amount" does not total more than $25,000 for a single or $32,000 for a couple filing jointly, there is no tax. If the "base amount" is exceeded, then an amount up to one-half of the social security retirement benefit is added to the tax payer's obligation.  In effect, for every $100 of benefit, somewhere between $7.50 to $16.50 is returned in added taxes.

Loss of Benefits due to Excess Earning
 At and above age 70, you may work and earn any amount without losing benefits under the "excess earnings" rule. Between ages 65 to 70 you may earn up to *$15,500 in 999 without losing benefits. (This amount automatically increases with inflation each year). For those under age 65, you may earn up to $9,600 in 1999  without losing benefits.*('97 bill is now raising rate to $30,000 by '02)
 If you are under age 65 and on Social Security, for every $2 you earn in "excess of the limits," you lose $1 of Social Security benefit (often done in a "pay-back"). For persons between 65 and 70, for every $3 you earn in excess of the limits, you must pay back $1. The definition of "earned":  wages as an employee and/or net earnings in self employment.
 If you go outside of the US for 30 days or more while receiving Social Security benefits, your absence may affect your right to further benefits. The booklet "Your Social Security Checks While You Are Outside the United States" should be obtained from your nearest Social Security office.

Calculating Benefits
 Only the Social Security Administration can give an authoritative estimation of retirement income a person should receive.  Within two years of retirement the Administration will, upon your request, supply the data. A new program will allow a projected figure to be obtained by any worker requesting it. Phone 1-800-SSA-1213. This figure is  a person's monthly retirement income at normal retirement age based on current circumstances (like earnings amount).
 To give an idea of how the system works, however, the following is offered: A person' age at birth limits the over-all benefits (older persons paid a lower percentage on a lower wage base than do younger people). The following chart selects the maximum AIME (limits to amount social security will pay) by birth for retiring at "normal" retirement for some ages:
Year of Birth   Max. "AIME"   Year of Birth    Max. "AIME"
    1923                $2,139             1944                $3,475
    1933                  2,846             1954                 3,729
    1943                  3,435             1964                 3,750

 

 -- The level of earnings on which Social Security taxes were paid determines, with an inflation factor, the "AIME" (Average Indexed Monthly Earning) which is subject to the "limit" mentioned.
 -- To simplify, consider your "AIME" the average of your last 5 year's monthly gross earnings, subject to the limit.
  -- The Social Security charts then establish your benefits. (From "Social Security, It Never Stops Working," 1988 Government pamphlet. Cost of  Living should be added to the following figures).

 Please note that on the next charts, the spouse is considered the same age as the retired worker. The spouse in the chart is taking a "dependant's" portion, and may receive a higher amount if her/his own work history allows such.
 Please note also that these are projected figures, with an  inflation factor built in. Please note as well that the charts assume a "steady earnings pattern."

Approximate Monthly Benefit If You Retire At "Full Retirement Age"
AND Had Steady Lifetime Earnings: 1996 from Soc Sec Admin
 Retired Workers earnings in 1996
Wage in 1996:              $20,000    $30,000   $40,000   $50,000
45   Worker only               $786      $1,053     $1,201    $1,326
       Worker & spouse      1,179      $1,579     $1,801    $1,989
55   Worker only               $786      $1,053     $1,192    $1,287
       Worker & spouse      1,179      $1,579     $1,788    $1,930
65   Worker only               $785      $1,047     $1,151    $1,211
       Worker & spouse      1,177      $1,570     $1,726    $1,816
--------------------------------------------------------------

Approximate Monthly Survivors Benefit if the Worker Dies: 1996
            Deceased worker's 1996 earnings
Wage                                               $20,000   $30,000   $40,000  $50,000 

Worker dies at age 35:
                 Spouse & 1 child                1,179      $1,580    $1,801   $1,989
                 Spouse & 2 or more kids    1,457        1,842      2,101     2,320
                 *Spouse at age 60                 562           753         858        948 

 

Worker dies at age 45:
               Spouse & 1 child                 $1,179      $1,580    $1,801   $1,975
               Spouse & 2 or more kids       1,457        1,842      2,101     2,303
             *Spouse at age 60                      562           753         858        941

Worker dies at age 55:
              Spouse & 1 child                  $1,179      $1,579    $1,766   $1,878
              Spouse & 2 or more kids        1,457        1,841      2,060     2,190
            *Spouse at age 60                       562           752         842        895

  *This figure is NOT projected for inflation, therefore should be higher when spouse actually would reach age 60. It is also the dependent's portion, and the spouse might do better on her/his own earnings history than this (you can not have both, must choose one or the other).
 -- The child or children's portions mentioned above are only in effect if they are "dependents" as defined by Social Security. This is now defined as under age 16 for "mother's benefits" to be paid and under 18 for the child's portion. No longer are their benefits to college educate the surviving child.

 

SSI: Supplemental Security Income
 Although not only specific to retirees, the SSI program was designed in 1974 to be a cash assistance program for the needy aged, blind and disabled. More than half of the current recipients are not aged, but disabled persons.  The Social Security Administration estimates that 30-35% of the aged eligible for the SSI do not participate in the program.
 The purpose of SSI is to help people have a minimum level of income.  Since SSI is "means tested", the amount of assets are used to determine eligibility. In 1995, the maximum allowable assets were $2,000 or less for an individual and  $3,000 or less for a couple. When no other income is available, the maximum that SSI will pay in 1998 is $741 per month for a couple and $494 for an individual who is not married.

Senior Companion/Foster Grandparent
 Both of these programs were designed to help low-income retirees supplement their income needs.  These programs, administered through the local Area Agency on Aging, provide tax-free income (which also is not counted against social security benefits in any way) and also pays related costs.

 

Civil Service
 Changes made in effective 1984 altered the retirement benefits for those in Federal employment. Workers hired after the changes have "Federal Employees Retirement System" (FERS), which incorporates Social Security coverage and Thrift Savings Plan (similar to a "401(k) plan" that corporations often use). Those hired before 1984 were given the option to move over to the FERS under special transition rules (the move worked best if the worker planned another 10 years with the Government and contributed at least 6% of their salary into the Thrift Savings Plan). The pre-1984 plan was "Civil Service Retirement System" (CSRS). Both are mentioned in more detail in the special appendix. For those who kept CSRS, a new mandatory payroll deduction into Social Security also came into being to "buy into" medicare (which is administrated by Social Security). Newly hired Federal Workers, as well as many others who had previously been able to "opt out" of Social Security, now must pay into that system.
 Changes have also occurred in pay-out provisions of Civil Service.  The government has put pressure on new retirees through pay-out options to cover spouses who may survive the retiree.

 CHAPTER 5 IN RETROSPECT:
  The purpose of this section has been to understand government benefits that might be available in retirement.
 1.  How do you view Social Security benefits in your situation?

 2.  Are (or will) your Social Security Benefits be taxed?

 3.  Will you lose some Social Security benefits due to "excess earnings?"

 4.  Have you been to your local Senior Citizen's Center?