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Social Security Planning
- 1. 1 TIMONIUM, MD • COLUMBIA, MD • BEL AIR, MD National HealthInsurance Helps to cover the cost of some health care -65 & over -Disabled -People with certain illnesses Does not cover long term care expenses Funded by payroll taxes and premium payments
- 2. 2 40 quartersof coverage through own or spouse’s (ex-spouse) employment and age 65. Example 1 – You are 65 and spouse is 55. You have 40 quarters. You qualify but spouse does not qualify until age 65. Example 2 – You are 65 and spouse is 55. You do not have 40 quarters but spouse does. You do not qualify for Medicare until your spouse is age 62. Example 3 – You wait until 67 to take social security. You must still sign up for Medicare at age 65. (Some exceptions apply) Example 4 – You take social security benefits at age 62. You are not eligible for Medicare until age 65.
- 3. 3 Initial Enrollment Periodis 7 months beginning 3 months prior to turning age 65. Apply 3 months before turning 65 Apply the month you turn 65- benefits are delayed for one month Apply during the 3 months after the month you turn 65- benefits are delayed Automatic Enrollment May happen if you are already receiving Social Security benefits. Annual Enrollment If you do not sign up within the 7 month initial enrollment period you can enroll between January 1 and March 31 each year. Coverage starts July 1 May pay higher Part B, C or D premium for late enrollment. Special exception for people covered under an employer group health plan.
- 4. 4 Generally stillapply during initial enrollment period for at least Part A Check with employer healthcare to coordinate benefits- generally Medicare will be primary and employer supplemental Consider delaying Social Security & Medicare if you are working and can contribute to Health Savings Account. If employer coverage ends you have 8 months to sign up to avoid a penalty. Part A – Hospital Insurance Part B - Medical Insurance Part C – Medicare Advantage Part D – Prescription Drug Coverage
- 5. 5 Pays forinpatient hospital and some in home health care Pays all or some portion of skilled nursing care for first 100 days. After 100 days Medicare does not cover. Does not cover long-term care, doctor visits or emergency room visits Cost Free if you meet the 40 quarters Can be purchased, $407 per month in 2015 If you buy Part A, generally you must also buy Part B
- 6. 6 Covers medically necessaryservices Doctor visits, labs, ambulance, outpatient care and home health services Medical equipment (wheelchairs, walkers, etc.) Preventive services including free annual wellness exam Generally pays 80% of most services, 100% of lab fees and vaccines Cost Monthly premium – currently $104.90 Increased premium if modified adjusted gross income is above $85,000 single or $170,000 married filing jointly. Depending on income premium ranges from $140 to $339 monthly If income drops you can request a reconsideration of the premium amount paid Part B deductible $147 annually.
- 7. 7 One plancovers same as Part A and Part B coverage and may have additional benefits similar to supplemental plan Similar to HMO or PPO Provided by private insurance companies approved by Medicare Covers costs within limits not covered by Part A and Part B Cost is about $50 monthly in addition to Part A and B cost May cause loss of employer/union coverage Must have Medicare Part A and B, or C. Cost vary depending on plan chosen and income. Average for 2014 is $40 per month Late Enrollment Penalty – If at any time after the initial enrollment period is over there is a period of 63 days or more when you do not have creditable prescription drug coverage you will pay a penalty when enrolling in Part D. Based on how many months you go without coverage. October 15 – December 7 annually – can make changes to plan
- 8. 8 MONTHLY PREMIUM VARIES AVERAGE $38 MONTH YEARLY DEDUCTIBLE $320 COPAYMENT Taxpayer pays copayment until totalcombined amount plus the deductible reaches $2960. Medicare pays 75% of costs. COVERAGE GAP Taxpayer pays 45% discount on covered brand prescription drugs and pays 65% of the plan’s cost for covered generic drugs until total amount paid for drugs reaches $4700 CATASTROPHIC COVERAGE Pay only a small copayment for each drug until end of year . Medicare Part D Extra Help -Medicare program to help people with limited income and resources to pay Medicare prescription drug costs. Medicare Savings Program – State programs that help people with limited income and resources to pay Medicare premiums, deductibles and copayments.
