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Start 2020 Thinking About Social Security Issues and Options

Posted on January 1, 2020 by hgasaway Leave a comment

The month of December for most of us is immersed in celebrations, pageant’s, football, parades, writing and mailing Christmas cards, decorating, cooking, parties and family. We are all over the top BUSY – BUSY and actually anticipate the colder, slower month of January to simply re-load. Don’t get me wrong, we all love Christmas and the meaning behind that special day, but we just over commit. Take lots of pictures as these memories fly by in a brief moment!

Having said that, January is also the month most folks start pulling out their tax receipts, 1099’s, W-2’s and other year-end compilations. This is a good thing as April 15th quickly roars its head. If nearing retirement, may we also encourage you to look at your Social Security statements? First of all, your Earnings History must be accurate as these numbers affect your PIA (primary insurance amount) for life. Also, the numbers presented on this statement are not your only options. Timing, flexibility, and the application of rules that apply to your situation could change your benefit amount.

Whether married, divorced, single, disabled or widowed, this message is for you. There are different rules for each situation, and people are in different categories based on their ages. Combining these differences is complicated, but a welcome challenge if this is your area of expertise. WHY – because in most cases, there is a better choice which equals improved cash flow.

Check for errors in your Social Security statements – in 2016 alone, the SSA processed 92,000 complaints about mistakes found in statements. Remember, that your benefit amount is based on your top 35 years of inflation-adjusted earnings, so if these numbers are wrong, your benefit amount will not be accurate.

When you file for your Social Security benefit, that decision has potential repercussions for your spouse as well, not only while you are living, but for your spouse’s Survivor benefit. Your benefit filing also has repercussions that include family members qualified to share in your benefits. Your benefits should be reviewed collectively, not individually – this is our area of expertise. Remember that when one of you dies, only one check remains. If by simply planning you can improve this amount for the rest of your spouse’s life, why would you not do this? The answer to this question is simple – a lack of knowledge regarding the rules and regulations that apply to Social Security benefits.

People who were born after January 1, 1954, will be “deemed” to apply for any available benefits when they file for Social Security and will be paid the higher of the two amounts. But, “deemed filing” does not apply to Survivor Benefits. This is a HUGE missed opportunity if not filed for at the right time. TIMING is critical in all Social Security decisions.

Social Security benefits for divorced spouses remains a fertile area where strategic claiming strategies can make a big difference in retirement benefit planning and future income for these spouses – not just women, men as well.

In agreement with the Social Security laws, there are Spousal Benefits, Family Benefits, Divorced Benefits, and Survivor Benefits, all not included on your annual Social Security statement. If you don’t know the questions to ask, how do you expect to get the answers you need or the benefit you deserve?

Do yourself a favor next year and make this one of your priorities. You take your taxes to a professional and you get a better end result – do the same with your Social Security benefit – it is for the rest of your life.

Pillars LLC is in the Corinth, MS area but service all 50 states. Roy and Diane are both National Social Security Advisors and Roy is a former CPA of over 40 years. You may contact them at dthompson@pillarsllc.com, on their website at www.pillarsllc.com or call at 601-954-0699. KNOW before you GO!!

Are You Missing Something?

Posted on August 12, 2019 by Pillars LLC Leave a comment

Got a call this week from a couple in Georgia that are both 67, still working, enjoy their jobs and were interested in getting a review of their Social Security benefits. Their plan was to wait until age 70 to maximize both their benefits. Is there anything we can do for them…..yes, yes and yes.

Unfortunately, because of their age and the fact they are both in Tier 2, (turned 62 by January 1, 2016) they should have called a year sooner. Joe’s benefit was $2875 at his full retirement age of 66. Ethel’s benefit was $1250 at her retirement age of 66. Yes, by waiting their benefits have increased by 8%, but they have lost a full year of benefits using the Restricted Application for Spousal Benefits.

