Did you know that your work history including any employment in foreign countries, may affect your benefits? The United States has established Totalization Agreements with numerous foreign countries. These agreements are designed to ensure that individuals who have worked both in the United States and a foreign country can combine their work credits to meet the eligibility requirements for Social Security benefits. Learn more.

 

 

Nicole Birkett-Brunkhorst is a CFP and an RSSA and she was recently interviewed by John Manganaro at ThinkAdvisor. “She said the [RSSA] course (in addition to her extensive planning experience) has given her deeper insight into the critical considerations that go into Social Security claiming — when to claim, how to claim and what these decisions mean for a client’s lifetime benefit.” Read the full interview.

 

Question: This question is for my husband. His first wife died 7 years ago at age 55 and made more money than my husband. We got married 4 years ago. He is ready to retire. Can he get her Social Security benefits?

 

Martha’s response: Individuals who have lost a spouse may still be eligible to collect survivor benefits, but only if they remarry after age 60. If you married prior to him being 60, he is eligible to collect a spousal benefit based on your earnings record, but only if it is higher than his own retirement benefit. There are many factors for him to consider. When he applies for Social Security benefits, he will be applying for any and all benefits he is entitled to and will receive the larger amount of those…Read Martha’s full response or Ask Martha your own question.

What are disability benefits? Social Security disability benefits are benefits paid to disabled workers and their dependent beneficiaries. Just like Social Security retirement benefits, FICA (Federal Insurance Contributions Act) taxes also cover the cost of Social Security disability benefits. FICA taxes are payroll deductions paid by you and your employer.

What are the eligibility requirements for disability benefits? To be eligible to receive disability benefits, a worker must meet two eligibility requirements: work requirements and medical requirements. More information below.

What are the work requirements to receive disability benefits? To be eligible to receive disability benefits, a worker must have enough “substantial lifetime work” in order to be insured. Substantial lifetime work means that the worker has 1.5 to 10+ years of work paying into the Social Security system (6 to 40+ work credits). Most people will need the 10+ years of work or 40+ credits, but younger workers may qualify with less work credits. In addition to substantial lifetime work, the worker must also meet the criteria for “recent work” in covered employment (paying FICA taxes) prior to onset of the disability. Recent work refers to the required recent employment paying into the system and the amount needed is based on the age of disability onset.

What are the medical requirements to receive disability benefits? The Social Security program has a very “strict” definition of disability, and it may be different from other disability programs. Even many people with common medical conditions such as cancer or psychiatric disorders will not be approved for benefits. To be eligible for Social Security disability benefits, the worker must be unable to work due to a medical condition that is expected to last a minimum of one year or result in death. To meet this definition, the medical condition must be severe enough that you cannot do the work you did before and cannot adjust to other work due to the condition.

Learn more about disability benefits and applying for them.

 

Social Security benefits are often subject to taxation, and the taxable amount isn’t always clear. In general, someone who receives most of their retirement income from Social Security will be subject to no or low taxation. For someone with a higher AGI, they will be subject to the maximum rate of 85% of Social Security income as taxable income. Those in the middle can strategize to minimize their taxation.

This is because taxation is based on the combined income (CI), which is equal to their adjusted gross income (AGI), plus tax-exempt interest, plus only 50% of the Social Security benefit. For a recent client, we decided to ensure a high proportion of income comes from Social Security (lower CI with same total income) by delaying until the maximum benefit. This couple is expecting about $42k from benefits, and receive no tax-exempt interest. Based on this knowledge and their filing status, we determined the threshold AGI of about $57k results in about 84% taxation – and with a lower AGI, they’d see lower taxation. This is valuable for planning their future income!