Month: March 2023

Retirement Earnings and Social Security

Posted on March 29, 2023 by fsykes - Social Security Benefits

What is it?

You have finally reached your long-awaited retirement. If you have saved and planned properly, this will be a time of financial independence for you. There are some other considerations that you should keep in mind when you retire. If you choose to work after retirement, you should be aware of the effect it will have on your Social Security benefits. You should also keep abreast of the required minimum distribution rules and their effect on your retirement investments.

Retirement earnings and Social Security

Reduction of Social Security benefits based on earnings

If you need extra income during retirement or if you find that a retiree’s life is boring, you may want to consider working. However, be aware of the effect that working during retirement has on your Social Security benefits. The Social Security Administration gives you the opportunity to work and receive retirement benefits so long as your earnings do not exceed the annual earnings limit, a limit that applies only if you are under “full retirement age,” which varies between 66 and 67 depending on your year of birth. After you reach your full retirement age, you can earn as much as you want without affecting your Social Security retirement benefit. In 2022, you can earn up to $19,560 if you have not yet reached full retirement age. If you earn more, $1 in benefits will be withheld for every $2 you earn over that amount. However, a special limit applies during the year in which you reach normal retirement age (up to, but not including, the month you reach normal retirement age). In 2022, this limit is $51,960. If you earn more, $1 in benefits will be withheld for every $3 you earn over that amount.

Evaluate the pros and cons of exceeding earnings limit

It might seem like a good idea to always keep your earnings below the Social Security Administration’s limits. However, there may be times when you might want to consider taking a job where your earnings exceed those limits. While you are subject to withholding for your higher earnings, your overall income may be greater because of those same higher earnings. Furthermore, because you pay Social Security taxes when you work, Social Security reconfigures your benefits to take into account the extra earnings.

Phillip, age 63, receives $1,000 in monthly Social Security benefits for a total of $12,000 per year. In 2021, Phillip takes a job that pays $30,960 per year, $12,000 over the annual earnings limit of $18,960. Social Security withholds $1 for every $2 that Phillip earns over the limit or $6,000. Phillip still receives $6,000 from Social Security ($12,000 – $6,000 = $6,000). He has a total income of $36,960 ($30,960 in earnings + $6,000 in Social Security). Although he has lower monthly Social Security benefits, Phillip’s overall income is greater than it would be without the job because of his higher earnings.

If you earn other income during the year, then you might have to pay income tax on part of your Social Security benefits if your total income exceeds a certain base amount.

Other facts regarding Social Security

There is a special rule regarding the annual earnings limit during your first year of retirement. If you retire midyear, you may find that you have already earned more than the annual earnings limit. The rule allows you to receive full Social Security benefits for any whole month that you are retired despite the fact that you exceed the annual earnings limit.
You will be subject to penalties if you fail to report retirement earnings.
If you receive Social Security benefits as a family member, your earnings will affect only your own benefits.

Required minimum distributions (the age 72 rule)

If you are retired, you might still be enjoying the tax-deferred status of your investments held in retirement plans. However, if you have a traditional IRA, you are required to begin taking required minimum distributions for the year in which you reach age 72. If you fail to take the minimum distribution, you are subject to a 50% penalty on the amount that should have been distributed. Required minimum distributions generally must be made from employer-sponsored retirement plans after age 72. However, if you retire from your employer after age 72, you may be able to delay taking required minimum distributions from that employer’s plan until after you’ve retired.

We love to help you retire better. Check out our many Social Security planning options. Also, we love to keep in touch with our newsletter; click here to sign up.

Broadridge Investor Communication Solutions, Inc. prepared this material for use by Social Security Benefit Planners, LLC.

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on individual circumstances. Social Security Benefit Planners, LLC provide these materials for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

Social Security Benefit Planners, LLC and its affiliates are in no way associated with or approved, endorsed, or authorized by the Social Security Administration.

Determining Eligibility for Social Security Benefits

Posted on March 27, 2023 by fsykes - Retirement Benefits

What is it?

Before you receive any Social Security benefits, the Social Security Administration (SSA) will need to determine your eligibility. Remember that Social Security is an insurance system designed to pay you benefits during times of economic hardship. Just as a medical insurance plan representative must review your policy coverage before paying your surgical bill, a Social Security administrator must examine your Social Security record to ensure that you are eligible for the type of benefit for which you have applied. Determining your eligibility will mean finding answers to the following questions:

Have your earnings been subject to Social Security taxes?
What is your insured status?
Have you met the eligibility requirements specific to your benefit claim?
Have you filed your benefit claim?

Your earnings have probably been subject to Social Security taxes

Most people are covered by Social Security. Since Social Security is compulsory, most company employees, members of the armed forces, and self-employed persons participate and will someday be eligible for benefits. Two groups that are excluded from Social Security coverage are railroad workers whose work is covered by the Railroad Retirement Act and federal employees hired before 1984, who are covered under the Civil Service Retirement System (CSRS). Special coverage terms apply to other groups, including hospital interns, farm workers, members of religious orders, student nurses, newspaper vendors, and domestic workers. If you are covered by Social Security, you will know it when you look at your paycheck. Currently, 6.2 percent of your pay up to an annual limit of $160,200 (in 2023) is deducted each pay period. A 1.45 percent Medicare tax is also withheld from your pay (no annual limit applies). Your employer matches your tax payments. If you are self-employed, you pay a 15.3 percent self-employment tax on your net earnings to finance Social Security.

Your insured status affects your eligibility for benefits

Your insured status is the foundation of any benefit claim. You are considered insured when you have acquired a certain number of Social Security credits. These credits are also known as quarters of coverage. Covered workers receive credits based on their annual earnings. Every year, the earnings necessary to earn one credit increase according to how much the national average wage has increased. In 2023, you earn one credit for every $1,640 in earned income, up to a maximum of four credits per year.

Earning Social Security credits (quarters of coverage)

Credits earned are based on your total annual income

The number of credits you earn in a year depends upon how much money you made, not how many months you worked. For instance, if you work for two months in 2023 and make $3,280, you will have earned two credits ($1,640 x 2). If you work six months and make $3,280, you will also have earned two credits. To earn three credits, you would have to earn at least $4,920 ($1,640 x 3). To earn four credits for the year, you would have to make at least $6,560, the income required to earn the maximum number.

Credits are awarded in whole units only

If you earn $3,280 in 2023, you will earn two credits. If you earn $4,100, you will still earn only two credits, not two and one-half credits, since credits are awarded in whole units only.

Credits can be acquired at any age (even after retirement age)

You’re never too old to earn credits. Unless you’ve already reached the maximum credits possible (40 credits), any income you have that is subject to Social Security taxes can earn you more credits, even if you are already old enough to retire.

Credits can’t be lost once you’ve earned them

Once you earn the credits, they’re yours to keep, even if you never work again.

Credits don’t determine the amount of your Social Security benefit

The size of your benefit check has nothing to do with how many credits you have earned. They only determine what type of benefits for which you might be eligible.

Fully insured status versus currently insured status

Determining your insured status is important because if you have not acquired the credits necessary to receive Social Security benefits, your claim will be denied even if you meet other eligibility requirements. Generally, you need to be fully insured to receive Social Security benefits, but other requirements may also apply. Once you are fully insured you are also permanently insured and you will not lose your fully-insured status if you stop working under covered employment.

Obtaining fully insured status means that you are entitled to full Social Security benefits. To become fully insured you must:

Earn 40 credits (10 years in work subject to Social Security taxes) or
Earn at least one credit for each calendar year elapsing after the year in which you reached age 21 and before the year in which you reach age 62, die, or become disabled (whichever comes first), and earn at least six total credits

Example(s): Example A: John died after suffering a head injury. He was 45. He had earned 30 credits during his lifetime. Because he had earned at least one credit for every year that had elapsed between the year he turned 21 and the year he died, he was fully insured, and his survivors were entitled to benefits based on his Social Security earnings record.

Note: A special rule applies to survivors benefits. Even if you didn’t earn the number of credits needed before your death, your children and your spouse who is caring for the children can get benefits if you have credits for one and one-half year’s work (6 credits) in the three years just before your death.

Disability-insured status

If you have earned at least 20 credits during the last ten years and you are fully insured you have disability-insured status. Exceptions apply for those under age 31 and in certain other cases.

Before age 24: If you become disabled in or before the quarter you turn age 24, you generally must have earned six credits during the three-year period ending with the quarter your disability began
Age 24 to 31: You may qualify if you have credit for working half the time between age 21 and the time you became disabled
Age 31 or older: If you are disabled at age 31 or older, you generally need at least 20 credits in the last 10 years immediately before you became disabled. You can view a table that shows examples of how many credits you would need if you became disabled at various ages at the SSA website, ssa.gov.

