My Mother's Social Security Was Cut! (calculate, tier, percentage, taxable)
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Just received her new statement from the SSA. Her SS was cut from $1041 to $796. Is this typical for the new year? She did have a sale of a piece of income property and did realize a pretty substantial gain on it, and of course paid the appropriate capital gains taxes, but could this have affected their decision, or is this an across-the-board cut for all seniors regardless of their income outside of SS? More info greatly appreciated.
The estimated benefits are calculated assuming your earnings continue at the current rate until 65... so a change in earnings for a person less than 65 can dramatically change the estimate.
Just received her new statement from the SSA. Her SS was cut from $1041 to $796. Is this typical for the new year? She did have a sale of a piece of income property and did realize a pretty substantial gain on it, and of course paid the appropriate capital gains taxes, but could this have affected their decision, or is this an across-the-board cut for all seniors regardless of their income outside of SS? More info greatly appreciated.
Irrelevant.
Social Security benefits are determined by a formula, which uses as a starting point the average annual income of your three highest years of earnings.
For most of the Boomers, that means the 3 highest grossing years will come in the last 10 years of their work history.
For Gen Dumb and Gen Dumber, that will be the last 10 years of the middle one-third of their life. Why? Because in this Brave New World they will end up losing their job and have to start over at a lesser wage/salary, and they may never have the same earning power again.
Your assets, such as your home, stocks, bonds, annuities, trust funds etc are not used in determining Social Security benefits, but they are used in determining Medicare eligibility for certain benefits.
Each Social Security Cohort has a different retirement age. The first Cohort can retire at age 62 with full benefits.
The 2nd Cohort can retire between the age of 65 and 67 prorated. That means depending on your birth date, you may be able to retire at 65 with full benefits, or you may have to wait until age 65 years and 3 months to get full benefits or age 65 years and 10 months to get full benefits or age 66 years and 5 months to get full benefits.
The 3rd Cohort are those born on or after January 1, 1960 who cannot draw 100% of benefits until age 67.
However, anyone can retire at age 62, but you receive reduced benefits for the full duration of your retirement. Your benefits will not increase when you reach your pre-determined retirement age.
Most likely, SSA miscalculated in determining her benefits, or failed to correctly put in the correct Cohort. She can appeal it, for what it's worth.
The letter from SSA should state exactly why here benefits were reduced.
Social Security benefits are determined by a formula, which uses as a starting point the average annual income of your three highest years of earnings.
I'm sorry - but this is absolutely NOT true.
Here is the correct information straight from the Social Security website:
"Social Security benefits are based on your lifetime earnings. Your actual earnings are adjusted or "indexed" to account for changes in average wages since the year the earnings were received. Then Social Security calculates your average indexed monthly earnings during the 35 years in which you earned the most."
To the original poster - I would suggest contacting your local office to find out why this reduction in benefits occurred. It could just be a simple error. Remember that if she still works, her benefits are reduced by a percentage of her income. Again directly from the website:
"If you are younger than full retirement age during all of 2011, we must deduct $1 from your benefits for each $2 you earned above $14,160."
I don't think so. It's earned income (i.e., wages, salary, tips, commissions, profits from your own business in which you work) which can trigger the offsetting reductions in benefits. The sale of the income property was investment income, which shouldn't affect anything as far as Soc. Sec. goes. The operative word in that quote in post #4 is "earned". Interest, dividends, capital gains, etc. are not categories of earned income.
The sale of the income property could have resulted in the Medicare Part B premium going up. Since this is deducted from the Social Security retirement benefit, a larger Medicare premium would result in a smaller benefit. Unlike the Soc. Sec. earnings limitation which is based on earned income only, the amount of the Medicare Part B premium is based on one's "modified adjusted gross income" from the IRS tax return of the latest available year. And that latter amount includes all income (investment income, capital gains, interest, etc.). There are five tiers of Medicare Part B premiums, all based on adjusted gross income. You can find the table at the Soc. Sec. website.
I don't think so. It's earned income (i.e., wages, salary, tips, commissions, profits from your own business in which you work) which can trigger the offsetting reductions in benefits. The sale of the income property was investment income, which shouldn't affect anything as far as Soc. Sec. goes. The operative word in that quote in post #4 is "earned". Interest, dividends, capital gains, etc. are not categories of earned income.
Not anymore. I had a lady come into my office panicking about her SS getting cut as well due to sale of property, got the exact same letter as the OP. Basically the sale of the property makes it look like you are rich to the IRS so they cut the SS payments down. There is nothing you can do about it. Eventually the SS department will review the next income tax form and bump up the SS payments again.
People seriously need to consult a tax advisor when it comes to matters like this. Especially before they make major life choices.
Quote:
Most likely, SSA miscalculated in determining her benefits, or failed to correctly put in the correct Cohort. She can appeal it, for what it's worth.
Nope, the calculation is correct. The calculation includes one-time property sales. Appealing to the SS department will do nothing for you since the calculation is correct.
Thanks much for all the helpful info, friends. A bit more information: my mother is 90 and hasn't worked in decades. I pulled the letter from the Administration out. It appears that "The SS Act requires some people to pay higher premiums for their Medicare Part B and their prescription drug coverage based on their income." So this capital gain zinged her. Her new benefit is 1,185. and from that they deduct $320. for Med Pt B and $66 for prescription, leaving $798. It says it is only for 2012 but I'll believe that when I see it.
So a34dadsf and Escort Rider are absolutely correct.
Thanks much for all the helpful info, friends. A bit more information: my mother is 90 and hasn't worked in decades. I pulled the letter from the Administration out. It appears that "The SS Act requires some people to pay higher premiums for their Medicare Part B and their prescription drug coverage based on their income." So this capital gain zinged her. Her new benefit is 1,185. and from that they deduct $320. for Med Pt B and $66 for prescription, leaving $798. It says it is only for 2012 but I'll believe that when I see it.
So a34dadsf and Escort Rider are absolutely correct.
Glad you got to the bottom of the issue. Just for the record, a34dadsf and I cannot both be correct because we said different things in our posts.
There are two different possible ways a person's Soc. Sec. can be less in a given year.
1.) If the person is not yet at "full retirement age" as defined by Social Security (and that would be 66 for most of us posting here), there is an earnings limitation which applies. If earned income is over a certain amount, the retirement benefit is reduced. The possibility no longer applies once we hit full retirement age. We could become a movie star or a rock star and earn millions of dollars each year, but our So. Sec. benefit would remain the same.
2.) A person's Medicare Part B premium could go up, which is what you discovered in your mother's case. Any income, if over the threshholds, can cause this, not just earned income.
These two things are totally separate, and I'm afraid a34dadsf is confusing them.
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Just thought of a possibility
