SOCIAL SECURITY
2 Retirement.news 202109RNNSSBMCSSElig Social Security can provide you with an ongoing income stream in retirement. It can also offer you – and possibly also your loved ones – a financial safety net in the event of your death or disability. But these financial benefits are not automatic, so it is important to understand Social Security eligibility criteria so that you know what you can and can’t anticipate going forward – and so you can also put a backup plan in place – just in case. Social Security Eligibility
3 Retirement.news 202109RNNSSBMCSSElig To be eligible for Social Security retirement income benefits, you must be at least age 62 or over and have worked in a covered job where you and/or your spouse paid taxes into the system. In addition, you and/or your spouse must also have accumulated 40 “work credits.” The dollar amount of earnings that is needed to earn one work credit typically changes each year. In 2021, you can earn one work credit for every $1,470 of earnings, and you may earn a maximum of four work credits per year. So, to be fully qualified for Social Security retirement income benefits, you (and/or your spouse) would have to work for at least ten years. Although you may claim Social Security retirement benefits as early as age 62, your benefit payment will be reduced if you file before reaching your full retirement age (FRA). For many years, all Social Security retirement benefit recipients had a full retirement age of 65. However, Congress changed the full retirement age in the early 1980s. Now, based on your birth year, your FRA may be between age 65 and 67. Non-working spouses may also claim spousal benefits from Social Security. The amount of Social Security spousal retirement income benefit is typically 50% of the worker’s amount – and these can also be filed for as early as your spouse’s age 62. However, if an eligible spouse waits until they have reached their full retirement age, they can receive the full amount due. Ex-spouses may also be eligible for benefits from Social Security based on their former husband or wife’s earnings. For instance, if you and your spouse are now divorced, you could be eligible to receive Social Security retirement income benefits based on your ex’s work record, even if they have remarried – provided that the following factors are all met: •• You were married to them for at least ten or more years •• You are age 62 or over •• You not currently married to someone else •• Your ex-spouse is eligible for Social Security retirement income benefits (even if they have not yet filed for them), and •• The Social Security benefits that you are entitled to receive based on your work record (if applicable) are lower than the benefits that you could receive based on your ex-spouse’s record. Just like with Social Security spousal benefits, your benefit as an ex-spouse will be equal to onehalf of your ex’s full retirement amount, as long as you start receiving these benefits at your full retirement age (based on the year of your birth). The dollar amount of the benefit will be lower if you start receiving benefits earlier than that time. If you remarry someone else, you will have to discontinue collecting the Social Security benefits based on your ex-spouse’s work record. That is unless your later marriage also ends (either by death, divorce, or annulment). Who is Eligible for Social Security Retirement Income Benefits?
4 Retirement.news 202109RNNSSBMCSSElig Depending on your situation, it might make sense to start collecting your Social Security retirement income (and/or spousal income benefits) as early as age 62. In this case, even though the dollar amount of each monthly payment would be less than if you waited until your FRA, you would be collecting this income for a more extended period. So, it is vital to determine your break-even point. Source: Social Security Administration Social Security Full Retirement Age Year of Birth Minimum Retirement Age for Full Benefits 1937 or Before 65 1938 65 + 2 months 1939 65 + 4 months 1940 65 + 6 months 1941 65 + 8 months 1942 65 + 10 months 1943 to 1954 66 1955 66 + 2 months 1956 66 + 4 months 1957 66 + 6 months 1958 66 + 8 months 1959 66 + 10 months 1960 or Later 67
5 Retirement.news 202109RNNSSBMCSSElig Eligible recipients can also determine the “cost” of claiming Social Security retirement benefits early (i.e., filing for these benefits before reaching full retirement age). This can also help you narrow down whether it makes sense to file for benefits early or wait until your FRA (or beyond). Source: Social Security Administration Social Security Benefit Reduction for Early Filers Year of Birth Full Retirement Age (FRA) Months Between age 62 and FRA Retirement Benefit is Reduced By A $1,000 Benefit Would Be Reduced By 1943-1954 66 48 25.00% $750 1955 66 and 2 months 50 25.83% $741 1956 66 and 4 months 52 26.67% $733 1957 66 and 6 months 54 27.50% $725 1958 66 and 8 months 56 28.33% $716 1959 66 and 10 months 58 29.17% $708 1960 and later 67 60 30.00% $700