Basic eligibility requirements for beneficiaries

In general, you can receive Social Security benefits if you meet the eligibility requirements for your type of claim. The following table outlines the basic requirements for beneficiaries but does not include all eligibility requirements.

When you file your claim for benefits, you may be asked to submit proof of age, family relationship, school attendance, and, in some cases, citizenship. These documents will be used to support your application for benefits and determine if you are eligible for them.

How you can file for benefits

Social Security benefits are not automatic. To receive benefits, you must apply for them online or by making an appointment at your local Social Security office or by calling the SSA (see below). You should file promptly in person, by mail, or by phone.

For retirement benefits: The SSA recommends that you apply for benefits three months before you want your benefits to start.
For survivor benefits: File for benefits in the month of the insured worker’s death. Each entitled person should file.
For disability benefits: You can file for benefits before you actually become entitled to benefits. If you file early (for example, before the five-month waiting period has ended), and your claim is approved, your application date is considered to be the first month you have satisfied the eligibility requirements.
For the lump-sum death payment: The beneficiary should file within two years of the insured person’s death.

If you have any questions about filing a benefit claim, or want information regarding eligibility for benefits, call the SSA at (800) 772-1213 or visit its website at ssa.gov.

Thank you for taking the time to read this article. We hope it has given you some insight into Social Security. If you have any questions or would like more information, please feel free to contact us. We would love to hear from you. Our newsletter is a great way to stay up-to-date with our latest offerings and get helpful retirement planning tips. Signing up is easy; click here.

Broadridge Investor Communication Solutions, Inc. prepared this material for use by Social Security Benefit Planners, LLC.

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on individual circumstances. Social Security Benefit Planners, LLC provide these materials for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Social Security Benefit Planners, LLC and its affiliates are in no way associated with or approved, endorsed, or authorized by the Social Security Administration.

Divorce and Social Security

Posted on March 23, 2023 by fsykes - Divorce, Family Benefits

How does divorce affect Social Security retirement benefits?

After a divorce, you can claim retirement benefits based on your own earnings record (if you have been employed and have accumulated enough credits over the years), or you can claim benefits based on your ex-spouse’s earnings record (whether or not you ever worked), provided that certain requirements are met.

What requirements must be met?

You may qualify for benefits based on your ex-spouse’s earnings record if all of the following conditions are met:

Your ex-spouse is currently entitled to receive Social Security retirement or disability benefits
You and your ex-spouse were married for at least 10 years before the divorce became final
You are not currently married
You are age 62 or older, and
You aren’t entitled to collect a retirement or disability benefit based on your own earnings record that equals (or exceeds) one-half of your ex-spouse’s PIA

If you are age 62 or older and you’ve been divorced for at least two years, you can receive Social Security benefits based on your former spouse’s earnings regardless of whether that spouse is already receiving benefits. This, of course, is assuming that the other four requirements listed above have been satisfied.

How much can you receive?

If you begin receiving benefits at your full retirement age (66 to 67, depending on your year of birth), your spousal benefit is equal to 50% of your ex-spouse’s full retirement benefit (or disability benefit). For example, if your ex-spouse’s benefit at full retirement age is $1,500, then your spousal benefit is $750. However, there are several factors that may affect how much you ultimately receive.

For example, if you’re eligible for benefits based on your own earnings record then the Social Security Administration (SSA) will pay that amount first. But if you can receive a higher benefit based on your ex-spouse’s record, then you’ll receive a combination of benefits that equals the higher amount.

When you begin receiving benefits will also affect the amount you receive. You can receive benefits as early as age 62, but your monthly benefit will be reduced (reduction applies whether the benefit is based on your own earnings record or on your ex-spouse’s.) This reduction is permanent. In other words, if you choose to receive reduced benefits at age 62, you will not be entitled to collect full benefits when you reach your full retirement age. If you decide to receive benefits later than your full retirement age, your benefit will increase by 8% for each year you wait past your full retirement age, up until age 70 (increase applies only if benefit is based on your own earnings record).

In addition, if you work after you begin receiving benefits (before you reach your full retirement age) and your earnings exceed the annual earnings limit that applies, your Social Security benefit may be reduced. Receiving a pension based on work not covered by Social Security may also result in a benefit reduction.

Note: If you decide not to collect retirement benefits until full retirement age, you may be able to maximize your Social Security income by claiming your spousal benefit first. The option to file a restricted application for spousal benefits may be available to you if you were born on January 1, 1954 or earlier. By opting to receive your spousal benefit at full retirement age, you can delay claiming benefits based on your own earnings record (up until age 70) in order to earn delayed retirement credits. This can boost your benefit by as much as 32%. Because deciding when to begin receiving Social Security benefits is a complicated decision and may have tax consequences, consult a professional for help with your individual situation.

How does remarriage affect Social Security benefits?

If your ex-spouse gets remarried and you don’t, your Social Security entitlement will be unaffected.

If you remarry, you generally can’t collect benefits based on your ex-spouse’s record unless your current marriage ends. Any spousal benefits you receive will instead be based on your current spouse’s earnings record.

What if your ex-spouse has died?

You may also qualify for Social Security survivors benefits based on your ex-spouse’s earnings record if your former spouse has died. You may qualify if:

Your ex-spouse was entitled to Social Security benefits
You and your ex-spouse had been married to each other for at least 10 years before the divorce was finalized
You are age 60 or over (or are between ages 50 and 60 and are disabled)
You aren’t currently married, and
You aren’t entitled to a retirement benefit that is equal to or greater than 100 percent of your deceased spouse’s benefit

Note that if you meet the above conditions, you will be entitled to full survivors benefits; that is, you will collect an amount equal to 100 percent of your former spouse’s PIA, not merely one-half. However, if you’re under full retirement age, your benefits will be reduced for each month you receive benefits under your full retirement age. Benefits at age 60 will be 71.5 percent of your former spouse’s PIA. It’s also important to note that a divorced spouse may be entitled to a mother’s or father’s benefit if caring for the dependent child (under age 16 or disabled) of his or her deceased former spouse. Typically, the amount of a mother or father’s benefit is equal to 75 percent of the deceased spouse’s PIA. Unlike a spousal benefit, it isn’t necessary for the marriage to have lasted 10 years.

For more information on how divorce may affect your Social Security benefits, contact the SSA at (800) 772-1213 or visit socialsecurity.gov.

Broadridge Investor Communication Solutions, Inc. prepared this material for use by Social Security Benefit Planners, LLC.

Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on individual circumstances. Social Security Benefit Planners, LLC provide these materials for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice. Social Security Benefit Planners, LLC and its affiliates are in no way associated with or approved, endorsed, or authorized by the Social Security Administration.

Timing Your Earnings in Retirement to Optimize Your Social Security Retirement Benefit

Posted on March 21, 2023 by fsykes - Retirement Benefits, Social Security Benefits

What is this strategy?

If you work after you begin receiving Social Security retirement benefits, all or part of your retirement benefit may be withheld if your earnings exceed the retirement earnings test exempt amount. However, excess earnings won’t affect your benefit once you reach full retirement age, and it’s possible to time your earnings in retirement in order to optimize your benefit before full retirement age.

If you’re under full retirement age and earn more than the annual retirement earnings test exempt amount by working after you retire, you may be considering timing your earnings in retirement.

Remember, though, if your monthly benefit is reduced in the short term due to your earnings, you’ll receive a higher monthly benefit later. That’s because the Social Security Administration recalculates your benefit when you reach full retirement age, and omits the months in which your benefit was reduced.

How to do it

Postpone your earnings

The easiest way to avoid having all or part of your Social Security benefit withheld due to excess earnings is to postpone your earnings. You can postpone your earnings in two ways:

The first way is to determine when you actually work and earn income: If you’re working for an employer, your wages are counted as income in the year you earn them. Because earnings at full retirement age or later will never reduce your Social Security retirement benefit, you might postpone working after retirement until you reach full retirement age if you expect to have excess earnings.

The second way is to postpone when you receive your earnings: If you’re self-employed, you can limit the effect of excess earnings on your retirement benefit by postponing when you receive your earnings. This is because earnings from self-employment are treated as earnings in the year they’re received.

Bunch your earnings

If you believe that all of your retirement benefit in one year will be withheld due to excess earnings, you may be able to bunch your earnings for that year in order to avoid affecting your benefits the following year.

Bunching your earnings from self-employment may help you avoid having your Social Security benefit withheld, but you should consider the overall tax implications. For example, if your earnings in one year are high enough, you may be subject to the additional Medicare payroll tax and the Medicare investment income surtax, or even be pushed into a higher income tax bracket, among other things. Consult a tax professional for help with your individual tax situation.