- 9. 9 Supplemental planto provide additional medical insurance for expenses not covered by Medicare. Must be enrolled in Medicare Part A and B. Designed for low income taxpayers. Varies per state Pays medical costs if you have limited resources income. Covers nursing home costs Must spend down assets
- 10. 10 40 Quarters- Maximum of 4 per year In 2015 - $1,220 per Quarter or $4,880 In 2015, if you earn $4,880 in January, and stop working - still earn 4 Quarters If you earn $10K in 2015, no additional benefit for qualifying (still 4 quarters) but might help in calculating your benefit Applies to be eligible for Medicare
- 11. 11 To ReceiveBenefits on Your Account ◦ You Qualify (40 Quarters) ◦ Age 62 or Over - or Disabled To Receive Benefits by Drawing on Someone Else's Account (i.e., Spouse, Parent, Ex-Spouse) ◦ They Qualify (40 Quarters) ◦ They Must be Dead, Disabled or Drawing Benefits Draws on own account Draws on spouse if: ◦ Still Married ◦ Age 62 or Older Spouse is Drawing and You Have a Child Under 16 in Your Care
- 12. 12 Draws onown account Draws on ex-spouse if: ◦ Married 10 years ◦ Not Married at age 60 ◦ Divorced 2 years ◦ Age 62, regardless if Ex-Spouse is Drawing ◦ Age 60, Ex-Spouse Dead Draws on own account Draws – on deceased spouse if: ◦ Age 60, if disabled at 50 Any Age - Caring for Dependent Child <16 years or Disabled
- 13. 13 Born: 9/25/44 Married for 19 years to D. Luker (Born in 1956) In 1999, married Catherine Zeta-Jones (Born in 1969) Two children born in 2000 & 2003 Children <18 years or <19 years in High School Dependent Parents, Step-Child, Adopted Children & Grandchildren
- 14. 14 Paid inthe following order: ◦ First - Paid to widow(er) ◦ Second - Children qualified for benefits on deceased worker (usually under 18 years of age) Can collect at any age No reduction in benefit Disabled before age 24 - six quarters in the three years before disability began Disabled from age 24-30 - quarters for working half the time between age 21 and the time of disability Disabled at 31 or older - Number quarters needed depends on age and the worker must have earned 20 quarters in the 10 years immediately before disability began (unless the worker is blind)
- 15. 15 Disabled at AgeQuarters Needed Disabled at Age Quarters Needed 31-42 20 52 30 44 22 54 32 46 24 56 34 48 26 58 36 50 28 60 38 62 or older 40 Disability (as defined by Social Security) : The inability to engage in any Substantial Gainful Activity by reason of any medical determinable physical or mental impairment which can be expected to last for a continuous period of period of not less than 12 months. Substantial Gainful Activity is defined as earnings of $1,090 per month (or $1,820 if blind) in 2015 in any work whether or not it is the work you were accustomed to. This is sometimes referred to as the severity rule.
