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Government Benefits

Tuesday, February 17, 2015

Difference between Social Security, Social Security Disability and Supplemental Security Income

There are many acronyms in government benefits. This article explains the difference between most common Social Security benefits.

Social Security benefits are based on the individual’s earnings, averaged over the worker’s life.

Eligibility: To be eligible, an individual must have a minimum of 40 quarters of reported earned income. To receive full credit for the quarter, the amount of earnings is currently $1,200. This amount has been raised incrementally since 1977.

Age of eligibility: for people born after 1959, the age of retirement is currently 67 years. For people born between 1943 to 1954, the full retirement age is 66. Individuals may retire early and collect reduced Social Security benefits as early as age 62. The reduced level of benefits will continue for the rest of the individual’s life.

What income is counted: only earned income is considered when determining eligibility or benefit amounts. Unearned income, such as interests and dividends, is not counted.

Earnings Limitations on Benefits: for individuals between ages 62 and 65 collecting Social Security benefits, earnings above $15,480 will reduce Social Security benefits by $1 for each $2 of earnings in excess of $15,480. For individuals above age 65 collecting Social Security benefits, all earnings limitations have been eliminated.

 

Social Security Disability (“SSDI”) benefits are based on several criteria, including medical condition, age, prior earnings level, and period between termination of employment and the onset of disability. The case will be periodically reviewed, to ensure that the individual is still disabled.

Definition of disability: inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of no less than 12 months, taking into account the person’s age, education and past work history.

Determination of Eligibility:

  1. To be fully insured and eligible for Social Security Disability payments, an applicant must have 40 quarters of earnings. For workers under the age of 31, there is a special calculation.

  2. To be fully insured and eligible for Social Security Disability payments, an applicant must have reported earnings within 5 years prior to the onset of disability.

If the above 2 criteria are met, then:

  1. There are 5 criteria that Social Security Administration evaluates when determining eligibility, such as (a) substantial gainful employment at the time of the application, (b) severe impairment, (c) listed impairment, (d) past relevant work and (e) residual functioning capacity.

Medicare for Social Security Disability recipients

If an individual receives Social Security disability benefits for a continuous period of 24 months, he becomes eligible for Medicare Part A and B, without regard to age.

Reduction of Social Security Disability benefits

An individual’s benefits are not reduced if he has other sources of income, such as IRA accounts, pensions, insurance, SSI, or Veterans Administration benefits.

 

Supplemental Security Income (“SSI”) is a federal program that pays a monthly cash stipend to indigent aged, blind or disabled individuals.

Eligibility:

1. Categories: There are 3 separate categories of people who are eligible to receive SSI:

a. Aged: people above 65 years of age

b. Blind: either total blindness or minimal vision that is incapable of correction

c. Disabled: people who are unable to perform any gainful employment because of a medical or mental condition that is expected to last for at least a year.

2. Resource test: an individual is entitled to have no more than $2,000 in resources (a married couple is entitled to no more than $3,000)

a. Certain assets are exempt from calculation, such as a primary residence, a car, and household goods

b. Assets held for the benefit of an individual in a Special Needs Trust, if structured properly, are also not considered resources

3. Income test: an individual’s income from all sources is considered when determining eligibility  

a. Certain income is exempt, such as food stamp benefits, German reparation payments, reverse mortgages, etc.

b. Other income is disregarded, such as the first $65 of earned income and the first $20 of unearned income.

Transfer of Assets

At the time of application, Social Security Administration will conduct an investigation into any transfers that were done by the applicant or his spouse in the past three years. A penalty will be calculated for all transfers that were made for less than a full market value. The penalty is calculated by dividing the amount gratuitously transferred by the maximum monthly benefit. The maximum penalty period is 3 years.  

Medicaid for SSI recipients

Any New York State resident who is eligible for SSI is automatically enrolled into the Medicaid program.

This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney client relationship.


Monday, February 9, 2015

Social Security “Spousal Benefits” – the money you never knew you had!

Spousal benefits are available to spouses, divorced spouses and widows / widowers. Married individuals can choose which Social Security benefit they will receive – their own or a percentage of their spouse’s, whichever is greater. The benefit of receiving the ‘spousal benefit’ is to delay the collecting spouse’s retirement age, and as a result, receive a larger Social Security Payment from her own earnings in the future.

When Should One Apply for Spousal Benefits:

Only after the both spouses reach the full retirement age (FRA). If you apply before the FRA, you may be permanently penalized and will not receive the full benefit of the program.

How Does It Work?

For example, Mary is 66 (her FRA), and her husband Jake is 67 (past his FRA). Jake is entitled to collect $2,000 from Social Security. Mary, if she were to start collecting her own social security benefit, would receive $800. Mary can either begin collecting her own benefit, or collect the $1,000 of the “spousal benefit” for the next 4 years (50% of Jake’s full benefit). As a result, she will delay collecting her own benefits until the age of 70. At the age of 70, she can begin collecting her own benefits, but at that point they will be 132% of the original amount - $1,056.

What If The Higher Earning Spouse Does Not Want to Collect His Own Benefit Yet?

In order for Mary to collect the “spousal benefit”, Jake needs to apply for his own benefit first. If he is not ready to start collecting yet, Jake can apply for benefits and then ‘suspend’ them. As a result, Mary will collect her spousal benefit based on Jake’s retirement benefit at the FRA. Simultaneously, by suspending the receipt of his own retirement benefits, Jake will be taking advantage of the increased benefits that he will receive after he turns 70. There is absolutely no downside to collecting ‘spousal benefits’.

Are These Benefits Available for Divorced Spouses?

Yes.  As long as you have been divorced for at least 2 years, the marriage lasted 10 years or longer, both you and your former spouse are aged 62 or older, and the former spouse is entitled to Social Security Benefits, you are entitled to ‘spousal benefits’.

Two additional benefits for divorced spouses:

  1. the former spouse does not need to know that the spouse has applied for ‘spousal benefit’

  2. the former spouse need not have filed (or filed and suspended) his own Social Security benefit in order for you to receive it.

Are These Benefits Available for Widows / Widowers?

At the death of one spouse, the surviving spouse will receive the larger of her own benefit or her husband's benefit, but not both. Therefore, it is beneficial for both spouses not to take their retirement benefits too early. The delay in collecting Social Security and maximizing  both spouse's benefits can act as another form of life insurance.

See more at: http://individual.troweprice.com/retail/pages/retail/applications/investorMag/2014/june/managing-it/index.jsp

This article only offers general information.  Each situation is unique. It is always helpful to talk to a specialized attorney, to figure out your various options and ramifications of actions.  As every case has subtle differences, please do not use this article for legal advice. Only a signed engagement letter will create an attorney client relationship.


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