Time the start of benefits

Special rules apply to excess earnings during the first year of retirement. You might benefit from electing to begin receiving retirement benefits during a year in which you expect your earnings to be particularly high. During the first year you receive retirement benefits, if your wages from an employer are more than the annual retirement earnings test exempt amount, your retirement benefit will be reduced by the lesser of: (1) the reduction in benefits that would occur if the annual test applied, or (2) the benefit you received in the month or months that you earned more than 1/12th of the annual retirement earnings test exempt amount.

Consider the following case: Jeff retires on September 30 at age 62. Before he retires, he earns $80,000 during the year. In October, he begins working part-time and earns $1,000 per month for the last three months of the year. Even though his earnings for the year greatly exceeded the annual retirement earnings test exempt amount for that year, Jeff still receives a full Social Security benefit for October, November, and December. This is because his earnings in those months did not exceed 1/12 of the annual earnings test exempt amount for that year. However, beginning the following year, the annual retirement earnings test amount will apply to him because he will be beyond his first year of retirement.

This monthly test for excess earnings only applies if your wages are from an employer. If you are self-employed, the excess earnings test applies in a different manner.

Strengths

You can avoid having part or all of your Social Security retirement benefit withheld

By postponing or bunching your earnings in retirement, you may be able to avoid earning more than the retirement earnings test exempt amount. By timing when you first begin receiving Social Security retirement benefits, you may be able to lessen the impact of earned income on those benefits. But see Tradeoffs.

Tradeoffs

The Social Security retirement benefit you keep may not be enough to offset the earnings from working that you lose

Phillip (age 63) receives a Social Security retirement benefit of $1,000, or $12,000 per year. Phillip earns $33,240 in 2023, exceeding the earnings limit of $21,240 by $13,000, so his benefit is reduced by $1 for each $2 over the earnings limit, a total of $6,500 in benefits. Phillip’s income for 2023 is:

Social Security retirement benefit	$6,500
Employment earnings	$33,240
Total income	$39,740

If Phillip decided to limit his earnings from his job to $21,240, his income in 2023 would have been:

Social Security retirement benefit	$12,000
Employment earnings	$21,240
Total income	$33,240

Even though part of Phillip’s Social Security retirement benefit was withheld due to excess earnings, the money he earned from his job more than made up for that reduction.

Questions & Answers

How will earnings during the year you reach full retirement age affect your retirement benefit?

Earnings after full retirement age won’t affect your retirement benefit. But few people reach their full retirement age on January 1. What if you have earnings during the year before you reach full retirement age? The answer is that you are entitled to a special earnings exemption for the months that precede your birthday. For example, if you reach your full retirement age on December 1, you will be entitled to earn up to the earnings test exemption amount for that year during the months that precede your birthday without reducing your benefit, and once you reach your birthday, none of your earnings will reduce your benefit. So, in this example, as long as your earnings from January through November don’t exceed the earnings limit, you will receive all of your retirement benefit. However, if your earnings do exceed that amount $1 of your benefit will be withheld for every $3 of earnings that exceed the limit. In 2023, the retirement earnings test exempt amount is $56,520.

We love to help you retire better. Check out our many Social Security planning options. Also, we love to keep in touch with our newsletter; click here to sign up.

Broadridge Investor Communication Solutions, Inc. prepared this material for use by Social Security Benefit Planners, LLC.

Social Security Benefit Planners, LLC and its affiliates are in no way associated with or approved, endorsed, or authorized by the Social Security Administration.

Social Security Retirement Income: a Primer

Posted on March 17, 2023 by fsykes - Social Security Benefits

What role does Social Security play in your retirement income strategy?

As you near retirement, it’s likely you’ll have many questions about Social Security. How much will your retirement benefit be? When should you apply? Will earnings from a part-time job affect your benefit? Social Security has always been a major source of income for many retirees, but with fewer companies offering traditional pensions, Social Security is playing an even more important role in retirement income planning. Not only can Social Security help protect you against risks that retirees often face, including longevity risk (the risk of outliving your retirement income) and inflation risk (the risk that your income won’t keep up with the rising cost of living), but it also offers built-in benefits for your family members and survivors.

When planning your retirement income strategy, you should be aware of three advantages that Social Security offers:

A steady stream of lifetime income

Social Security provides a steady source of retirement income that you can’t outlive. Although you may not be able to rely on Social Security as the sole source of your retirement income, your benefit can serve as the foundation of your retirement income plan.

Annual inflation adjustments

Your Social Security benefit provides some protection against inflation risk. Your benefit is subject to automatic annual cost-of-living adjustments (COLAs) that will generally increase the amount you receive by a certain percentage each year to help offset the effects of inflation. COLAs are payable in most years but are not guaranteed.

Benefits for eligible family members and survivors

After you retire, certain members of your family may also be eligible for benefits based on your Social Security record, which may increase your household income. They may receive continuing income from survivor benefits upon your death as well. Eligible family members may include your spouse, your minor children, and your dependent parents. The amount they receive will depend on your earnings and other factors.

How much will you receive?

Your Social Security retirement benefit is based on the number of years you’ve been working and the amount you’ve earned. When you become entitled to retirement benefits, the Social Security Administration (SSA) calculates your primary insurance amount (PIA), upon which your retirement benefit will be based, using a formula that takes into account your 35 highest earnings years.

Your age at the time you begin receiving Social Security also affects your retirement benefit. If you were born in 1943 or later your full retirement age is 66 to 67, depending on your year of birth. Electing to receive benefits before your full retirement age (you can receive benefits as early as age 62) will result in a lower benefit than if you had waited until full retirement age to begin receiving Social Security. If you delay receiving benefits past your full retirement age, you can receive delayed retirement credits that will increase your benefit by a certain percentage for every month you wait, up until age 70.

Receiving benefits at full retirement age

At full retirement age, you will be eligible for full Social Security benefits (100 percent of your PIA), provided that you have worked in a job covered by Social Security and meet other eligibility requirements. Your full retirement age depends upon the year in which you were born.

If you were born in:	Your full retirement age is:
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

If you were born on January 1st of any year, the full retirement age for the previous year applies.

Receiving benefits earlier than full retirement age

The minimum age at which you can retire and receive Social Security retirement benefits is currently 62. At age 62, you will be eligible for reduced retirement benefits based on a percentage of your PIA, provided that you are fully insured. Your retirement benefit will be reduced by 5/9ths of 1 percent (or 0.55556 percent) for every month between your retirement date and full retirement age, up to 36 months, then by 5/12ths of 1 percent thereafter. This reduction is permanent; when you reach full retirement age, you will not be eligible for a benefit increase. However, it may still make sense to receive benefits early, because you may receive benefits over a longer period of time.

Mimi decides to begin collecting her Social Security benefit at age 62, five years before her full retirement age of 67. As a result, she will receive 30 percent less per month than if she had waited until her full retirement age. However, she will receive 60 more benefit checks than if she had waited until full retirement age.

Receiving benefits later than full retirement age

You will permanently increase your retirement benefit for each month that you delay receiving Social Security retirement benefits past your full retirement age. Your benefit will increase by a predetermined percentage for each month you delay receiving retirement benefits up to the maximum age of 70. If you were born in 1943 or later, your benefit will increase by 2/3 of 1 percent for each month you delay receiving retirement benefits (8 percent per year).

Robert, who was born in 1950, will receive a $1,000 monthly retirement benefit at age 66. He decides to delay collecting Social Security until age 70, four years after his full retirement age of 66. At age 70, his retirement benefit will be $1,320, which is 32 percent higher than it would be if he had collected benefits at his full retirement age.

You can estimate your benefits under current law by using the benefit calculators available on the Social Security website. You can also sign up to view your online Social Security Statement there. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivor, and disability benefits. If you’re not registered for an online account and are not yet receiving benefits, you’ll receive a statement in the mail every year, starting at age 60.

When should you begin receiving Social Security benefits?

Should you begin receiving Social Security benefits early, or should you opt to wait until full retirement age or even longer? Obviously, if you need the money right away, your decision is clear cut. But otherwise, there’s no ”right” time to begin receiving Social Security benefits; it depends on your personal circumstances, and there are many variables. Here are some questions that can help you make your decision.

Are you planning to work?

It may be advantageous to work as long as possible if you want to increase your Social Security retirement benefit because your PIA will be recalculated annually if you have had any new earnings that might result in a higher benefit. However, although you can work and still receive Social Security, if you’re under full retirement age, wages you earn as an employee (or net earnings from self-employment income) may reduce your retirement benefit. If you’re under full retirement age for the entire year, $1 in benefits will be withheld for every $2 you earn over the annual earnings limit ($21,240 in 2023). A higher earnings limit applies in the year you reach full retirement age, and the calculation is different, too–$1 in benefits will be withheld for every $3 you earn over $56,520 (in 2023).