- 16. 16 John losthis ability to perform his job because of a serious illness. He can never again perform the job he is accustomed to. However, he can perform a part- time job making $1,200 a month. When John applies for Social Security Disability his claim is denied. He is considered to be able to perform a substantial gainful activity meaning he cannot meet the definition of disability. Spouse if age 62 or older unless spouse's own social security benefit is greater than half the worker's benefit Spouse at any age if caring for the worker's child and the child is under age 16 or is disabled and receiving Social Security benefits Unmarried children, if they are: ◦ Under age 18 ◦ Age 18 or 19 if a full-time elementary or secondary school student ◦ Age 18 or older and disabled, if the disability started before age 22
- 17. 17 Was marriedto worker at least 10 years, Is unmarried and at least age 62, and Is not individually entitled to a retirement or disability benefit over half the worker's benefit Long Term Disability only 5 month waiting period before benefits begin Must be totally disabled ◦ For at least one year, or ◦ Expect to result in death Applicant may get retroactive payments for up to 12 months When on disability, the taxpayer qualifies for Medicare after 24 months or with chronic kidney failure or Lou Gehrig's disease ◦ For at least one year, or ◦ Expect to result in death
- 18. 18 Highest 35years for Social Security Benefit of replacing a "zero wage" in the highest 35 years. 10 11 17 34 35 YEARS WORKED MONTHLYBENEFIT Taxpayer averages earnings of $11,500 per year
- 19. 19 Do youqualify to collect under your spouse’s Social Security? If you qualify, will the benefit under your spouse be greater than your own benefit? Is going back to work for another year worth the expenses (such as payroll taxes)? Is going back to work for another year worth the value of your time? Website to Check Statements: www.ssa.gov/mystatement 1out of every 7 statements are wrong Statute of Limitations for correction of errors 1) Re-Issue W-2's – No Statute 2) Self-Employed – 3 years 3) Watch Filing Past or Late Tax Returns
- 20. 20 Earnings Potentialfrom age 62 to FRA (full retirement age) Financial Need Personal Health of the Individual Family Health History Marital Status Other Retirement Assets or Income Sources
- 21. 21 Age 62- 65 (reduced benefit with earnings limit) Age 66 - 67 (full retirement age – varies) Age 67 – 70 (earn additional delayed retirement credits) Widow/Widower – Age 60 unless disabled, then age 50 Age to Receive Full Social Security Benefits Year of Birth Full retirement age 1943-1954 66 1955 66 and 2 months 1956 66 and 4 months 1957 66 and 6 months 1958 66 and 8 months 1959 66 and 10 months 1960 and later 67 NOTE: People who were born on January 1 of any year should refer to the previous year.
- 22. 22 Year of BirthFull Retirement Age Payment Reduction % at Age 62 1937 or earlier 65 80.0% 1938 65 + 2 months 79.2% 1939 65 + 4 months 78.3% 1940 65 + 6 months 77.5% 1941 65 + 8 months 76.7% 1942 65 + 10 months 75.8% 1943 – 1954 66 75.0% 1955 66 + 2 months 74.2% 1956 66 + 4 months 73.3% 1957 66 + 6 months 72.5% 1958 66 + 8 months 71.7% 1959 66 + 10 months 70.8% 1960 and later 67 70.0% Average benefit – all retired workers - $1,306 Average benefit – married couple both receiving benefits - $2,140 Maximum benefit – single $2,663 1.7% COLA
- 23. 23 12 Ways to Spend Social Security Increase Retirees, if you haven’t already heard the good news, you’ll be getting more from Social Security next year. Beneficiaries will receive a 1.7% cost‐of‐living adjustment in 2015, boosting the average monthly benefit for a retired worker from $1,306 to $1,328. That $22 extra each month will add up to $264 over a year. It’s not a windfall, but the extra cash certainly will come in handy. In addition to covering everyday expenses, here are 12 ways retirees can best use their Social Security increase. By: Cameron Huddleston Source:Kiplinger Consumer News Service 1. Protect your identity. Scammers and identity thieves often target seniors. One way to prevent your personal information from falling into the wrong hands is to shred statements and other documents containing vital details such as account numbers after you no longer need them. A good cross‐cut shredder costs about $100. It might also pay to enroll in a credit monitoring service that can help if you do become a victim of identity theft. For $14.99 a month, TrustedID will monitor your credit reports for suspicious activity, scan black‐market sites for your Social Security, credit card and bank account numbers, help you cancel and replace stolen cards, and provide insurance to cover costs you incur after identity theft. 2. Make a wise investment. Kiplinger recently pinpointed nine stocks with significant growth potential. Among our picks is Facebook, which is now trading at about $75 a share. So you could buy three shares with the extra $264 in Social Security benefits, and have change left over. Or consider a great mutual fund you can begin investing in for just $100. 3. Modify your home to help you age in place. You can add a grab bar in a bathroom for about $100 to $175, including materials and labor, according to Homewyse.com, a Web site that estimates home‐improvement costs. Or you can replace doorknobs with easy‐to‐use lever‐style handles for about $15 to $25 each for non‐locking interior levers and $25 to $50 for lockable levers, according to the National Association of Realtors' HouseLogic.com.
