Like Social Security Benefits, the Survivor benefits are also difficult to compute and usually need a automatic calculator. However, knowing the basis of how they are calculated can be useful and help one be aware of the benefits that can sometime become available. Awareness is sometimes the key to timely and proper benefits.
The calculation of your SOCIAL SECURITY SURVIVOR BENEFIT is similar to that of Social Security Retirement benefits, with certain exceptions and conditionality. To a large extent, it is same as retirement benefit.
Eligibility for Social Security Survivor Benefits
Social Security Survivor benefit is available to the surviving spouse near the retirement age or a dependent child under the age of 18 (there are exceptions). The minimum age for collecting survivor benefit is 60 years. The survivor benefit is largely based on the retirement benefit.
Calculation of Social Security Survivor Benefits
The first step would be to calculate the retirement benefit, and the age of retirement or the age at which the person becomes eligible for full retirement benefit.
Age of retirement is relevant for survivor benefits to the extent that if the retiree had opted for retirement benefit at the normal age and become eligible for full benefit, the surviving spouse will also be eligible for the same. However, if the deceased had opted for a reduced retirement benefit, then the spouse will also get the reduced amount.
The Social Security retirement benefits are calculated by a complex formula, using the following steps.
(i) Annual earnings for all the years in which you have earned an income are indexed to the value in current year. This is done using WAGE INDEXING, which is somewhat different from inflation indexing, and leads to a higher value because of rising incomes and standards of living.
(ii) Take the earning of those 35 years in which your indexed income was highest.
Income during the other years will be ignored.
(iii) All the indexed income of those 35 years is added together, and then divided by 420 (the number of months in those 35 years) to get the AVERAGE INDEXED MONTHLY EARNING or AIME. For instance, if a person who had maximum-taxable earnings since he was aged 22, retires at age 62 in 2017, his AIME will be $9,784.
(iv) BY applying a formula on the AIME, SSA calculates the PRIMARY INSURANCE AMOUNT (PIA), which becomes the basis of payment to the individual. PIA is the sum of three separate percentages of portions of the AIME, which are fixed by law, the dollar amounts in the formula, called "bend points," change every year in accordance with the national average wage index. For instance, for a person with maximum-taxable earnings in each year since age 22, retiring at age 62 in 2017, the PIA would equal $2,888.00.
(iv) The PIA would be taken into account the ‘reduced’ benefit to which he would be eligible. The reduction in his case comes from his decision to retire at an age lower than full retirement age. The MONTHLY RETIREMENT BENEFIT is calculated using a formula that gives a higher credit to initial dollars compared to additional dollars of income, in order to allow higher benefit to lower income workers.
(v) The benefits once calculated, are adjusted in subsequent years for inflation, known as COST OF LIVING ADJUSTMENT or COLA.
Components of Social Security Survivor Benefit
The survivor benefits for the family depend on the average lifetime earnings of the deceased. The higher your earnings, higher would be the. The maximum benefit for a survivor is limited to what the deceased would have received if she was still alive. The total amount that the family can receive is between 150 percent and 180 percent of the worker’s full retirement benefit amount.
There are four components of survivor benefits.
(i) Survivor benefits for the Spouse depend largely on age. A widow or widower of full retirement age or older is entitled to 100% of the retirement benefits of deceased. A widow or widower, aged less than the full retirement age but 60 years or more is entitled to anywhere 71.5% to 99% of the retirement benefits. A disables widow or widower, from 50 to 59 years is entitled to 71.5% of the retirement benefits.
(ii) A one-time death benefit of $ 255
(iii) Survivor benefits for dependent child under the age of 18 years, or up to 19 years of age if elementary or secondary school, or if disabled are 75% of retirement benefits. In such cases, both the children and the spouse are eligible to receive 75% of the retirement benefits, subject to ceiling for the family, till the youngest child reaches the age of 18 years.
(iv) Surviving parents, aged 62 years or older can also get survivor benefits, which is 82.5% for one surviving parent and 75% each for both surviving parent.
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