If your earnings will be high enough to affect your Social Security benefit, you may want to consider waiting until full retirement age to begin receiving benefits, because once you reach full retirement age, you can earn as much as you want, and your benefit won’t be affected.

The benefit reduction is based on your annual earnings and is not permanent; your monthly benefit is reduced starting in January of the year following the year you had excess earnings and will be reduced until the excess earnings are used up. Additionally, if your monthly benefit is reduced in the short term due to your earnings, you’ll receive a higher monthly benefit later. That’s because the SSA recalculates your benefit when you reach full retirement age, and omits the months in which your benefit was reduced.

Will Social Security be around when you need it?

You’ve probably heard media reports about the worrisome financial condition of Social Security, but how heavily should you weigh this information when deciding when to begin receiving benefits? While it’s very likely that some changes will be made to Social Security (e.g., payroll taxes may increase or benefits may be reduced by a certain percentage), there’s no need to base your decision on this information alone. Although no one knows for certain what will happen, if you’re within a few years of retirement, it’s probable that you’ll receive the benefits you’ve been expecting all along. If you’re still a long way from retirement, it may be wise to consider various scenarios when planning for Social Security income, but keep in mind that there’s been no proposal to eliminate Social Security.

How long will retirement last?

Retirees must make sure that they have enough income to last for a lifetime. But how many years will that be? You can never know for sure, but you can make an educated guess by using calculators or tables to calculate your life expectancy, then factoring in that information when deciding when to take your Social Security benefits. You’ll also want to consider your current health and your family health history when deciding when to take your Social Security benefits. For example, if you have a serious health condition, you may decide to take benefits earlier. On the other hand, if you can reasonably expect to live well into your 80s or 90s, you may decide to delay receiving Social Security benefits so that you can increase your retirement benefit, and boost the odds that you’ll have enough income for the years ahead.

Calculating your “break-even” age can help you compare the long-term financial consequences of starting benefits at one age versus another. Your break-even age is the age at which the total accumulated value of your retirement benefits taken at one age equals the value of your benefits taken at a second age. Although many factors can affect this number, you’ll generally reach your break-even age about 12 years from your full retirement age if taxes and inflation aren’t accounted for. For example, if you begin receiving benefits at age 62, and your full retirement age is 66, you will generally reach your break-even age at 78. This calculation may vary by one to three years, depending on what factors are used.

However, unless you’re able to invest your benefits rather than use them for living expenses, your break-even age is probably not the most important part of the equation. For many people, what really counts is how much they’ll receive each month, rather than how much they’ll accumulate over many years.

How will your spouse be affected?

If you’re married, you and your spouse should consider how Social Security will affect your joint retirement plan. Are you both eligible for benefits? How much will you each receive? What are your combined life expectancies and break-even ages? These variables can affect the decisions you make regarding your Social Security benefits.

For example, the age at which you begin receiving benefits may significantly affect the amount of lifetime income your spouse or surviving spouse may receive. If your spouse has never worked outside the home or in a job covered by Social Security, or has worked but doesn’t qualify for a retirement benefit higher than yours based on his or her own work record, he or she may be able to receive a spousal retirement benefit based on your work record. At full retirement age, your spouse may be entitled to receive 50 percent of your full retirement benefit amount, and will generally be eligible for a survivor benefit equal to 100 percent of your benefit upon your death. If you’re the primary wage earner, it may make sense for you to delay receiving benefits, because the larger your benefit, the larger benefit your spouse may receive, both before and after your death. If your spouse’s life expectancy is much longer than yours, this can be an especially important consideration.

However, your spouse can’t file for spousal benefits based on your earnings record until you reach full retirement age and file for benefits.

What is the impact on your overall retirement income plan?

Any decisions you make regarding Social Security income should take into account other potential sources of retirement income, and your overall retirement income plan. For example, you may need to determine whether it’s wise to take early Social Security benefits so that you can delay withdrawing funds from tax-advantaged investments (e.g., 401(k) plans, 403(b) plans, or traditional IRAs), allowing them to continue to accumulate tax deferred. If you’re eligible for pension benefits, you’ll need to consider how Social Security impacts that income. For example, pension benefits from a job not covered by Social Security may be reduced (offset) by any Social Security income you receive.

Another major consideration is your tax situation. If the only income you had during the year was Social Security income, then your benefit generally won’t be taxable. However, other income you receive during the same year (generally earned income or substantial investment income) may trigger taxation of part of your Social Security benefit. It’s important to look at how other sources of income are taxed and how your overall tax liability might be affected when considering when to take your Social Security benefits.

The rules surrounding taxation of Social Security benefits are complex. The IRS has a worksheet you can use to determine whether or not your Social Security benefits are taxable. You can find this worksheet and more information about the taxation of Social Security benefits in IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits. You may want to speak to a tax professional about your specific situation.

How do you apply for Social Security benefits?

According to the SSA, you should apply for Social Security benefits approximately three months before your retirement date. No matter when you apply for Social Security, you’ll be eligible for Medicare at age 65, so make sure you contact the SSA three months before you turn 65, even if you plan to retire later. To apply for Social Security benefits, you can fill out an application on the SSA website (ssa.gov), or call or visit your local Social Security office. You can also call the SSA at (800) 772-1213 to discuss your options or to get more information about the application process.

Broadridge Investor Communication Solutions, Inc. prepared this material for use by Social Security Benefit Planners, LLC.

Social Security Benefit Planners, LLC and its affiliates are in no way associated with or approved, endorsed, or authorized by the Social Security Administration.

Restructuring Business Entity to Minimize Social Security Payroll Taxes

Posted on March 15, 2023 by fsykes - Business Owners

What is restructuring a business entity?

Restructuring your business entity can minimize Social Security taxes

If you own a business as a sole proprietorship, you may be able to minimize the Social Security taxes you pay by incorporating your business and causing the business to elect to be taxed as an S corporation. If your business is treated as an S corporation for federal income tax purposes, then you may be able to continue to benefit from a single level of tax on your business earnings, while minimizing the portion of your business earnings that are treated as wages or self-employment income subject to Social Security taxes.

How does it work?

S corporation owners are considered employees of the corporation

If you own a corporation and perform substantial services as an officer of that corporation, you’re not treated as self-employed for tax purposes; rather, you’re treated as an employee of the corporation. Because you’re not self-employed, you don’t pay self-employment taxes. However, as an employee, both you and the corporation have to pay Social Security payroll (FICA) taxes on your salary. If you’re both an officer of your corporation and a shareholder, you may be able to reduce the amount of FICA tax you pay by receiving some of your compensation as corporate dividends.

Corporate dividends can reduce your payroll taxes

As a shareholder, you can withdraw earnings from your corporation in the form of dividends. You won’t have to pay Social Security payroll taxes on that part of your corporation’s earnings, because investment income is not subject to FICA taxes. You will only pay FICA taxes on the wages you receive from the corporation.

Strengths

You can reduce the amount of Social Security payroll taxes you owe

Incorporating your business and causing it to elect to be taxed as an S corporation can save you money by reducing the amount of Social Security payroll taxes you owe if, as a shareholder of the corporation, you withdraw part of the corporation’s earnings in the form of corporate dividends, rather than withdrawing such earnings as wages.

Tradeoffs

Setting up a corporation can be expensive

Operating a sole proprietorship is simpler and less expensive than operating a corporation. If you incorporate your business and elect for it to be taxed as an S corporation, you will have to pay incorporation fees, and you may have to hire accounting, tax, or legal professionals to advise you. There are a number of requirements that must be satisfied for a corporation to be eligible to elect to be taxed as, and continue to qualify as, an S corporation.

The Internal Revenue Service (IRS) may challenge your compensation structure

The IRS may audit your business and it may recharacterize all or a portion of any dividends distributed by the corporation to you as wages if it believes that the corporation is paying you compensation that is unreasonably low in order to avoid Social Security taxes. To avoid this, you must pay yourself an annual salary that is reasonable considering the work you actually do for the corporation during the year. (The IRS may, in certain circumstances, challenge unreasonably high compensation as well.)

We love to help you retire better. Check out our many Social Security planning options. Also, we love to keep in touch with our newsletter; click here to sign up.

Broadridge Investor Communication Solutions, Inc. prepared this material for use by Social Security Benefit Planners, LLC.

Social Security Benefit Planners, LLC and its affiliates are in no way associated with or approved, endorsed, or authorized by the Social Security Administration.

Integrating Social Security with Other Retirement Plans

Posted on March 13, 2023 by fsykes - Social Security Benefits

What is it?