- 24. 24 4. Take a defensive driving class. You can update your driving skills and perhaps even earn an auto insurance discount by taking a refresher course from organizations such as AARP and AAA. The AARP Smart Driver eight‐hour online course is $17.95 for members, $21.95 for non‐members. AAA offers defensive‐driving courses starting at $19.95 for non‐members in most states. AAA members can usually get a $4 discount, but check with your local AAA for exact pricing and availability. 5. Buy discounted gift cards. You can score instant savings by using discounted gift cards to purchase things you regularly buy. Gift card resale sites buy unwanted cards and sell them at a discount to face value. For example, we recently found a $250 CVS gift card selling for $225 at CardCash.com. A good site to visit to see offers from several resellers is Gift Card Granny. 6.Write a will. You can add a grab bar in a bathroom for about $100 to $175, including materials and labor, according to Homewyse.com, a Web site that estimates home‐improvement costs. Or you can replace doorknobs with easy‐to‐ use lever‐style handles for about $15 to $25 each for non‐locking interior levers and $25 to $50 for lockable levers, according to the National Association of Realtors' HouseLogic.com. 7. Purchase a home safe. You need a secure place to store important documents, such as a will. A fire‐proof safe is the answer. We saw a two‐hour fireproof Hollon safe for sale on ValueSafes.com starting at $234. 8. Fill gaps in your homeowner's policy. Most standard homeowners policies don't include sewage‐backup coverage, but you can purchase a rider that will pay for $10,000 to $20,000 of damages for about $50 a year. You might also want to boost your liability coverage with an umbrella policy, which is an inexpensive way to protect yourself from lawsuits. Insurers generally require that you have at least $300,000 in liability coverage on your home and automobile before you can buy umbrella coverage, which picks up after you've exhausted your homeowner and auto liability limits. You'll pay about $175 to $300 a year for $1 million in umbrella coverage. For more information, see How to Add a Personal Liability Umbrella Policy. 9. Prepare for an emergency. Stock up before bad weather strikes so you can get by if the power goes out. For example, the Duracell DPP‐300EP Powerpack 300 (about $135) will let you run small appliances and jumpstart your car.
- 25. 25 10. Buy a tablet computer. These lightweight, inexpensive alternatives to laptop computers can offer you access to the Web so you can send e‐mails, keep up with family and friends on Facebook and even watch movies. Kiplinger's pick for "best tech value" for a tablet is the Amazon Fire HD 6. The 8GB model sells for $99. Invest another $99 for a year's worth of Amazon Prime service so you can stream movies and TV shows from Amazon. 11.Preserve old photos. Scanning photos allows you to create digital copies that you can easily organize, archive and share with family. Good scanners start at about $200. 12. Fund a Roth IRA for your grandchild. Give your grandchild a jumpstart on retirement savings by helping him or her open a Roth IRA. Children of any age with earned income from a job ‐‐ even if it's from lawn mowing or babysitting ‐‐ can contribute to a Roth. Schwab will let a parent open a custodial IRA for a minor for just $100. If you contribute just the $264 in extra Social Security benefits you get in 2015 and not a cent more, that amount will grow to $5,735 in 40 years (assuming an 8% return). Maximum Taxable Earnings Each Year 1937-50 $3,000 1978 $17,700 1990 $51,300 2002 $84,900 1951-54 $3,600 1979 $22,900 1991 $53,400 2003 $87,000 1955-58 $4,200 1980 $25,900 1992 $55,500 2004 $87,900 1959-65 $4,800 1981 $29,700 1993 $57,600 2005 $90,000 1966-67 $6,600 1982 $32,400 1994 $60,600 2006 $94,200 1968-71 $7,800 1983 $35,700 1995 $61,200 2007 $97,500 1972 $9,000 1984 $37,800 1996 $62,700 2008 $102,000 1973 $10,800 1985 $39,600 1997 $65,400 2009- 2011 $106,800 1974 $13,200 1986 $42,000 1998 $68,400 2012 $110,100 1975 $14,100 1987 $43,800 1999 $72,600 2013 $113,700 1976 $15,300 1988 $45,000 2000 $76,200 2014 $117,000 1977 $16,500 1989 $48,000 2001 $80,400 2015 $118,500
- 26. 26 For thosewho are married filing separately, 85% of Social Security benefits are fully taxable at any income level. Tax free in MD and most other states Taxpayer who is……. Percentage of benefits that are taxable… 50% 85% Single or Head-of-Household Over $25,000 Over $34,000 Married filing joint Over $32,000 Over $44,000 Delay benefits till age 70 and begin drawing from taxable IRAs or taxable annuities after age 59 ½ Convert taxable IRAs to Roth IRAs before collecting Sell significantly appreciated property in 2014 before collecting For longer-term non-IRA investments consider using tax- deferred annuities Consider investing a portion of taxable IRAs in fixed-income investments and a portion of after-tax investments in equities.