6 Retirement.news 202109RNNSSBMCSSElig Alternatively, it is also possible to wait until after your full retirement age to claim your Social Security income. In this case, for every year that you wait beyond your FRA (until you reach age 70), you can increase the dollar amount of your Social Security “paycheck” by 8%. You can still hold off on filing for your Social Security retirement benefits until after age 70. However, the dollar amount will not continue to increase. It is also essential to determine whether or not you could be taxed on your Social Security retirement benefits. Up to 85% of your benefit could be taxable if you start your Social Security income before your full retirement age, and you are also receiving income from other sources, such as a part- or full-time job. With that in mind, be sure that you work through all of your potential income sources to maximize cash flow while also minimizing taxes on that income. Source: Social Security Administration Cost of Taking Social Security Income Before Your Full Retirement Age Age Full Retirement Age 66 Full Retirement Age 67 62 25% reduction 30% reduction 63 20% reduction 25% reduction 64 13.3% reduction 20% reduction 65 6.7% reduction 13.3% reduction 66 Full Benefits 6.7% reduction 67 Full Benefits
7 Retirement.news 202109RNNSSBMCSSElig In addition to retirement income, Social Security pays disability income to qualified individuals who can no longer work due to an injury or illness. Like Social Security retirement income, you must build up a certain number of work credits to be eligible for disability payments. In this case, the number of work credits needed is based on your total annual wages and/or selfemployment income. The amount of earnings required to earn one work credit in 2021 is also $1,470, and you can earn a maximum of four work credits per year. Regarding Social Security disability income, though, the number of required credits depends on your age when you become disabled. For example, you will typically have to have a total of 40 work credits, with 20 earned within the last ten years, ending with the year that you become disabled. However, it may be possible for younger individuals to qualify for Social Security disability income credits with fewer credits on their work record. For instance, if you were to become disabled before turning 24, you may only need six work credits to have built up within the immediate three-year period of time before you became disabled. Likewise, suppose your disability starts between age 24 and age 31. In that case, you could qualify for Social Security disability income if you have work credits that were built up for working half the time between age 21 and the time that your disability begins. For example, if you are age 27 when you contract a disabling condition, you would need three working years – or 12 work credits – accumulated over the immediate past six years. Suppose you become disabled at age 31 or older. In that case, you may require at least 20 work credits that were accumulated within the immediate ten-year period of time before you became disabled to qualify for disability income benefits from Social Security. Social Security Disability Income Benefit Eligibility
8 Retirement.news 202109RNNSSBMCSSElig Note that these figures and periods are only estimated to show this example. Example of Social Security Work Credits Needed for Disability Income Benefits If you become disabled… You would generally need… Before age 28 1.5 years of work Age 30 2 years Age 34 3 years Age 38 4 years Age 42 5 years Age 44 5.5 years Age 46 6 years Age 48 6.5 years Age 50 7 years Age 52 7.5 years Age 54 8 years Age 56 8.5 years Age 58 9 years Age 60 9.5 years In addition to having enough work credits on your record, it is also necessary that you have a condition that meets the Social Security Administration’s definition of disability before you will be eligible for benefits. Deciding whether or not your condition qualifies, you will be required to answer a series of questions that all build upon each other, including: 1. Are you working? 2. Is your condition considered severe? 3. Is your condition included in Social Security’s list of disabling conditions? 4. Are you able to perform the type of work that you did before becoming disabled? 5. Are you able to perform any type of work? Source: Social Security Administration
9 Retirement.news 202109RNNSSBMCSSElig Are you working? If the answer to the first question – are you working – is yes, and you are also earning at least $1,310 per month (in 2021), the Social Security Administration will not consider you disabled. You will not receive disability income benefits from the SSA. Otherwise, if you are not working because of your disability, the Social Security Administration will forward your application for benefits to the DDS (Disability Determination Services) office. Once there, the Administration will take a look at various other criteria to decide whether or not you are considered disabled, and in turn, qualified for benefits from Social Security. Is your condition considered severe? Your condition must be considered severe for you to qualify for disability benefits from Social Security. This means that your condition must limit your ability to perform even basic work-related activities such as sitting and standing, lifting, walking, and/or remembering job-related information. Even if you are limited in your physical or cognitive abilities, your condition must also be anticipated to last for at least one year. If this is the case, the next step will be to determine whether your condition is listed as one of Social Security’s disabling conditions. Is your condition included in Social Security’s list of disabling conditions? The SSA has a list of health-related conditions that it considers severe enough to prevent individuals from performing any type of job activity. If your condition(s) is included on the list, your application will continue to move forward through the next processing step. Even if your condition(s) is not on this list, it may still be possible that it is considered severe so that you’ll qualify as being disabled by the Social Security Administration. The next step will then be to consider whether or not you can perform the duties of your previous job.