You may receive retirement and/or survivor’s benefits from sources other than Social Security. Perhaps you are a federal employee, or maybe your employer pays you a pension. You can plan better for retirement if you know how income from other benefit plans may affect your Social Security benefits and how your Social Security benefits may affect how much you receive from other benefit plans.

The government pension offset

What is the government pension offset?

If you are entitled to receive a government pension as well as Social Security spousal retirement or survivor’s benefits, the government pension offset may reduce the amount of the spousal retirement or survivor’s benefit paid to you.

Who does it affect?

Social Security retirement or survivor’s benefits payable to the spouse (or divorced spouse) of a worker covered by Social Security may be reduced (offset) if that spouse receives a federal, local, or state governmental pension based on his or her own earnings.

The government pension offset applies only to a pension payable to the spouse based on his or her own earnings that weren’t covered under Social Security. For example, a pension received by a federal employee enrolled in the Civil Service Retirement System (CSRS) may affect Social Security benefits, because the pension is based on earnings that weren’t subject to Social Security payroll taxes.

The pensions of some government employees are exempt from the offset

The Social Security Administration (SSA) lists the following employees as exempt from the government pension offset:

Any state, local, or military service employee whose government pension is based on a job where he or she was covered by Social Security throughout his or her last 60 months of employment with the government entity.
Anyone whose government pension is not based on his or her own earnings.
Anyone who received or who was eligible to receive a government pension before December 1982 and who meets all the requirements for Social Security spouse’s benefits in effect in January 1977.
Anyone who received or was eligible to receive a federal, state, or local government pension before July 1, 1983, and was receiving one-half support from her or his spouse.
Federal employees who are mandatorily covered under Social Security.
Federal employees who chose to switch from the CSRS to the Federal Employees Retirement System (FERS) on or before December 1987. Federal employees who chose to switch after December 1987 need five years under FERS to be exempt from the government pension offset. If, however, the Office of Personnel Management allowed an employee to make a belated election to FERS, that change could have been made through June 30, 1988.

How much is the government pension offset?

The government pension offset will reduce spousal Social Security retirement or survivor’s benefits by two-thirds of the amount of the government pension.

Marilyn receives $600 a month from her government pension (based on her own earnings), and she is entitled to receive a $500 spousal retirement benefit based on her husband’s Social Security record. Two-thirds of the amount of her government pension is $400, so her Social Security spousal retirement benefit will be reduced from $500 to $100.

The windfall elimination provision

What is the windfall elimination provision?

The windfall elimination provision (WEP) affects how your Social Security retirement benefit is figured if you receive a pension from work not covered by Social Security. The formula used to figure your benefit is modified, resulting in a lower Social Security retirement benefit.

Who does it affect?

The WEP provision might affect you if:

You earned a government pension from work not subject to Social Security taxes, and you also worked at another job where you paid Social Security taxes long enough to qualify for a Social Security retirement benefit, and
You reach 62 after 1985 and first become eligible for the monthly pension after 1985 (you are considered eligible for the pension, if you meet the pension requirements, even if you continue to work).

How your retirement benefit is normally calculated

Normally, your benefit is calculated by applying a benefit formula to your average indexed monthly earnings (AIME). This benefit formula separates your average earnings into three levels and multiplies each level by a different factor. For example, if you turn 62 in 2022, the first $1,115 of your AIME is multiplied by 90 percent. The next $6,721 is multiplied by 32 percent and the remainder by 15 percent.

How your retirement benefit is calculated using the revised formula

The revised formula is used to calculate your benefit if you are eligible for a pension from noncovered employment. This formula reduces the 90 percent factor to 40 percent to calculate the benefit for people who reached age 62 in 1990 or later and have minimal Social Security coverage. However, if you have between 21 and 29 years of substantial earnings, the percentage factor is reduced to between 45 and 85 percent.

Two other methods, the simplified old-start method and the special minimum PIA, are also considered when determining the amount of benefits payable. The computation that yields the highest PIA will be used by the SSA to determine the amount of benefits payable.

The revised formula doesn’t apply in certain cases

The revised formula doesn’t apply if:

You’re a federal worker covered for Social Security purposes
You were employed on December 31, 1983, by a nonprofit organization that was exempt from Social Security and it became mandatorily covered under Social Security on that date
Your only pension is based on railroad employment
You have 30 or more years of coverage under Social Security
Your Social Security benefit is a survivor’s benefit

The revised formula can reduce benefits only up to a certain limit

Your Social Security retirement benefit can’t be reduced to an amount less than one-half of the part of your pension attributable to earnings after 1956 not covered by Social Security. A calculator is available at the Social Security Administration’s website, socialsecurity.gov, that can help you calculate your WEP reduction.

How will your Social Security benefits affect income you receive from other benefit plans?

The FERS annuity supplement

A retired employee receiving a Basic Annuity under the Federal Employees Retirement System (FERS) also receives a Basic Annuity Supplement if that employee is under age 62. The Supplement is equal to the estimated amount of Social Security retirement benefits that the employee would be eligible to receive based on civil service retirement earnings. The Supplement stops when the employee becomes eligible for Social Security retirement benefits (age 62). Only employees eligible to receive an unreduced retirement annuity can receive the Supplement, unless the employee was retired involuntarily and is age 55 or older.

Survivor’s benefits under FERS

Besides receiving a survivor’s annuity, the widow or widower of an employee covered under the FERS system will be eligible to receive an annuity supplement if he or she is under age 60 and therefore not yet eligible to receive Social Security benefits. The annuity supplement is designed to be the equivalent of Social Security or a Civil Service Retirement System survivor’s benefit. In addition, the survivor’s annuity that a dependent child receives is reduced by the amount of any Social Security survivor benefits he or she receives.

Survivor’s annuities under the Railroad Retirement Act

The Railroad Retirement Act provides retirement and survivor’s benefits (in the form of an annuity) to railroad employees. These benefits are financed by payroll taxes. The benefits are divided into two levels: Tier I and Tier II. Tier I benefits are based upon railroad service and Social Security covered employment. They’re generally equivalent to Social Security benefits and are calculated in a similar way. Tier II benefits are based on railroad service alone and are paid over and above Social Security benefit levels.

Survivor’s annuities paid under Tier I are reduced by the amount of any Social Security benefit received by the survivor. In addition, like Social Security benefits, railroad annuities are subject to an excess earnings limit. Survivors who are receiving Social Security benefits have their railroad retirement annuity and Social Security benefit combined for earnings limitation purposes.

How Social Security affects qualified retirement plans

Your employer may integrate Social Security with a qualified retirement plan where permitted by law. Check with your employer if you have questions regarding your qualified retirement plan.

Your employer-sponsored disability or health care plan may also be integrated with Social Security disability benefits or Medicare.

Questions & Answers

Will you qualify for Medicare even if you don’t receive a Social Security retirement benefit because you receive a government pension?

If you’re age 65, you may qualify for Medicare even if you don’t receive a Social Security retirement benefit.

If you are interested in our Social Security planning options, learn more here! We understand that retirement planning can be daunting, and we are here to make it easier for you. Our newsletter is a great way to stay up-to-date with our latest offerings and get helpful retirement planning tips. Signing up is easy; click here. We appreciate your interest in our services and look forward to helping you retire better!

Broadridge Investor Communication Solutions, Inc. prepared this material for use by Social Security Benefit Planners, LLC.

Social Security Benefit Planners, LLC and its affiliates are in no way associated with or approved, endorsed, or authorized by the Social Security Administration.

Social Security Disability Benefits

Posted on March 12, 2023 by fsykes - Social Security Disability Benefits

What is it?

Most people don’t expect to become disabled and are unprepared when they are unable to work due to illness or injury. The fact is, however, that you are much more likely to become disabled than die during your earning years. Because eligibility standards are strict, Social Security disability benefits may not offer the comprehensive protection that you need. However, they can help protect you and your family from financial devastation when you can’t work for a year or more.

Two programs administered by the Social Security Administration (SSA) pay disability benefits. The Social Security disability insurance program pays benefits to qualified individuals who are under full retirement age, regardless of income. The other program, Supplemental Security Income (SSI), pays benefits to qualified individuals who are either over age 65 or who are blind or disabled and have limited income. The following discussion pertains only to the Social Security disability insurance program.

Who is eligible for disability benefits?