- 27. 27 In 2015,can earn up to $15,720 in earned income with no benefit reduction Social security benefit is reduced by $1 for every $2 of earned income beyond $15,720 Earned income includes wages and net earnings from self employment. Does not include pensions, annuities or investment income Earnings Test during the First Partial Year: ◦ Earned income prior to collecting is not counted; Earnings test is applied on a monthly basis ($1,310 per month) for the remainder of first year Earnings Test in the Year FRA is Reached: ◦ Earnings limit is increased to $41,880 before reduction applies and reduction is $1 for every $3 of earned income over the limit. Limit only applies to months before reaching FRA Assumptions: ◦ Single Benefit at FRA - $2,513 ◦ Benefit at age 62 is 75% of FRA - $1,885 ◦ Benefit at age 70 is 32% higher than FRA - $3,317 ◦ 85% of Benefits will be taxed at 28% ◦ Rate of Return is 1% ◦ COLA (Inflation) is 2%
- 28. 28 Breakeven Analysis: Age79 is the breakeven age when comparing benefits at Age 62 vs. Age 66 Age 84 is the breakeven age when comparing benefits at Age 66 vs. Age 70 Age Cumulative After Tax Dollars 62 66 70 75 $278,050 $254,128 $193,252 80 $397,574 $401,357 $372,794 85 $529,538 $563,909 $571,023 90 $675,237 $743,380 $789,883 95 $836,100 $941,531 $1,031,523 Spousal Benefits – When can or should we begin? ◦ A non-working spouse can collect a spousal benefit equal to ½ of the worker’s benefit based on earnings of their working spouse when the worker applies for their own benefit. ◦ A working spouse can collect a spousal benefit when their spouse applies for benefits if ½ of their spouse’s benefit is greater than their own benefit. ◦ Caution – Spousal benefits are subject to the earnings test and are based on the earnings of the person receiving the benefits.
- 29. 29 File andSuspend – Can or should my spouse begin receiving benefits? ◦ Allows working spouse at FRA to apply for benefits and immediately suspend so benefits can continue to accumulate 8% per year to age 70 ◦ Allows non-working or lower-earning spouse to collect spousal benefit on worker’s earnings record at worker’s FRA File and Suspend - When to utilize this option? o Assuming the retirement benefit is not needed, this option should be used in most situations with a wage earner and a non-working spouse o Also should be considered when the lower-earning spouse’s lifetime earnings are significantly less than the higher-earning spouse’s
- 30. 30 *this technique isa way to maximize Social Security for working couples who have reached FRA Restricted Application Procedure - Assuming “you” are the higher earner: 1. Your spouse receives their “own” SS retirement payments before FRA, at FRA, or later. 2. At age 66 (or later), you file for “spouse” benefits on your spouse’s record. You do not file. 3. At 70 (or earlier), you file for your “own” benefits. Delayed Retirement Credits have escalated Your retirement benefits, up to 132% at age 70. a-the new retirement payments will eliminate the previous “spouse” payments you received, since your own payment is higher. b-your spouse can now file for spouse benefits on your record, if that would result in a raise. 4. The long-term effect is that the 132% payments continue throughout your life. The surviving Spouse will also get the 132% payment, no matter who dies first, so the higher payment will continue for the joint life of the couple. Harry and Sally both work and are eligible for their own SS retirement benefits. Each is eligible for $1,000 per month at FRA. Harry has a lower life expectancy. At 66, Sally files for SS retirement and gets $1,000 per month. Harry files a “restricted application” for spouse benefits on Sally’s work record, limiting the scope of the application to spouse benefits only. Harry gets $500 per month as a spouse. While Harry draws as a spouse, DRC’s are augmenting his own retirement benefit every month. At 70, Harry files his own retirement claim. Harry gets 132%, or $1,320 per month, because of maximum DRC’s. Harry’s $500 spouse payment stops because of entitlement to the higher payment on his own record. Sally’s $1,000 payments continue, as they are more than the $500 spouse payment she could get on Harry’s record. When Harry dies, Sally files for widow payments on Harry’s record. Sally gets her own $1,000 plus $320 as a widow, so the augmented $1,320 benefit continues for the rest of her life.