Here is what they had planned:

1. By waiting until age 70, there will be no income stream between 66-70, which they are entitled to.

2. Their cumulative benefit through life expectancy (age 85 for Joe and 88 for Ethel) will be $1,123,155.

What could happen:

1. Ethel would begin her benefits in the amount of $1308 in July 2019.

2. Joe would file a Restricted Application for Spousal Benefits only in the amount of $625 beginning in July 2019.

3. Joe allows his benefit to continue to grow at 8% per year until age 70.

4. They have generated an income of $1933 per month until age 70.

5. They are both past Full Retirement Age, so they do not need to be concerned about the Earnings Limitations Rule.

6. Joe switches to his benefit at age 70 which has grown to $3,795; Ethel is now eligible for a Spousal Boost at age 69.6 to $1,438 per month.

7. Survivor Benefits have increased to $3,795 for the remaining spouse.

8. Cumulative benefits through life expectancy has grown to $1,154,738 a $31,583 increase over and above their plan.

Also, if interested, they could get six months of retroactive benefits because they were past full retirement age; this would reduce their lifetime benefits by that 6 months reduction. The check for the both of them would be approximately $11,598. This needs to be analyzed before asking for or taking because it is taxable, and the reduction might not be worth the additional income.

This is not the only option that is available, but one that needs to be recognized. Folks, you need to know what your options are. We like to see our clients about two years before consideration of retirement for this exact reason.

Your Birthday, Social Security and Retirement are not Synonymous

Posted on July 15, 2019 by Pillars LLC Leave a comment

I will be 65 on June 24th, so I am planning to retire. I have worked hard my whole life and am ready to reap the rewards of my hard labors. So, in all one breath, this individual is filing for Medicare, retiring, drawing his/her Social Security and celebrating 65 years. Does it have to be all at one time?

That depends on many variables. At a minimum, file for your Medicare Part A at age 65; this is very important. You don’t want to procrastinate with Medicare deadlines as they can be very costly. We do not handle Medicare issues, but there are many professionals that do. So, you picked your birthday as your retirement date….why? Because it sounded good, or did you have a plan that took into consideration the rules and regulations that apply to your situation?

If still working, depending on your birthday month, drawing your Social Security benefit needs to be a strategically calculated decision. The Earnings Limitations Rules can be very costly if retiring prior to your Full Retirement Age. Monthly Social Security benefits may be reduced or eliminated due to the Earnings Test. By making small adjustments, you can have a much more fruitful retirement plan. But by filing, and just continuing to work, you could be hurting your revenue source and not realize what you did. These are the phone calls we get from folks that do not understand the rules and want to change what they have just done.

The year you turn Full Retirement Age, the Earnings Limitations rule changes to a much higher threshold, and that needs to be calculated into your plan. If your birthday is one of the later months of the year, you could greatly benefit by waiting to draw because of this increase. The year you start drawing benefits, there is another exception to the rule based on a monthly calculation of earnings.

In the event that other family members are entitled to benefits based on your work record (spousal benefits and/or child benefits), the earnings test will also reduce their benefits as well as yours if your earnings exceed the applicable threshold.

The good news is that people are starting to understand the need for a professional review before filing. Your date to file for Social Security really should have nothing to do with your birthday, but everything to do with what financially best serves you and your family. People are researching on their own, getting

frustrated or confused, but continuing that search for a professional review to nail down the rules and regulations. Education never hurt a single soul!

What Qualifies for Social Security Credits?

Posted on June 10, 2019 by Pillars LLC Leave a comment

Social Security credits are based on the amount of your earnings. Not all income qualifies for credits. In 2019, you will receive one credit for each $1,360 of earnings, up to a maximum of four credits for the year. The amount necessary to qualify for earnings increases with each year. For a person born in 1929 or later, it takes a minimum of 40 work credits (10 years of part-time work) to qualify for a Social Security retirement credit; of course, there are exceptions to this rule as with all Social Security rules.

There is also an annual limit to the amount of income Social Security taxes are applied; that amount in 2019 is $132,900. So, if your salary is over this limit, anything above the limit is not subject to the Social Security, but still subject to Medicare taxes. This does not have an effect on your work credits required, but it certainly has an effect on the increase to your Social Security benefit.

