Jan Neal Law Firm, LLC

Alabama Estate, Elder and Special Needs Law

Tag Archives: Social Security


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Social Security Retroactive Lump Sum Benefits

If you need a lump sum of cash on hand when you retire, Social Security offers a lump sum payment option that’s worth six months of benefits for those who have waited beyond full retirement age to draw benefits (for those born between 1943 and 1954 full retirement age is 66). Known as retroactive benefits, the maximum that Social Security offers is six months’ worth of back payments in a lump sum.

This may be a good deal depending on your needs and goals, but it does come at a cost. By taking the lump sum, your retirement date and the amount of your monthly benefit are rolled back six months. So it is important to understand the details before requesting the payment.

When you delay taking retirement beyond your full retirement age, you amass “delayed retirement credits” that increase your benefits by 8 percent for every year that you wait, over and above annual inflation adjustments. By taking the retroactive lump sum payment, you lose the delayed credits that you had accumulated over the previous six months, so your monthly benefit will be lower than if you did not take the lump sum. 

Whether you should take the lump sum payment depends on a number of factors, including your life expectancy, your spouse’s needs, and what you will do with the money. Taking the lump sum payment makes more sense if your life expectancy is shorter. In this case, the immediate cash infusion may be more beneficial than bigger monthly payments, especially if you need cash for caregiver expenses. However, if you are married and are the higher earner, you will want to consider your spouse’s needs. If you die, your spouse will receive spousal benefits equal to the monthly amount of your benefits. The higher your benefit, the more your spouse will receive, and that is important when the spouse goes from a two earner household to a one earner. 

You also need to consider what you will do with the lump-sum payment. If you are paying off high-interest debt or investing in something with a good rate of return, the lump sum might be better than having the higher monthly payment. 

For more information about the retroactive benefit see the Online Social Security Handbook found at https://www.ssa.gov/OP_Home/handbook/handbook.15/handbook-1513.html.


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Social Security Recipients Can Draw Unemployment Benefits

It is estimated that 20 percent of Americans over 65 are in the work force.  AARP calls the hottest demographic in the labor market to be those men and women working not only past traditional retirement age but into their 70s, 80s and sometimes beyond.  So among the unemployed are seniors who found irreplaceable meaning in work and/or counted on their jobs to supplement inadequate retirement.

The COVID-19 pandemic has sent unemployment to its highest levels since the Great Depression, and older workers have been particularly hard hit.  Many of those who continued to work beyond retirement age also draw Social Security benefits, and some are now being forced to take their benefits early after losing their jobs when doing so will permanently reduce the amount of benefits they can draw. 

If you are already receiving Social Security, are you also eligible for full unemployment benefits? Until recently, the answer was not necessarily.  Many states reduced unemployment benefits of those receiving Social Security retirement benefits by up to 50 percent, something called the “Social Security offset.” But after AARP and the National Unemployment Law Project pushed to have these laws overturned, this is no longer the case. In 2015 Illinois became the last state to repeal the Social Security offset.

“These two benefits are not duplicate payments,” the Law Project said at the time.  “Older workers who must work or choose to work should not have their unemployment benefits cut or eliminated simply because they have reached the age to qualify for Social Security.”

So do not assume that you cannot draw Unemployment Compensation because you are at or above the traditional retirement age and draw, or could draw, Social Security.  If you have lost your job you need to apply for Unemployment Compensation. Similar to Social Security, certain other “unearned” income you may receive, like annuities and investment income, do not count against receiving unemployment insurance.  Only earned income affects unemployment benefits.


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Stimulus Payments for Seniors

Pursuant to the CARES ACT (Coronavirus Aid, Relief, and Economic Security Act), individuals with income up to $75,000 for a single person or $150,000 for married and filing jointly are eligible to receive $1,200 for a single person or $2,400 for a married couple filing jointly. An additional $500 per qualifying  dependent child  under the age of 17 will also be provided to families.

For individuals who filed federal income tax returns in 2018 or 2019, you do not need to take any further action at this point. You will either receive the stimulus via direct deposit based on the information the IRS has on file or you will receive a physical check in the weeks to come.

More than 20 million taxpayers over the age of 65 do not file a federal income tax return each year – likely because their only source of income is Social Security benefits. For persons who may not have filed a 2018 or 2019 tax return, there does not appear to be clear directions at this time on how to ensure that they receive the stimulus. According to the CARES Act the filing of a tax return should not be necessary, and the payment could be direct deposited along with monthly benefit payments.  However the IRS has issued a notice that appears contrary to the actual CARES Act indicating that seniors on Social Security will need to file a simple tax return (which has not been made available at the end of March). There is also discussion of a web based portal at the Treasury Department through which people could enter their information (this has yet to be designed or implemented).

