Uni Social Club

Posts Tagged ‘social security’

We continue our discussion of social security issues that may affect your retirement decisions. Part of this discussion can be found in an earlier article.

Spousal benefits are calculated with little or no earnings history by the spouse becasue of marriage to a wage earner who has earned social security credits. The spousal benefit is equal to half the workign spouse’s PIA. As an example, ifthe working spouse benefi is $2,230 per month the spouse benefit would be half that, or $1,115. If the spouse has worked and is entitled to ther own benefit, social security will compare the two amounts and pay the higher benefit. The spouse can apply at age 62 as along as the husband is eligible for benefits even if he has not applied.

Divorce does not preclude receiving social security benefits if the following facts are available. Did the previous marriage last at least 10 years and is the non-woking spouse still single? Marrying again would change your ability to receive benefits unless you are at least age 60. If you and your spouse have been divorced for at least two years, he does not need to apply for his benefits in order for you to receive yours. He does to be eligible for benefits and be at least 62, though. All you need to do is present proof that you were married to him and give enough identifying information that the social security can look up his records.

If your spouse dies, you can apply for survivor benefits as early as age 60. The survivor benefits equals 100% of your spouse’s benefits and is subject to reduction if you apply before you turn 66. If your spouse dies when receiving social security, you can switch over to your survivor benefit if it is higher. There are some further limitations if this situation occurs so now is the time to plan for this potential shortfall of monthly income. Life insurance benefits are normally used to make up this shortfall since you are now eligible for only one social security monthly payment versus two previously when your spouse was alive.

If you are working and receiving social security without being at least age 65 some of your benefits may be withheld. The max you can earn before benefits are withheld is $14,160 per year or $1,180 per month. For every $2 you earn over the earning limit, $1 in benefits will be withheld. A long term planning issue relates to a reduction in your benefits after you reach full retirement age. You will end up with a lower benefit than if you had waited until full retirement age to apply.

After you reach your full retirement age (65,66,67), you can earn any amount from working and no benefits will be withheld. The earnings test amount increases as you near your 66th birthday. It’s $37,680 per year now but this amount will change every year due to inflation so don’t memorize the amount. Any earnings made prior to applications for benefits does not count toward the earning test. This earnings test applies to spousal and survivor benefits as well as earned benefits.

Pension income from former mployer does not affect social security benefits. Other retirement income, such as 401K or IRA distributions also do not affect social security benefits.

Benefit reductions occur becasue of several bills passed by Congress. If you worked in a job not covered by social security you may not be eligible for any social security benfits. This reductions may also affect spousal benefits. Terms like Government Pension Offset,  Windfall Elimination Provisions need to be reviewed by going to the social security website, www.socialsecurity.gov, for more information. If you or your spouse are eligible for any type of government pension benefit (Federal, State, Local) and you have paid some into social security you still will not be eligible to receive any benefit due to your government pension. Get some professional help before you give up on getting any of your social security benefits because the law has a few loopholes that you may be eligible for. Don’t rely on the Social Security office to counsel you in this matter.

As you’ve now figured out this is a very complex and difficult topice to write about since the law is difficult, and confusing, and there are just too many expectations to all of these rules. Get professional help – don’t try this on your own!

For more information please visit: http://www.hargrave-lyons.com

One of the most important retirement decisions facing most Americans is: WHEN TO START SOCIAL SECURITY BENEFITS. Conventional wisdom has always been “take it as early as possible — age 62″. Why? Several reasons are given: (a) it might not be there if you wait; (b) you can take the benefits and invest them and have more money later; (c) I might die early and never get a dime.

About three-fourths of Americans have heeded this advice and for most it was, or will prove to be, a big mistake. Why? There are several reasons: spousal benefits, higher benefits for delaying, penalties for starting early, penalties if you work while drawing benefits and are less than normal retirement age, and Social Security benefits get favorable income tax treatment.

Spousal benefits: If you qualify for Social Security benefits they will last the rest of your life — what’s more, if you’re married and your spouse is entitled to a lower amount, she/he will “step up” to the higher amount at your death. The spousal benefits say a spouse gets at least 50% (even if they paid zero into their Social Security account) of what the other spouse qualifies for AND the larger amount when the first spouse passes on. So by delaying your benefits your surviving spouse could get a bigger Social Security check every month for the rest of her/his life. Since “break-even” is about age 80 and joint life expectancy is closer to 90 for a married couple age 62, the odds of getting more are overwhelming. In fact, if Las Vegas gave the same odds you’d be booking reservations today.