Things that do count for credits:

1. Commissions.

2. Cash tips of $20 or more per month, but only if reported on your Federal Tax Return.

3. Severance packages with accrued vacation pay and bonuses.

4. W-2 wages and self-employment income as reported by a sole proprietor, certain shareholders or partner.

5. Special rules for domestic work, farm work and work for a church that does not pay Social Security taxes.

6. Military wages – additional credits can be assigned under certain conditions.

7. Advances on future wages as long as the future wages are a type of income that qualify.

Things that do not count for credits:

1. Wages for federal employees not paying Social Security taxes (since 1983, all federal employees have paid the Medicare hospital insurance part of the Social Security tax).

2. Railroad employees with more than 10 years of service.

3. Employees of some state and local governments that chose not to participate in Social Security.

4. Children younger than age 21 who do household chores for a parent (except a child age 18 or older working in the parent’s business).

5. Investment income or capital gains.

6. Any gift or loan you receive, even if from your former employer, does not count toward credits (whether property or cash).

It is important to most to focus on types of income that will boost your Social Security benefits. It is also important to review your annual earnings history each year to make sure that what is reported, is actually what your earned. This mistake falls back on you as it can be corrected if found, and if not found will result in a lower Social Security benefit for life.

Do You Know What Questions are Necessary? Part 2

Posted on May 12, 2019 by Pillars LLC Leave a comment

We met with a new client referral this week that is close to age 62; she had been referred by a financial advisor. Her experience was an Interesting scenario that we thought would interest our readers.

The husband is older and has been drawing his benefit for several years. The client met with staff at her local Social Security office and was told that she did not have enough quarters to qualify for a benefit. So in her mind, it was a done deal. She stayed at home and raised her family as her husband wished and as a result did not qualify for a benefit based on her Earnings History record.

Their Financial Advisor contacted us, on her behalf, to determine how many more quarters she needed to qualify for benefits and what is required. In her situation, she would have to work about 4 more years, part-time, to qualify for a very minimal benefit. A “quarter of coverage” generally means the three-month calendar quarter. In addition, you must earn at least $1,320 in a quarter (in 2019) for it to count.

The Social Security Administration’s credit system uses workers’ earnings and work history to determine eligibility for retirement benefits. People born in 1929 or later need 40 Social Security work credits, which are the equivalent of 10 years of employment for which they paid taxes. Those who don’t have the required number of credits are not eligible to receive retirement benefits based on their work record. However, you may still qualify for benefits based on your spouse’s benefits, even if you were a stay-at-home spouse who never worked. You could receive up to half of your spouse’s retirement benefit amount if your spouse is retired and you are at least 62 years of age.

This client actually qualifies for between $750-$1100 per month based on the options we have presented. That could be over $12,000 per year in income that she would have walked away from simply because she did not know the questions to ask. Is the Social Security office required to give her this information – actually not. The Social Security Administration is only required to give her information on her benefit, which was zero. But the facts are the facts, and every day people are leaving money on the table due to lack of knowledge about the rules and regulations. How many retiring Mom’s out there are struggling each month to make ends meet because they didn’t have the proper advice on how, when and why to file?

Professionals are available for this purpose and can be a valuable resource before you file.

Do You Know What Questions are Necessary? Part 1

Posted on May 1, 2019 by Pillars LLC Leave a comment

Met with a new client this week that is close to age 62; she had been referred by a financial advisor. Her’s was an Interesting scenario that we thought would interest our readers.

Husband is older and has been drawing his benefit for almost 8 years. He took an early retirement due to some health issues. Wife met with staff at her local Social Security office and all that they told her was that she did not have enough quarters to qualify for a benefit. So in her mind, it was a done deal. She stayed and home and raised her family as her husband wished and as a result did not qualify based on her Earnings History record.
Her Advisor actually initially contacted us on her behalf to d

Minimum Widow Benefits

Posted on April 5, 2018 by hgasaway Leave a comment

Widow benefits are indeed complex and have options available that other benefits do not. With that being said, we will try and explain some of these additional options. First of all, widow/widower benefits (Survivor benefits) are available at age 60 or 50 if disabled; other benefits start at age 62. If you start drawing these benefits at an earlier age, there will be costs attached to your decision.

