Social Security Facts: A Quick Reference for Advisors and Clients

Counselors of Social Security should be knowledgeable about the program’s benefits, as it will provide a large percentage of retirees’ income in the future.

When clients reach the age when they may begin receiving Social Security payments, they should be ready to point out important information. They should also direct them to the right person or area for additional information.

Following is a guide sheet for advisers to use when clients are approaching the age of eligibility for Social Security benefits. However, this is merely the initial step. Social Security is a tricky subject with numerous levels and complexities that might have an impact on customers’ financial situations.

Here are ten topics that should be addressed with customers for the time being.

1. Social Security payouts are still subject to taxation in the twelve states of the US

There is a variation between the state’s income level and the tax rate. However, the states that continue to impose some form of tax on Social Security benefits are the following: Colorado, Montana, Kansas, Missouri, Vermont, New Mexico, Utah, West Virginia, Rhode Island, Minnesota, Nebraska, and Connecticut.

2. Every year that Social Security payments are delayed beyond the Full Retirement Age (FRA) results in an increase in payouts of 8%

For instance, for a customer who earns roughly $36,000 yearly at full retirement age (FRA), commencing the payouts at the age of 70 would lead to nearly $49,000 payments annually, demonstrating an increase of 36% in the annual benefits payment. Obtaining a systematic increase in the benefits by 8% is significantly challenging due to current market conditions.

3. Even if the trust fund fails, Social Security will persist

If Congress does not take any action until 2033, the Old-Age and Survivors Trust Fund will deplete. This is why many prospective retirees are concerned about the future of Social Security. Most professionals assume that Congress will surely act at some point, but even if that occurs, about 75% of the regularly scheduled payments will be paid out by the program.

4. Eligibility criteria of the divorced couples to receive benefits from the Social Security of their ex-partner

It is legal if their marriage duration is a minimum of 10 years and the divorce has been finalized for two years. It does not matter whether their ex-spouse remarries. There will also be no changes to the benefits they receive. Remarrying will prevent the receiving spouse from getting the advantages of the prior marriage. However, if the previous or current spouse of the receiver dies, they can claim for the higher payouts.

One-half of the PIA of the ex-spouse is the highest amount that may be granted to the client. The divorce of the client must be inquired about first. However, the client may be eligible to collect on their ex-spouse’s earnings record, even if the divorce was finalized 30 years ago and there is no contact between them.

5. Make sure not to wait longer than the age of 70 to receive benefits

The bonuses of Social Security will be applied maximum until the age of 70. Waiting beyond this age is a huge financial blunder since the clients are essentially accepting a loss, whether they continue their work or not. Social Security will pay six months’ back pay if a retiree requests it once he reaches FRA. It is a loss of the benefit payment of one and a half years if the client is claiming to receive the amount at 72.

6. Spouses with lower incomes may file a claim on their spouse’s Social Security account

Minimum age of 62 is required for the lower-earning spouse. The marriage duration of the couple must be a minimum of one year to be eligible for Social Security payments.

However, there are a lot of uncertainties in this domain. Deemed filing, for example, requires low-income earners to claim all applicable benefits quickly. They have to obtain their complete payout initially. A spousal top-up is rewarded to the lower earners if the amount is not greater than 50% of the initial benefit of the higher earner. Consequently, the total amount reaches equal to half of the higher earner’s PIA. No additional spousal benefit is paid if the PIA of the lower-earning partner is higher than 50% of the higher-earning partner.

7. The regular retirement age is between 66 and 67 years old

The FRA of anyone born in 1943 or afterward is 66, with additional months based on the date of their birth. FRA is 67 for individuals who were born in the year 1960 or afterward.

This means anybody over the age of 62 may retire and begin receiving Social Security payments. It is necessary to inform the clients that their monthly benefit payment will be lowered up to 30% from their main insurance amount, which is the amount they would get if they filed a claim at FRA. However, this reduction would be permanent.

8. When it comes to marriage and Social Security benefits, gender does not matter

Couples are classified as either lawfully married or not by the agencies.

9. Social Security payouts are subject to taxation if they exceed a particular limit

Inflation is not considered when Social Security benefits are taxed, despite the fact that Congress established an annual cost-of-living adjustment for Social Security payments.

As in 1983, the tax is implemented on the Social Security income above $25,000 or $32,000 if the spouses file jointly. The benefits are taxed at the usual income tax rate. The collective income, calculated using an IRS spreadsheet, determines the real amount.

10. If the benefits of a deceased spouse are more than those of the widow, they will immediately receive the entire amount of the deceased spouse’s benefits

The funeral home registers the death. Assure the buyer that survivor benefits are not available until age 60. Unexpectedly, a surviving spouse only receives one of their own or deceased spouse’s benefits. Thus, family income might decline.

Contact Information:
Email: [email protected]
Phone: 6232511574

I grew up in Dubuque, Iowa, where I learned the concepts of hard work and the value of a dollar. I spent years in Boy Scouts and achieved the honor of Eagle Scout. I graduated from Iowa State University and moved to Chicago and spent a few years managing restaurants. I then started working in financial services and insurance helping families prepare for the high cost of college for their children. After spending years in the insurance industry, I moved to Arizona and started working with Federal Employees offing education and options on their benefits. I became a Financial Advisor / Fiduciary to further help people properly plan for the future. I enjoy cooking and traveling in my free time.

Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice filed, or is excluded from notice filing requirements. BWM does not accept or take responsibility for acting on time-sensitive instructions sent by email or other electronic means. Content shared or published through this medium is only intended for an audience in the States the Advisor is licensed in. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this transmission is strictly prohibited. If you receive this communication in error, please immediately notify the sender. The information included should not be considered investment advice. There are risks involved with investing which may include market fluctuation and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making an investment decision.

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