Question of the Day – October 17

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Here’s the question of the day.

Question: My client is receiving Social Security survivor benefits based on the work record of her late husband. Can she get retirement benefits based on her own work record if they are higher?

Answer: Generally, yes.

Here’s an excerpt from the Social Security website that confirms that a person receiving survivor benefits can switch to the person’s own Social Security retirement benefits later on:

If you receive benefits as a widow or widower or as a surviving divorced spouse, you can switch to your own retirement benefit as early as age 62. This assumes you are eligible for retirement benefits and your retirement rate is higher than your rate as a widow, widower or surviving divorced spouse.

In many cases, a widow or widower can begin receiving one benefit at a reduced rate and then, at full retirement age, switch to the other benefit at an unreduced rate.

Reminder: Full retirement age for retirement benefits may not match full retirement age for survivors benefits.

The client should check with Social Security directly to confirm the facts of her situation.

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Question of the Day – March 7

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The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers. Here’s the question of the day.

Question: One of my clients passed away recently. Is his widow entitled to collect Social Security survivors’ benefits?

Answer: Yes, if she falls into one of the categories of people eligible for benefits. Here’s an excerpt from the Social Security website:

As you work and pay Social Security taxes, you earn credits toward your Social Security benefits. The number of years you need to work for your family to be eligible for Social Security survivors’ benefits depends on your age when you die. The younger you are, the fewer years you need to work. But no one needs more than 10 years of work to be eligible for any Social Security benefit.

Under a special rule, if you have worked for only one and one-half years in the three years just before your death, benefits can be paid to your children and your spouse who is caring for the children.

Your widow or widower may be able to receive full benefits at full retirement age. The full retirement age for survivors is age 66 for people born in 1945-1956 and will gradually increase to age 67 for people born in 1962 or later. Reduced widow or widower benefits can be received as early as age 60. If your surviving spouse is disabled, benefits can begin as early as age 50.

Your widow or widower can receive benefits at any age if she or he takes care of your child who is receiving Social Security benefits and younger than age 16 or disabled.

Your unmarried children who are younger than age 18 (or up to age 19 if they are attending elementary or secondary school full time) also can receive benefits. Your children can get benefits at any age if they were disabled before age 22 and remain disabled. Under certain circumstances, benefits also can be paid to your stepchildren, grandchildren, stepgrandchildren or adopted children.

Your dependent parents can receive benefits if they are age 62 or older. (For your parents to qualify as dependents, you would have had to provide at least one-half of their support.)

The benefit amount is based on the earnings of the person who died. The more the worker paid into Social Security, the greater your benefits will be.

Social Security uses the deceased worker’s basic benefit amount and calculates what percentage survivors are entitled to. The percentage depends on the survivors’ ages and relationship to the worker. If the person who died was receiving reduced benefits, your survivor’s benefit is based on that amount. Here are the most typical situations:

A widow or widower, at full retirement age or older, generally receives 100 percent of the worker’s basic benefit amount;
A widow or widower, age 60 or older, but under full retirement age, receives about 71-99 percent of the worker’s basic benefit amount; or
A widow or widower, any age, with a child younger than age 16, receives 75 percent of the worker’s benefit amount.
Children receive 75 percent of the worker’s benefit amount.

There is a limit to the benefits that can be paid to you and other family members each month. The limit varies, but is generally between 150 and 180 percent of the deceased’s benefit amount.

Have a question for the professionals at AUC? Feel welcome to submit it by email. We may post your question and the answer as the question of the day.

Question of the Day – February 23

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The professionals at Advanced Underwriting Consultants (AUC) answer the tax and technical questions posed by producers. Here’s the question of the day.

Question: My client and her minor children are receiving Social Security survivors’ benefits. If my client has taxable income this year, will it make the survivors’ benefits taxable?

Answer: Yes, possibly. Up to 85% of survivors’ benefits, like Social Security retirement benefits, are potentially income taxable.

If kids are entitled to survivors’ benefits under Social Security, the income is considered to be theirs. Any tax result on the benefits will depend on their own other taxable income. For most minor children, that means their survivor’s benefit will be tax free.

Likewise, a surviving spouse’s benefit under Social Security is potentially taxable depending on her own other taxable income. If an unmarried surviving spouse adds up half her Social Security benefit plus other taxable income, if the result is greater than $25,000, then at least part of the survivor’s benefit will probably be income taxable.

IRS Publication 915 gives a worksheet to calculate how much of the benefit is taxable.

Have a question for the professionals at AUC? Feel welcome to submit it by email. We may post your question and the answer as the question of the day.