Under the Social Security disability program, you may be eligible for benefits if you meet the following criteria:

You must be under full retirement age
You must have attained disability insured status by meeting one of the following requirements for Social Security credits (also known as quarters of coverage):
If you are disabled at age 31 or older, you are considered to be fully insured for disability benefits if you earn at least one credit for each year after age 21 and before the year you become disabled or reach age 62, whichever comes first. However, unless you are blind, you must also have earned at least 20 of the credits in the 10-year (40-quarter) period ending with the quarter in which disability begins. The following table, published by the SSA, shows the number of credits you will need:

Born after 1929 and become disabled at age:	Credits you need:
31 through 42	20
44	22
46	24
48	26
50	28
52	30
54	32
56	34
58	36
60	38
62 or older	40

Rob was disabled when he tripped over a footstool in his home. He was 46. Because 24 years had elapsed from the year he turned 22 until the year before he became disabled, he needed 24 credits to be eligible for disability benefits.

If you are disabled at any age between 24 and 30, you may qualify if you have attained special insured status. To qualify for benefits, you must have earned credits in one-half of the years that have elapsed after age 21 and up to the age you became disabled.
If you are disabled before age 24, you may qualify if you have earned six credits in the 12 quarters ending with the quarter in which your disability begins.
You have fulfilled the five-month waiting period for benefits. This waiting period begins with the first full month after the date the SSA decides your disability began.

Keith was hurt on January 10. He applied for disability benefits on March 4. His claim was approved in May. The SSA determined that the onset of his disability was January 10, so the five-month waiting period began in February and ended in June. He became entitled to benefits on July 1.

You are a disabled individual, as defined by the SSA. Social Security does not allow coverage for partial disability; you’re either disabled or you’re not. In general, you’re considered disabled if you’re unable to engage in substantial gainful activity (productive work for which you could earn money) because you’re impaired mentally or physically. This impairment must be medically determined. The period of disability has to last or be expected to last 12 months or more or result in your death (for a detailed discussion about how your disabled status is determined, see below).

If you are blind, special considerations may govern your situation. The Social Security definition of blindness is that your vision field is 20 degrees or less, even with a corrective lens, or that your vision cannot be corrected to better than 20/200. If you are 55 or over, a special definition of disability exists that may affect your eligibility for disability benefits: the inability, because of blindness, to engage in substantial gainful activity requiring skills or abilities comparable to those of any gainful activity in which you have previously engaged with some regularity and over a substantial period of time.

In addition, if you are eligible for disability benefits, certain members of your family may also qualify for benefits if:

Your spouse is age 62 or over or caring either for a dependent child of yours who is under age 16 or a child who is disabled
Your dependent unmarried child is under 18, or under 19 if enrolled in secondary school full time
Your dependent unmarried disabled child is over 18 (if disability began before age 22)

If you die, your disabled widow or widower, age 50 or older whose disability began before your death or within seven years after your death, and your disabled ex-spouse who is 50 or older (if the marriage lasted 10 years or longer) may also qualify for Social Security benefits based on your earnings record.

How much will you receive from disability insurance?

Your disability benefit amount will generally be 100 percent of your primary insurance amount (PIA). It is based on your average lifetime earnings. You can estimate your disability benefits by using one of the benefit calculators available at the Social Security website (ssa.gov.) You can also sign up at the website for a my Social Security account so that you can access your Social Security Statement where you can view your actual earnings record and get an estimate of how much you would receive if you were disabled right now.

Keep in mind that your disability benefit amount (or that of your family members) may be affected by income you receive from these other programs:

Workers’ compensation benefits
Disability benefits from some federal, state, civil service, and local government programs
Government pensions from work not covered by Social Security

Your disability benefit may end when:

Your condition improves, and you are no longer considered disabled
You become eligible for retirement benefits
You refuse to follow a prescribed rehabilitation program that may restore your ability to engage in substantial gainful activity
You do not supply the SSA with the evidence necessary to substantiate your claim
You die

Benefits for family members are expressed as a percentage of your PIA. Generally, each family member can expect to receive 50 percent of your PIA, but the total benefit payable to all family members on your record can’t exceed a certain limit. This limit varies, but is around 150 to 180 percent of your disability benefit. If the sum of benefits payable to your family members exceeds this limit, their benefits will be reduced proportionately. Your benefit will not be affected.

How does the SSA decide if you are disabled?

The claims process for disability benefits usually takes three to five months because the SSA has to obtain medical information and assess your disability. The eligibility determination generally proceeds as follows:

You apply for benefits as soon as you become disabled. If you choose to apply by phone, call (800) 772-1213 to start the application process. The SSA representative will arrange to take your claim over the telephone or in your local SSA office, send you a claim form, and tell you what documents or information you will need to support your claim. You can also complete an application online at the Social Security website.
You supply any supporting documents available to you, including a copy of your most recent W-2 Form (or tax return if you are self-employed) and the names, addresses, and phone numbers of doctors, hospitals, and clinics that treated you. You will also need your Social Security number, proof of age, a summary of where you worked in the past 15 years, and your medical records.
The SSA reviews your application to make sure that you meet the nondisability requirements of the law, such as age and insured status.
Your application is then forwarded to your state’s Disability Determination Services (DDS) office. The DDS employs a team consisting of a physician and a disability evaluation specialist who will determine whether you are disabled (unable to perform substantial gainful activity). To do this, they try to answer the following five questions:

Are you currently working? If your earnings in 2019 are more than the substantial gainful activity (SGA) level of $1,220 per month for individuals who are not blind or $2,040 per month for blind individuals, you generally cannot be considered disabled. Your claim may be denied.
Is your condition severe? Your work activities must be limited by your condition. If not, your claim may be denied.
Is your condition found in the list of disabling impairments? The DDS maintains a list of impairments that automatically mean you are disabled. If your condition is not on the list, they decide whether it is of equal severity to one that is on the list. At this point, your claim may be approved based on this evidence.
Can you do the work you did previously? If your disability was found to be limiting but not as severe as a disability on the list of impairments, then the DDS determines whether it interferes with your ability to do the work you did during the past 15 years. If it does, your claim will be considered further.
Can you do any other type of work? If you cannot do the work you did previously, the DDS will decide whether you can do any other type of work by considering your age, education, experience, and skills. If you cannot do any other kind of work, your claim will be approved. Otherwise, it will be denied.

If necessary, the DDS will gather medical evidence from your doctors and places where you have been treated. They may ask you for help in obtaining a medical report if necessary. Your doctors will be asked about your medical condition, when it began, how your activities are limited, and how you have been treated.
If medical evidence regarding your disability is scanty or inconclusive, you may be asked to take a “consultative exam.” Social Security may ask you to take (and will pay for) a physical exam (often performed by your doctor) to gather more information.
Finally, you will receive a benefit notice. If your claim is approved, the notice will tell you how much benefit you will receive and when it will begin. If the claim is denied, you will find out why.

If your disability claim is approved, what happens next?

If your claim is approved, your first benefit check will be dated the sixth full month after the date your disability is determined to have begun. If necessary, benefits can be paid up to 12 months retroactively. Your benefits will continue as long as you are considered disabled. Your case will be reviewed occasionally to see if you still meet the SSA’s definition of disability.

While you are receiving disability benefits, you are encouraged to try to work again. The Social Security Administration has established various work incentives to help you succeed. Most beneficiaries become eligible for the SSA’s Ticket to Work Program when they start receiving Social Security disability benefits or Supplemental Security Income benefits based on disability. This program is free and voluntary, and provides support services that will help you return to work. Other work incentives are also available.

If your disability benefit claim is denied, what can you do?

If your claim is denied, you may appeal the decision within 60 days. There are four levels of appeal. If you disagree with the decision at one level, you may move to the next:

A special group in the Office of Disability Operations of the SSA will review the claim
An administrative law judge will conduct a hearing
An Appeals Council will consider the case if it feels the judge overlooked an issue
If the Appeals Council will not hear the case or you disagree with the decision, you may appeal to federal civil court

We love to help you retire better. Check out our many Social Security planning options. Also, we love to keep in touch with our newsletter; click here to sign up.

Broadridge Investor Communication Solutions, Inc. prepared this material for use by Social Security Benefit Planners, LLC.

Social Security Benefit Planners, LLC and its affiliates are in no way associated with or approved, endorsed, or authorized by the Social Security Administration.

Optimizing Your Social Security Retirement Benefits

Posted on March 9, 2023 by fsykes - Retirement Benefits, Social Security Benefits

What does it mean?

Getting the most out of your contributions

Optimizing your Social Security retirement benefits means getting the best return possible on each dollar you’ve contributed to the system. Every pay period, you pay 6.2 percent of your salary in taxes that finance your future benefits (retirement, disability, and survivor’s benefits) and those of other Americans. In addition, your employer pays an equal share of taxes; if you’re self-employed, you contribute both your own portion and the employer portion by paying a self-employment tax.

Most Americans should plan a benefit strategy

Most jobs are covered by or are eligible for coverage under Social Security. This means that most Americans will use their benefit coverage at some point during their lives. The amount of Social Security benefits you receive will partly be determined by law, inflation, and other conditions outside your control. However, if you make wise decisions regarding when you retire and how much you earn, you can potentially increase the amount of benefit you will receive.