Regardless of the mechanism which will be used for “non-filers” the IRS will have to have the Social Security numbers of all parties to include any dependent children in order to generate the stimulus payment as well as information on bank accounts for direct deposit.

At this point, if you did not file in 2018 or 2019 you may want to  file a return either by hard copy or e-file. If you do not want to file the tax return for 2018 or 2019 you have the option to wait and see what action will be required of you. The stimulus payment is available through 2020, and tax payments for 2019 have been delayed until July, so you do not have to rush to file a tax return.

Be advised that the receipt of the stimulus payment will not be treated as a resource for one year and will not affect eligibility for federal means tested programs such as Medicaid, SSI or SNAP.

We will stay on top of this issue and continue to provide information as it develops in an effort to assure that all eligible seniors obtain their stimulus payments.    


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Social Security Tools Online

Social Security Administration (SSA) has made available many online services. From applying for Social Security benefits to replacing a card, SSA has online tools to help, and if you can get the information you need online you can avoid calling 1-800 Medicare or going to a SSA office where you may have to wait to get help.

To access most of the online services, you need to create a mySocial Security account.  This account allows you to receive personalized estimates of future benefits based on your real earnings, see your latest statement, and review your earnings history. You can also request a replacement Social Security or Medicare card, check the status of an application, get direct deposit, change your address. If you are a representative payee, you can use mySocial Security to complete representative payee accounting reports.  The graphic above provided by Social Security gives you an overview of all the online services available.

 


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Social Security and Medicare Solvency

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I watched the debate last night and was particularly interested in the segment concerning Social Security and Medicare.  I was disturbed to hear the prophecy of doom posed to the candidates by this question:

WALLACE: “All right. The one last area I want to get into with you in this debate is the fact that the biggest driver of our debt is entitlements, which is 60 percent of all federal spending. Now, the Committee for federal — a Responsible Federal Budget has looked at both of your plans and they say neither of you has a serious plan that is going to solve the fact that Medicare’s going to run out of money in the 2020s, Social Security is going to run out of money in the 2030s, and at that time, recipients are going to take huge cuts in their benefits.

So, in effect, the final question I want to ask you in this regard is — and let me start with you, Mr. Trump, would President Trump make a deal to save Medicare and Social Security that included both tax increases and benefit cuts, in effect, a grand bargain on entitlements?”

Candidate responses and proposals can be found at The New York Times transcript of the debate.

Wanting to know the truth about Social Security and Medicare solvency,  I went looking and found the reports.  The Social Security forecast can be read at the 2016 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds.  And the Medicare forecast can be read at the 2016 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

The best summary of these reports I have read can be found at Forbes who says:

Social Security isn’t running out of money, and it is not going bankrupt, but the program will face a shortfall in 2034.

The Trustees now predict Medicare will exhaust its reserves by 2028, two years sooner than last year’s estimate.

There are manageable solutions to these problems, but action does need to be taken.

The full Forbes article can be read here.

Aging related issues and the relative positions of the presidential candidates can be read at Next Avenue, a web site produced by PBS.


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Social Security Spousal Strategies Eliminated

shutterstock_277089179Once upon a time a married worker could file for Social Security benefits at full retirement age and then suspend the benefits, allowing the worker’s spouse to begin drawing spousal benefits while the worker postponed receiving benefits until a later date resulting in higher benefits due to the delay in drawing.  The strategy was known as “File and Suspend,” and it resulted a substantial monetary gain for couples who used it.

But “File and Suspend” is a thing of the past as a result of the budget signed into law November 2, 2015.  Under the new rules, effective April 30, 2016, a spouse cannot begin receiving benefits until the worker is actually receiving benefits, too. Workers can still file and suspend, but the spousal benefit suspends along with worker’s benefit.

The law does not affect those already electing “File and Suspend” or those who turn 66 prior to the effective date who elect to “File and Suspend” before April 30, 2016.

Another strategy known as “Claim Now, Claim More Later” has been eliminated.  That strategy allowed a spouse who takes benefits at full retirement age to choose whether to take spousal benefits or benefits on his or her own record.  This allowed a higher-earning spouse to claim a spousal benefit at full retirement age and then switch to draw his or her own retirement benefit instead at age 70.  Under the new law the worker cannot take spousal benefits and let his or her benefits continue to increase.  An exception to this is the election allowed by a surviving spouse who will still be able to choose to draw on the deceased spouse’s account first and later switch to a larger retirement benefit.