- 31. 31 Traditional approach: Restrictedapplication: Each draws 100% at 66. Harry draws 50% at 66, 132% at 70. At 66, Harry and Sally each draw their own $1,000 per month. At 66, Sally draws her own $1,000. Harry draws $500 as Sally’s spouse. At 70, total payments = $96,000. Payments of $1,000 per month each continue. At 70, total payments = $72,000. Harry switches to his own $1,320 per month. Sally’s $1,000 per month continues. At 85, total payments = $456,000. At 85, total payments = $489,600. After first death, survivor continues to receive $1,000 per month. After first death, survivor receives $1,320 per month. The break even point is 6.25 years, or shortly after Harry turns 76 You must be FRA or above. Under FRA, you must apply for your “own” retirement before you can apply for a “spouse” payment. At FRA, that rule ends, opening the door to restricting the application to spouse benefits only. Harry needs to be FRA but Sally does not. You must have assets or income to bridge the four years of lower SS from age 66 to 70. This strategy is best used when the higher earner also has a lower life expectancy. The couple should have a life expectancy past the break-even point of age 76. Note that, with higher monthly payments, all the ensuing COLA’s would be larger dollar amounts. A failsafe is in place: if Harry dies before age 70, Sally can still get widow payments augmented by DRC’s up to the death month.
- 32. 32 This techniqueis to get higher SS payments over the long-term. This method works best for married couples, especially if one is eligible for little or no SS. And, the primary worker must be between FRA and age 70. Works best if both spouses are FRA or over. And, either partner may be working or retired after FRA. 1. At 66, or older, you file for your own retirement benefit. However, you request that benefits be suspended. 2. Your spouse files for up to 50% spouse payments on your record. 3. At 70, or before, you trigger your own retirement payments. a. Your payment could be up to 132% for you (at age 70) plus up to 50% for your spouse, for a total payment of 182%. b. Flexibility and possible lump sum: You may specify any start-payment date all the way back to your application date, with resulting back payment. 4. The long-term effect is that the 182% payments continue until the first death. After that, the survivor will get 132% payment for life no matter who dies first, so the augmented payment will continue for the joint life of the couple.
- 33. 33 Bob andSue are both turning 66, their FRA. Sue is not eligible for SS on her own. Bob is eligible for $1,000 a month at FRA. They have long life expectancies, have additional funds to live on, and want to maximize lifetime SS. At 66, Bob file for SS retirement but immediately suspends payments. Sue files for spouse payments on Bob’s record. Since she is also 66 she get a $500 payment, 50% of Bob’s full payment amount. That’s what they expect to get for the next four years. At 70, Bob triggers his payments to start. DRC’s have augmented his payment for the last four years even though payments were suspended, so his payment amount is now $1,320. Sue’s $500 payments continue. A family total of $1,820. Whether Bob or Sue dies first, the survivor payment will be $1,320 for the life of the survivor. Traditional approach: File and Suspend: Bob draws 100% at 66 Sue draws 50% at 66 Bob suspends at 66; Sue draws 50% at 66; Bob starts payments at 70 At 66, Bob draws his own $1,000 per month and Sue draws $500. At 66, Bob files, but draws $-0- (suspended payment). Sue draws $500 spouse payment. At 70, total payments = $72,000. Payments of $1,500 per month total continue. At 70, total payments = $24,000. Bob triggers his payments at $1,320. Sue’s $500 per month continues, for total payments of $1,820 per month. At 85, total payments = $342,000. At 85, total payments = $351,600. After first death, survivor receives $1,000 per month. After first death, survivor receives $1,320 per month. The break-even point is 12.5 years, when Bob is 82.5.