Will you get out of Social Security what you’re putting in?

What you pay into the system isn’t exactly what you get out of it

If you have a 401(k) or another qualified retirement plan, you probably know exactly how much you contribute to it each month. From year to year, you watch as your savings grow. But do you know what you contribute to Social Security? Because Social Security taxes are involuntary (unlike contributions to a private retirement plan), you probably don’t. You may know approximately what distribution you will receive from an IRA, for example, but when you’re ready to retire, how much of what you’ve paid into the Social Security system will you collect? The answer to that question is tricky because you may never need to use some of the benefits you have earned. In addition, Social Security is both a pay-as-you-go system of benefits and a social program. What you pay into the system isn’t exactly what you get out of it.

How the average indexed monthly earnings (AIME) benefit formula favors low-income individuals

If you retire at normal (full) retirement age, your retirement benefit will be 100 percent of your primary insurance amount (PIA). Your PIA is calculated by applying a benefit formula to your AIME. If you have had low earnings over your lifetime, your benefit will be much lower than the benefit of someone who had high earnings. However, because the benefit formula is weighted to favor individuals with low earnings, you will get back a greater percentage of what you put in than someone who had high earnings.

You can’t change the benefit formula

Clearly, the individual with the highest lifetime earnings receives the highest monthly retirement benefit. However, the individual with the lowest lifetime earnings receives a benefit that reflects the highest percentage of lifetime earnings. Though you can’t change Social Security’s benefit formula, you can make some decisions during your lifetime that will affect the amount of your retirement benefit.

Decisions that affect the amount of your Social Security retirement benefit

When you receive your retirement benefit

Choosing when to start receiving retirement benefits is a personal decision but one that shouldn’t be made hastily. Taking time to clip grocery coupons may save you a few dollars; taking a few minutes to decide when you want to start receiving retirement benefits could save you thousands. This is because retiring earlier or later than normal (full) retirement age can greatly change the amount of your monthly retirement benefit.

When you retire at normal (full) retirement age, you will receive a retirement benefit equal to 100 percent of your PIA. If you retire early (often at age 62, but anytime before normal (full) retirement age), you will receive a reduced benefit. If you retire later than normal (full) retirement age (but before age 70), you will receive an increased benefit. Because you want to receive the highest benefit, you want to postpone retirement as long as possible, right? Not necessarily. Even though you will receive less money per month if you retire early, over your remaining lifetime you may receive more than someone who retired late or at normal (full) retirement age. For example, if you retire at age 62, you will receive 60 more benefit checks than someone who retires at 67. This may add up to a substantial amount of money that will be difficult to compensate for even with an increased benefit check. On the other hand, you may want to work as long as possible because you need to provide for your family. In addition, if you postpone receiving your Social Security retirement benefit, you will increase your benefit substantially because your monthly earnings may increase and you will receive a late retirement credit.

When deciding at what age you want to begin receiving Social Security retirement benefits, consider other retirement benefits you may receive as well. For example, you may be able to retire at age 62 (or earlier) and begin receiving a pension from your employer as well as a Social Security supplement that will pay you a benefit equivalent to what you would receive from Social Security until you reach normal (full) retirement age. Consider, too, your tax situation, and how your decision will affect your spouse or dependent family members.

How much you earn during your lifetime

Since your retirement benefit check will be based on your average monthly earnings, earning more during your lifetime is one way to maximize your Social Security retirement benefit. The indexed income you receive in a certain number of your highest earnings years (usually 35) is added up and divided by the number of months that elapsed during those years. The result is your AIME amount. Then, a benefit formula will be applied to determine your PIA upon which your monthly benefit will be based.

You can’t increase your monthly benefit by changing the formula used to calculate it; that formula is determined by law. However, you may increase your monthly benefit by increasing your AIME amount. You may also wish to increase your AIME to ensure that you will be eligible for minimum Social Security benefits in the event that you’ve worked only sporadically in a job covered by Social Security.

How much you earn after you retire

Part of your Social Security retirement benefit is not payable if you’re under normal (full) retirement age and have earned income in retirement in excess of a certain amount. This amount is known as the retirement earnings test exempt amount. In 2023, you can earn up to $21,240 if you have not yet reached normal (full) retirement age or up to $56,520 during the year you reach normal (full) retirement age (up to, but not including the month you reach normal (full) retirement age). If you make the same as or less than these amounts, your Social Security retirement benefit won’t be reduced.

Once you have reached your normal (full) retirement age, your earnings in retirement won’t reduce your Social Security benefit. So to optimize your benefit, you can calculate how your earned income might affect your benefit and consider postponing any earned income in retirement until you reach your normal (full) retirement age. However, keep in mind that the benefit reduction is based on your actual earnings and is not permanent; your monthly benefit is reduced starting in January of the year following the year you had excess earnings and will be reduced until the excess earnings are used up. Additionally, if your monthly benefit is reduced in the short term due to your earnings, you’ll receive a higher monthly benefit later. That’s because the Social Security Administration (SSA) recalculates your benefit when you reach full retirement age, and omits the months in which your benefit was reduced.

Get the information you need to plan your strategy

Before you can plan a strategy to optimize your retirement benefits, you need to find out how much you might receive. You can use the SSA’s Retirement Estimator tool available on the SSA’s website (ssa.gov) to estimate your future Social Security benefits based on your earnings record. You can also visit the SSA website to sign up for a my Social Security account and obtain a copy of your Social Security Statement. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivor, and disability benefits. If you’re not registered for an online account and are not yet receiving benefits, you’ll receive a statement in the mail every year, starting at age 60.

We love to help you retire better. Check out our many Social Security planning options. Also, we love to keep in touch with our newsletter; click here to sign up.

Broadridge Investor Communication Solutions, Inc. prepared this material for use by Social Security Benefit Planners, LLC.

Social Security Benefit Planners, LLC and its affiliates are in no way associated with or approved, endorsed, or authorized by the Social Security Administration.

Myths and Facts About Social Security

Posted on March 7, 2023 by fsykes - Retirement Benefits, Retirement fears

Myth: Social Security will provide most of the income you need in retirement.

Fact: It’s likely that Social Security will provide a smaller portion of retirement income than you expect.

There’s no doubt about it — Social Security is an important source of retirement income for most Americans. According to the Social Security Administration (SSA), nearly nine out of ten individuals age 65 and older receive Social Security benefits.¹

But it may be unwise to rely too heavily on Social Security, because to keep the system solvent, some changes will have to be made to it. The younger and wealthier you are, the more likely these changes will affect you. But whether retirement is years away or just around the corner, keep in mind that Social Security was never meant to be the sole source of income for retirees. As President Dwight D. Eisenhower said, “The system is not intended as a substitute for private savings, pension plans, and insurance protection. It is, rather, intended as the foundation upon which these other forms of protection can be soundly built.”

No matter what the future holds for Social Security, focus on saving as much for retirement as possible. When combined with your future Social Security benefits, your retirement savings and pension benefits can help ensure that you’ll have enough income to see you through retirement.

Myth: If you earn money after you retire, you’ll lose your Social Security benefit.

Fact: Money you earn after you retire will only affect your Social Security benefit if you’re under full retirement age.

Once you reach full retirement age, you can earn as much as you want without affecting your Social Security retirement benefit. But if you’re under full retirement age, any income that you earn may affect the amount of benefit you receive.

If you’re under full retirement age, $1 in benefits will be withheld for every $2 you earn above a certain annual limit. For 2023, that limit is $21,240.
In the year you reach full retirement age, $1 in benefits will be withheld for every $3 you earn above a certain annual limit until the month you reach full retirement age. If you reach full retirement age in 2023, that limit is $56,520.

Even if your monthly benefit is reduced in the short term due to your earnings, you’ll receive a higher monthly benefit later. That’s because the SSA recalculates your benefit when you reach full retirement age and omits the months in which your benefit was reduced.

What Is Your Full Retirement Age?
If you were born in:	Your full retirement age is:
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

If you were born on January 1 of any year, refer to the previous year to determine your full retirement age.

Myth: Social Security is only a retirement program.

Fact: Social Security also offers disability and survivor benefits.

With all the focus on retirement benefits, it’s easy to overlook the fact that Social Security also offers protection against long-term disability. And when you receive retirement or disability benefits, your family members may be eligible to receive benefits, too.

Another valuable source of support for your family is Social Security survivor insurance. If you were to die, certain members of your family, including your spouse, children, and dependent parents, may be eligible for monthly survivor benefits that can help replace lost income.