Available to you are the Survivor benefit and your benefit and it is paramount that you know which benefit to take first. Also, if still working, you will be hit with the Earnings Limitations rules that lives with you until your Full Retirement Age. This rule limits your income to $17,040 (2017) without being subject to a penalty, that could, in turn, potentially eliminate any Social Security benefit. And if you have filed, you have locked in your amount regardless of the income.

If you take the Survivor Benefit at age 60, it will immediately be reduced by 27.5% – at Full Retirement Age you will be eligible for 100%. Now, this rule has an exception if your spouse started drawing his/her benefit prior to Full Retirement Age. Although the Survivor Benefit would normally be limited to the amount your spouse claimed before death, this exception (Minimum Widow’s Benefit) would allow you to draw the larger of what the deceased worker was collecting or 82.5% of the Full Retirement Age amount. This could be a big difference in your monthly income. This benefit is computed using the WINDEX computation at the Social Security office.

Widows who are eligible for both a widow benefit and a retired-worker benefit can claim one benefit initially and then claim a higher one at a later date. For example, a widow can claim a widow benefit at age 60 and wait to claim a retired-worker benefit (with DRCs) at age 70. In this case, the widow would be a widow beneficiary initially and then only a retired-worker beneficiary. As another example, a widow might claim only a retired-worker benefit at age 62 and then claim an unreduced widow benefit at the FRA of 66. The widow, in this case, would initially be only a retired-worker beneficiary, but then would become a dually entitled widow beneficiary.

A Survivor Benefit does not qualify for Delayed Retirement Credits but your own benefit does if drawn after Full Retirement Age. So, here is where the decision making takes place – take my benefit or Survivor Benefit? Work or not work? Just work and not file yet…….you need to know ALL the rules before making an intelligent filing decision.

Currently Insured Status

Posted on March 25, 2018 by hgasaway Leave a comment

There is a special rule for those who do not meet the requirements for “Fully Insured Status” and it is called “Currently Insured Status”. It can be considered a backup that gives only partial protection for your family.

If you are “currently insured”, there are only two types of survivors that can be paid your qualifying benefits – your children, and your spouse who is caring for your children.

To qualify for this status, your spouse must be caregiver for a child under 16 years of age, and the recipient of Social Security payments. No payments are possible to your parents or your surviving spouse not caring for children. You are considered “currently insured” if when you die, you have accumulated 6 work credits in the previous 13 calendar quarters. This breaks down to working at least 1.5 years in your final three years of life. This rule only applies when surviving children are involved.

EXAMPLE: John dies at age 30 with only 8 work credits. He is not fully insured because he needed 10 work credits for fully insured status. However, 6 of his work credits were in his last 3 years; therefore, he is deemed currently insured status. His children will get Social Security benefits from his work record until they meet the deadline for benefits (based on age or school graduation) and his wife Susan will get Social Security while she is caring for the children, until the youngest turns age 16.

When Susan reaches retirement age, she will not be eligible for widow benefits on John’s record because his “currently insured status” does not provide for that type of benefit. The payments to his family will also be low because of his limited work history.

“Fully Insured Status” is by far the most comprehensive coverage for your family. This means you have earned enough work credits to provide Social Security payments to your survivors in all categories – spouses over 60, younger spouses caring for your children, your children and your dependent parents. Once you earn 40 credits, you are permanently insured for all your family members. There is a sliding scale with the requirements to become “fully insured” based on your age of death.

EXAMPLE: Greg was 28 when he died so he only needed 6 credits for fully insured status for survivor benefits, not the full 40 credits required for retirees. Greg had accumulated a total of 30 works credits, so his wife and children will be eligible for Social Security benefits.