- 34. 34 You musthave assets or income to bridge the four years of reduced benefits, ages 66-70. Working by either partner will not affect SS payments after FRA. Your spouse may be eligible for their own SS, although the File and Suspend strategy is ideal for a worker with non-working spouse. Your spouse does not have to be FRA to file on your suspended record but, at FRA, the full 50% spouse payment is available. As a couple, you must be expected to live past the break-even point. Note that, with higher monthly payments, all the ensuing COLA’s would be larger dollar amounts. There is a failsafe: if Bob dies before age 70 Sue can still get widow payments augmented by DRC’s up to the death month. You can start payments any time after suspension. You can start payments any month from filing date to age 70, any time you need them. And, when you are ready to start payments, you can specify any start date back to your original application. An earlier start date will trigger monthly payments plus back pay. For example: Bob, at age 70, decides to start payments effective with his original claim at age 66. He would receive a $48,000 lump sum ($1,000 per month for 48 months) plus $1,000 a month for life (his original Age 66 payment amount). Divorced taxpayers who wish to remarry should consider how close they are to age 60 before tying the knot. Earnings on tax-exempt investments must be included in the calculation to determine taxability of Social Security benefits. 1 out of 7 people have an error in their earnings report. You only have 3 years to correct it. Spouses who have flexibility to allocate income between them, such as self- employed or those involved in a closely held business, should be looking at ways to best allocate income between them. File & Suspend can only be done once per recipient and must be completed within 12 months of receiving your first check.
- 35. 35 Social SecurityAdministration (SSA) will not notify survivor’s of their eligibility for survivors benefits. If working and receiving benefits, SSA will recalculate your benefits in your first year. However, if your benefit doesn’t change as a result of the recalculation, SSA will not automatically recalculate future years. You must ask them to recalculate. Utilize Optional SE Method on tax return. Benefits are available as long as the deceased worker earned the required number of credits. The following people can receive Social Security survivors benefits on the earnings of a deceased worker: ◦ A widow or widower ◦ A surviving divorced spouse ◦ Unmarried children ◦ Dependent parents
- 36. 36 Family Member %of deceased’s PIA A widow or widower or surviving divorced spouse at or above FRA 100% A widow or widower or surviving divorced spouse between age 60 and FRA 70-99% A widow or widower or surviving divorced spouse at any age caring for a child under age 16 75% Unmarried children 75% Dependent parents 75% each if two parents, 82.5% if one parent 1. Planning for Spousal income needs ◦ Potential gap in survivor benefits. Secure additional income funding. 2. Allocating the Survivors benefit between family members ◦ Possible family maximum limitations ◦ If surviving spouse is working could subject benefit to income taxation ◦ Forgoing spousal benefit could increase child benefit at lower tax rates. 3. Death of two parents with minor children
- 37. 37 1. Apply atwww.socialsecurity.gov 2. Call toll free at 1-800-772-1213 3. Make an appointment to visit any Social Security office in person Your Social Security number card; Your birth certificate; Your W‐2 forms or self‐employment tax return for last year; Your military discharge papers if you had military service; Your spouse’s birth certificate and Social Security number if they are applying for benefits; Children’s birth certificates and Social Security numbers, if you are applying for children’s benefits; Proof of U.S. citizenship or lawful alien status if you (or a spouse or child applying for benefits) were not born in the United States; and The name of your bank and your account number so your benefits can be deposited into your account.
- 38. 38 Do Iqualify What is my benefit amount When can I collect How long will I live Which decision will give me the most money in my pocket Should spouse #1 start collecting at age 62…66…70 Should spouse #2 start collecting at age 62…66…70 Should either spouse consider “file and suspend” Should either spouse consider “spousal benefit” Steve Gershman, CPA, PFS, CFE 410.290.3288 sgershman@KatzAbosch.com Lori Kirk, CPA 410.307.6416 lkirk@KatzAbosch.com Bob Kollra, CPA, PFS 443.640.1115 rkollra@KatzAbosch.com Mark Kelly, CPA, PFS 410.838.5717 mkelly@KatzAbosch.com