For every year you delay taking Social Security benefits beyond age 62, your benefits grow between 7.5% and 8.0% annually PLUS a cost of living adjustment (COLA) based on inflation. In the past 30 years inflation has averaged over 3% annually…so your Social Security benefits will grow by over 10% a year. Where else can you get an investment backed by the U.S. Government and pay you over 10% annually? Stop looking, they don’t exist unless you want to take loads of risks. So if you are healthy, married and can afford to wait, postponing Social Security until age 70 will pay great dividends. Social Security will be there because with 50 million current getting benefits and another 76 million (the boomers) coming of age, politicians who vote to do away with Social Security will be unemployed.

If you start benefits at age 62 (the earliest time possible) you get about 25% less than if you wait until your normal retirement age (age 66 for most 62-year olds). This 25% less is for the rest of your life AND COLA is applied to a lower amount to compound the injury. Again, postponing make a great deal of sense.

If you start Social Security before normal retirement age and continue to work, your benefits will be reduced $1 for every $2 you make over about $13,000 annually. Yes, you’ll get this back later but when you consider taxes and the time value of money you’ll be worse off.

The big reason to delay is because Social Security benefits are taxed differently than other income: it is never 100% taxed and it is easy to manage the taxes on your Social Security benefits. PLUS, if taxes rise you’ll want to have as much of your retirement money in tax advantaged places (like larger SS benefits) as possible. Which way to you think income taxes are headed? Let’s see: record federal deficits, fighting terrorism, rebuilding our highways, bridges & infrastructures, an aging population, cleaning up the environment, etc. which must be financed by the federal government with income taxes. No doubt in my mind…how about you?

If you’d like to make sure you get Social Security right — and also take your qualified money (IRA, 401(k), 403(b), TSP, etc.) at the right time and use your other savings & investments wisely, I invite you to read my Guide to Social Security…and a Better Retirement by going to http://www.theretirementpros.com/eReport_Social_Security.php

You’ll have one chance to get Social Security right, so get all the info you can to make a good decision — most Americans haven’t and they’ll pay a lot more in taxes on their retirement money. Less money in retirement means less of a retirement. For more info on Retirement Planning, go to the Retirement Pros website at http://www.theretirementpros.com/

Is it a good idea to join the Spanish social security system?    Contracted employees have no choice: they are obliged to join the system and their employers will deduct contributions from their salaries.  Pensioners who have retired to Spain have the right to free state healthcare, so they are effectively in the system.  But what of those who are not in contracted employment, living off savings, working cash-in-hand or perhaps thinking of starting a business i.e. those that are, or potentially could be, self-employed?

For this group the benefits of joining the system must be weighed against contributions of almost 250€ a month and having to charge IVA (VAT) and pay income tax.  Besides the peace of mind that comes from being “legitimate”, there are two main benefits:

Healthcare for themselves and their families:  The alternatives are paying as you go which can be risky and private health insurance which will normally cost less than social security but exclusions and excesses usually apply.

Pensions: Anyone paying into the Spanish system will start accruing pension rights.  If you also contributed in your home country (like the UK) you will get two pensions, both reduced depending on years spent contributing in each country or even possibly a full UK one and a reduced Spanish one.  If you only ever contribute to the Spanish system you will need a minimum 15 years to qualify.

These benefits mean that if you can afford the contributions it makes a lot of sense to join the system, particularly when you have a family and aim to live in Spain long term.  So how do you go about it?

Once you have decided to join the system:

-         go to the local “Tesoreria de la Seguridad Social” with your NIE and passport (plus copies).  Complete a “Solicitud de Afiliacion” form and get social security number.

-         Register with the Hacienda (Tax Office) as “autonomo” (self-employed).  At this stage you will need to provide an address, social security number and NIE.

-         Return to the Social Security office and complete a “solicitud de alta de autonomos” form and hand it in with a copy of your NIE and the proof that you have registered with the Hacienda (from the step above and called a “modelo 36”)

Most Spanish lawyers, accountants and gestorias will be able to help you through this process and do some it quickly online.  My firm has fixed price deals both for registration as autonomo (self-employed) and for ongoing reporting requirements. A longer version of this article and others like it can be found at www.advoco.es.