Rules, rules and more rules. Education and knowledge are necessary to make a desirable Social Security filing.

Situational Social Security

Posted on March 20, 2018 by hgasaway Leave a comment

Social Security is available at age 62 for all those that have earned this benefit. But, the age at which you claim can make a huge difference in your financial health during those remaining retirement years.

Every situation is different – everyone has a unique earnings history, everyone needs or wants to retire for different reasons, everyone has different assets over and above Social Security to get them through retirement, some people have family eligible for benefits, some people are on disability that rolls over to Social Security, some people had a spouse that died at an early age, some people have been married more than once, and the list goes on.

To rely on advice from your family and neighbors can be a mistake – if they don’t know the rules or the entirety of your situation. Their advice will be based on their situation, and who knows if they got their situation right?

Here are a few situations that may cause you to think:
Single – no beneficiaries, so what are options for filing?
Divorced and single, married 10 years and divorced 2 years with one or more ex -spouses – can I get a Spousal benefit off of them and what if one of them dies?
Surviving spouses with one of more deceased spouses?
Retired couples with custody of grandchildren? What about benefits for caregiver as well?
Couples with handicapped adult children?
Couples with a large age difference?
Couples where the wife is the higher earner?
Filing after Full Retirement Age – what about retroactive benefits and when is it wise to take or not?
If I don’t need my Social Security money and have already filed, should I suspend at Full Retirement Age and what are the consequences?
If I don’t have 40 quarters, but my spouse does, do I have any options?
Should I weigh heavily Break-even point or Life Expectancy?
If I have a government pension, will my Social Security be reduced? How will this affect the widow/widower benefits?
If I am a current widow/widower should I draw the Survivor Benefit or my benefit? Can I switch from one to the other?
If my pension was reduced because of WEP and spouse dies, will my benefit change?

This is only a partial list of questions that came to mind in 5 minutes…..many more that could be addressed. The point is folks, Social Security is very complicated. Study of the rules is a daily event at this address to keep up with the changes. Don’t shortchange yourself – it happens every day!!

Mama Stayed at Home to Raise the Kids

Posted on March 10, 2018 by hgasaway Leave a comment

You would be surprised the number of couples we see where the Mom did not work, or barely worked, and does not know if there are any options available regarding Social Security. If married and your husband qualifies for benefits, yes you do. Many rules and regulations to wade through but don’t lose heart!
I qualify for benefits but have 7 zero’s in my Earning History where I stayed at home with the kids – this adversely affects my benefit amount. These 7 zero’s are included in my top 35 years of Earnings History and are calculated, with factoring, to determine my benefit. So, just maybe, I need to look at filing a different way.
Upon reaching age 62, even if you have no work history of your own, you can begin receiving a benefit as the spouse of someone who is entitled to a retirement or disability benefit; the requirements are that you have been married to your spouse for at least one year, that your spouse has filed for his/her own benefit (exceptions for ex-spouses), and you cannot claim spousal benefits if you have filed for your own retirement benefit and your benefit amount is greater than one-half of your spouse’s primary insurance amount. If you wait until Full Retirement Age to file for this benefit, it will be 50% of your spouse’s primary insurance amount. Filing for this benefit early, could result in a reduction as high as 30%.
Unlike Social Security retirement benefits, the spousal benefit does not increase if you wait to take benefits beyond your full retirement age, currently age 66 for most retirees. Thus, there is no advantage in waiting beyond your full retirement age to start taking your spousal benefit.

Also, if your spouse has suspended their benefits, you will not be entitled to a spousal benefit until they start drawing again.

These benefits are called auxiliary benefits and were created to acknowledge the support you provided for your family during your working years – such as homemaking assistance, child rearing, transportation and all the other things necessary for a family to function properly. This is one of the strengths of the Social Security system – providing for family benefits.

Caution – if you are entitled to two different benefits such as spousal, ex-spouse, widower, or your own, please make sure you know which benefit to file for first – we refer to these people at DUALIES – dually entitled and you could possibly be making a huge mistake if you don’t know which direction to take.

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