10 Retirement.news 202109RNNSSBMCSSElig Are you able to perform the type of work you did before becoming disabled? If your Social Security disability income application has made it this far, the next step is for the SSA to determine whether or not you can perform the type of work you did before you were disabled. In this case, if it is decided that you can still perform these duties, then it is likely that you will not be eligible for Social Security disability income benefits. However, if you cannot perform such tasks, the next step is for the SSA to determine if you can perform any type of work, even for a job you have not held in the past. Are you able to perform any type of work? When the Social Security Administration (SSA) is deciding whether or not you can perform any type of work activity, it will consider several factors, including your: - Age - Education - Prior work experience - Skills that could be used in a different occupation - Medical condition Should the SSA determine that you are unable to do any other type of work, you are likely to be considered disabled, and in turn, may qualify for disability income benefits through the Social Security Administration. Going through Social Security eligibility for disability income benefits can be long and somewhat confusing. So, to reference more in-depth information, you can visit the SSA website by going to: https://www.ssa.gov/disability/. You can also download the Social Security Disability Income publication by visiting: https://www.ssa.gov/pubs/EN-05-10029.pdf.
11 Retirement.news 202109RNNSSBMCSSElig The number of work credits required for family members eligible for Social Security survivor’s benefits will depend upon your (the worker’s) age when you pass away. In this case, the younger you are when you die, the fewer work credits are needed for your eligible survivors to qualify. In any case, though, nobody is required to have more than 40 work credits for their loved ones to receive survivor’s benefits from Social Security. Some additional provisions can allow Social Security survivor’s benefits to be paid out to a worker’s spouse and/or children, even if there are not enough work credits to be otherwise eligible. In this case, individuals may qualify for survivor’s benefits if you (the worker) have credits for one and one-half year’s work (or six work credits) within the three years immediately before your passing away. It is important to note that if you are already receiving Social Security disability or retirement income benefits at the time of your death, your survivor(s) will be paid based on that entitlement versus recalculating the amount of their benefit as your survivors. If you pass away, your survivors may also be eligible for a one-time death benefit of $255. This is typically paid to the surviving spouse – provided that you and your spouse were living together at the time of your passing. If you do not have a surviving spouse, the benefit can instead be paid to your eligible, surviving child(ren). When an eligible Social Security benefit recipient passes away, family members – such as their spouse, children, and/or dependent parents - could be eligible to receive Social Security survivor’s benefits. The list of possible benefit recipients includes: •• Widow(er)s who are age 60 or older (or who are 50 or older if they are also disabled) •• Widow(er)s of any age who is/are caring for the deceased worker’s disabled child who is either disabled or under the age of 16 •• Unmarried children of the deceased worker who are under the age of 18 (or under age 19 if they are a full-time student), or who are age 18 or older with a disability that started before them turning age 22 •• Stepchild, grandchild, step-grandchild, or adopted child under certain circumstances •• Parents of the worker who are age 62 or over and who were dependent on the deceased worker for at least half of their financial support •• Surviving divorced spouse (under certain circumstances) Qualifying for Social Security Survivors’ Benefits
12 Retirement.news 202109RNNSSBMCSSElig There are several methods that eligible recipients may use to file for Social Security benefits. These include online, over the phone, or in-person at a local Social Security Administration office. To file for Social Security benefits online, you can visit the SSA’s main website at www.ssa.gov. From there, you will be asked to create a “my Social Security” account or sign in to your existing one. (It is important to note that not all types of Social Security benefits may be applied for via the Internet). If you opt to file for Social Security benefits by phone, you can contact the SSA directly by calling (800) 772-1213. When going this route, you will typically be asked several questions to verify your identity. Should you decide to apply for your Social Security benefits in person, you can visit your local SSA office. Due to the possibility of a long wait time, it is recommended that you call the office first and schedule an appointment. In addition, it is also a good idea to inquire about what precautions are being taken at the SSA office due to the COVID-19 pandemic. How Eligible Recipients Can File for Social Security Benefits
13 Retirement.news 202109RNNSSBMCSSElig If you are eligible for Social Security, it is good to coordinate these benefits with any other income sources that you may have in retirement. Likewise, should death or disability occur, it is good to know what you can anticipate regarding benefits from Social Security and how you or your survivors can go about applying for them. It can help to discuss your short- and long-term financial objectives with a professional specializing in retirement income planning and well-versed in how Social Security benefits can factor in. Coordinating Your Overall Financial Plan with Social Security
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