For specific information about the benefits you and your family members may receive, visit the Social Security Administration website at ssa.gov, or call 800-772-1213 if you have questions.

Myth: Social Security benefits are not taxable.

Fact: You may have to pay taxes on your Social Security benefits if you have other income.

If the only income you had during the year was Social Security income, then your benefit generally isn’t taxable. But if you earned income during the year (either from a job or from self-employment) or had substantial investment income, then you might have to pay federal income tax on a portion of your benefit. Up to 85% of your benefit may be taxable, depending on your tax filing status (e.g., single, married filing jointly) and the total amount of income you have.

For more information on this subject, see IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits.

Myth: Social Security is going bankrupt soon.

Fact: Social Security is facing significant financial challenges, but is not going bankrupt.

Social Security is largely a pay-as-you-go system, with today’s workers (and employers) paying for today’s retirees through the collection of payroll (FICA) taxes. These taxes and other income are deposited in Social Security trust funds, and benefits are paid from them.

According to the SSA, due to demographic factors, Social Security is already paying out more money than it takes in. However, by drawing on the Old-Age and Survivors Insurance (OASI) Trust Fund, the SSA estimates that Social Security should be able to pay 100% of scheduled benefits until fund reserves are depleted in 2034. Once the trust fund reserves are depleted, payroll tax revenue alone should still be sufficient to pay about 77% of scheduled benefits. So at that time, if no changes are made, beneficiaries may receive a benefit that is about 23% less than expected.²

That’s not good news, but Congress still has time to make changes to strengthen the program and address projected shortfalls. Until then, consider various income scenarios when planning for retirement.

1) Social Security Administration, Social Security Basic Facts, 2022

2) 2022 OASDI Trustees Report

Broadridge Investor Communication Solutions, Inc. prepared this material for use by Social Security Benefit Planners, LLC.

Social Security Benefit Planners, LLC and its affiliates are in no way associated with or approved, endorsed, or authorized by the Social Security Administration.

Four Things Women Need to Know about Social Security

Posted on March 2, 2023 by fsykes - Women and Retirement

Ever since a legal secretary named Ida May Fuller received the first retirement benefit check in 1940, women have been counting on Social Security to provide much-needed retirement income. Social Security provides other important benefits too, including disability and survivor benefits that can help you and your family members.

1. How does Social Security protect you and your family?

When you work and pay Social Security taxes, you’re paying for three types of benefits: retirement, disability, and survivor benefits.

Retirement benefits

Retirement benefits are the cornerstone of the Social Security program. Even if other sources of retirement income are exhausted, Social Security retirement benefits can’t be outlived. Many women qualify for benefits based on their own work record. If you’re married, you may also qualify based on your spouse’s work record, or on your former spouse’s record if you’re divorced.

Disability benefits

During your working years, you may suffer a serious illness or injury that prevents you from earning a living, potentially putting you and your family at financial risk. But if you qualify for Social Security on your earnings record, you may be able to get monthly disability benefits. You must have worked long enough in recent years, have a disability that is expected to last at least a year or result in death, and meet other requirements. If you’re receiving disability benefits, certain family members (such as your dependent children) may also be able to collect benefits based on your work record. Because eligibility requirements are strict, Social Security is not a substitute for other types of disability insurance, but it can provide basic income protection.

Survivor benefits

You probably know the value of having life insurance to financially protect your family, but did you know that Social Security offers valuable income protection as well? If you’re qualified for Social Security at your death, your surviving spouse (or ex-spouse), your unmarried dependent children, or your dependent parents may be eligible for benefits based on your earnings record. You also have survivor protection if you’re married and your covered spouse dies and you’re at least age 60 (or at least age 50 if you’re disabled), or at any age if you’re caring for your covered child who is younger than age 16 or disabled.

2. How do you qualify for benefits?

When you work in a job where you pay Social Security taxes or self-employment taxes, you earn credits (up to four per year, depending on your earnings) that enable you to qualify for Social Security benefits. In 2023, you earn one credit for each $1,640 of wages or self-employment income. The number of credits you need to qualify depends on your age and the benefit type.

For retirement benefits, you generally need to have earned at least 40 credits (10 years of work). However, you may also qualify for spousal benefits based on your spouse’s work history if you haven’t worked long enough to qualify on your own, or if the spousal benefit is greater than the benefit you’ve earned on your own work record.
For disability benefits (if you’re disabled at age 31 or older), you must have earned at least 20 credits in the 10 years just before you became disabled (different rules apply if you’re younger).
For survivor benefits for your family members, you need up to 40 credits (10 years of work), but under a special rule, if you’ve worked for only one and one-half years in the three years just before your death, benefits can be paid to your children and your spouse who is caring for them.

Whether you work full-time, part-time, or are a stay-at-home spouse, parent, or caregiver, it’s important to be aware of these rules and to understand how time spent in and out of the workforce might affect your entitlement to Social Security.

3. What will your retirement benefit be?

Your Social Security retirement benefit is based on the number of years you’ve worked and the amount you’ve earned. Your benefit is calculated using a formula that takes into account your 35 highest earnings years. If you earned little or nothing in several of those years, it may be to your advantage to work as long as possible, because you may have the opportunity to replace a year of lower earnings with a year of higher earnings, potentially resulting in a higher retirement benefit.

Your benefit will also be affected by your age at the time you begin receiving benefits. If you were born in 1943 or later, full retirement age ranges from 66 to 67, depending on the year you were born. Your full retirement age is the age at which you can apply for an unreduced retirement benefit.

However, you can choose to receive benefits as early as age 62, if you’re willing to receive a reduced benefit. At age 62, your benefit will be 25% to 30% less than at full retirement age (this reduction is permanent). On the other hand, you can get a higher payout by delaying retirement past your full retirement age, up to age 70. If you were born in 1943 or later, your benefit will increase by 8% for each year you delay retirement.

For example, the following chart shows how much an estimated monthly benefit at a full retirement age of 67 would be worth if you started benefits early at age 62 (your monthly benefit is reduced by 30%), and how much it would be worth if you waited until age 70 (your monthly benefit is increased by 24%).

Benefit at age 67	Benefit at age 62	Benefit at age 70
$1,000	$700	$1,240
$1,200	$840	$1,488
$1,400	$980	$1,736
$1,600	$1,120	$1,984
$1,800	$1,260	$2,232

What if you’re married and qualify for spousal retirement benefits based on your spouse’s earnings record? In this case, your benefit at full retirement age will generally be equal to 50% of your spouse’s benefit at full retirement age (subject to adjustments for early and late retirement). If you’re eligible for benefits on both your record and your spouse’s, you’ll generally receive the higher benefit amount.

One easy way to estimate your benefit based on your earnings record is to use the Retirement Estimator available on the SSA website. You can also visit the SSA website to sign up for a my Social Security account so that you can view your personalized Social Security Statement. This statement gives you access to detailed information about your earnings history and estimates for disability, survivor, and retirement benefits.

4. When should you begin receiving retirement benefits?

Should you begin receiving benefits early and receive smaller payments over a longer period of time, or wait until your full retirement age or later and receive larger benefits over a shorter period of time? There’s no “right” answer. It’s an individual decision that must be based on many factors, including other sources of retirement income, your marital status, whether you plan to continue working, your life expectancy, and your tax picture.

As a woman, you should pay close attention to how much retirement income Social Security will provide, because you may need to make your retirement dollars stretch over a long period of time. If there’s a large gap between your projected expenses and your anticipated income, waiting a few years to retire and start collecting a larger Social Security benefit may improve your financial outlook. What’s more, the longer you stay in the workforce, the greater the amount of money you will earn and have available to put into your overall retirement savings. Another plus is that Social Security’s annual cost-of-living increases are calculated using your initial year’s benefits as a base — the higher the base, the greater your annual increase, something that can help you maintain your standard of living throughout many years of retirement.

This is just an overview of Social Security. There’s a lot to learn about this program, and each person’s situation is unique. Contact a Social Security representative if you have questions.

For more information about Social Security benefits, visit the Social Security Administration website at ssa.gov, or call (800) 772-1213 to speak with a representative. You may also call or visit your local Social Security office.

Use the benefit calculators available on the Social Security website to estimate your future retirement, disability, and survivor benefits
Check your earnings history regularly, and report any name changes right away to the SSA so that your earnings are recorded properly
No matter when you apply for Social Security, you’ll be eligible for Medicare at age 65, so make sure you contact the SSA three months before you turn 65 to sign up for Medicare even if you plan to retire later

Broadridge Investor Communication Solutions, Inc. prepared this material for use by Social Security Benefit Planners, LLC.

Social Security Benefit Planners, LLC and its affiliates are in no way associated with or approved, endorsed, or authorized by the Social Security Administration.