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At no time until then or since then, had there been such a high proportion of disabled persons or survivors of deceased breadwinners in our country. From this tragedy, the Pension Act of July 14, 1862 was born; a pension for soldiers and their families that bares many resemblances to our modern social security system. At the turn of the 20th century the social fabric of America was beginning to change. Specifically, the population was on the move. The Industrial Revolution was shifting the population from farms and into the cities. In 1890, 28% of the population lived in cities.
By 1930, it was 56%. The agrarian lifestyle was prevalent in most of the country at the time and had been since our early beginnings. Rural families lived together with many generations often living in the same home; if not in the near vicinity. When a family member became elderly or disabled, the “takes a village” decorum would pull together and take care of the person. When the population shifted into the urban areas, the nuclear family became he norm; while extended families so prevalent for much of our history slowly began to fade away.
In addition to this shift in the family unit, thanks mostly to improved health care and health programs, Americans began living significantly longer. From 1900 to 1930, the average age of death increased by a full 10 years; the most rapid increase in longevity in recorded human history. As you can imagine, the senior citizen population exploded. America was getting older, more urban, more industrial, and the family unit less extended. The year the Act was signed into law, America had 7. 8 million senior citizens.
Additionally, the Great Depression had left nearly half of them living below the poverty line. 4 USA Tax and Insurance Services Social Security Marketing System On August 14, 1935, President Franklin D. Roosevelt signed into law the Social Security Act; a social insurance program designed to pay elderly persons a continuing income during their retirement. Many changes have been made to the program throughout the years. There have been significant changes to the withholding and distribution amounts. Eligibility for the program has increased from less than 50% to nearly 100%.
Cost of living adjustments were added in 1950. Monthly distributions began in 1940; prior to this, either annual or lump-sum payments were made. Interestingly, the first lump sum payment was made to a one Ernest Ackerman; he had retired the day after the security has changed our society of senior persons. It has drastically reduced poverty amongst the elderly. Benefit payments are being made to nearly 58 million people; including 37 million retired workers and 8 million disabled workers. For over half of retired persons in this country, social security is their primary source of income. USA Tax and Insurance Services Social Security Marketing System Training – Chapter 2 The most important thing to consider when it comes to your knowledge of social security is this: -?? During the 2nd appointment, your financial planning recommendations will immediately follow your social security recommendations. -?? As you see more and more people in your office and deliver your social security recommendations to them, you will realize many of your attendees are requesting your assistance and coming to see you because their situation is complicated.
A widowed homemaker, for example, who has not been in the workforce most of her life will receive her “survivor benefit” from her deceased husband; fully, 100% of the inept received by the deceased spouse. It is unlikely she will need your assistance in reaching the best decision for her benefits. However, a man and a woman with multiple marriages and considerable age difference will have a myriad of options available to them and will likely seek assistance. For this reason, and many others, you cannot take lightly the training that is needed to cement your position as a social security expert. Ђ?? If your recommendations on the various benefits available to them are not concise or are delivered in a way suggesting your lack of experience, how will our financial planning recommendations be received when you begin making them? 6 USA Tax and Insurance Services Social Security Marketing System In addition, giving someone bad or incorrect advice on their social security may subject you to legal liability. Suffice it to say, training and knowledge are of the utmost importance when it comes to using social security as a marketing tool.
Know your product! This section of the manual is not intended to be comprehensive in nature. The POMP (Program Operations Manual System) from social security is ass’s of pages long. Links to this annual and the “Social Security Handbook” from the Social Security Administration are located in Appendix A of this manual. The ‘Training section of this manual is recommending most often to your clients. The spousal benefit and delayed retirement credits To begin our training, we’ll start with one of the core strategies you will be recommending.
In many cases you work with, the best recommendation will be for both husband and wife to delay taking their benefits from age 66 (full retirement age) until age 70; whereby each couple will earn a full 32% (8% annually, assuming they ere born after 1943) increase in their benefit payments for the remainder of their lives through the use of delayed retirement credits. In addition, once both spouses have reached full retirement age, the lower earning spouse can collect a spousal benefit from the higher earning spouse; fully one half of the higher earnings spouses benefit at full retirement age.
If done correctly, these two strategies can be done at the same time. You must know the rules of these 4 terms to implement this strategy: Delayed Retirement Credits Spousal Benefit File and Suspend Restricted Application Delayed Retirement Credits – Once a retiree reaches full retirement age, their benefits do not cap out. As a matter of fact, for each year after full retirement age (66 for most of the baby-boomers you’ll be working with) that they delay taking benefits, provided they were born after 1943, they will accumulate a permanent increase in their benefits of 8% a year up until age 70.
Technically, their payment increases each month they delay receiving benefits after they reach full retirement age; equal to 8% annually. 7 USA Tax and Insurance Services Social Security Marketing System The Spousal inept – Below are some key things to know about the Social Security spousal benefit. It is especially important to understand how a spouse benefit is affected when taking Social Security benefits are taken early, and what happens upon the death of a spouse.
Basics of the Social Security Spouse Benefit A spouse can claim a Social Security benefit based on their own earnings record, or they can collect a spousal benefit that pays 50% of their spouse’s Social Security benefit; as calculated at their spouse’s full retirement age. They are automatically entitled to receive the benefit that provides hem the higher monthly amount. After reaching full retirement age, they can choose to receive only the spousal benefit and delay receiving their benefits until a later date. This allows them to receive a higher benefit later based on the effect of delayed retirement credits.
They must be age 62 to qualify for either type of Social Security benefit. They cannot collect a spousal benefit until their spouse files for their own and Early Retirement If the spousal benefit is elected prior to reaching full retirement age, the benefit will be permanently reduced and your client will never earn delayed detriment credits. If either spouse takes their benefit or a spousal benefit prior to reaching full retirement age, the amount of benefits paid over their lifetime will be significantly reduced.
Social Security Benefits upon the Death of a Spouse – The Survivor Benefit A widow or widower can collect a survivor’s benefit as early as age 60. Upon the death of a spouse, the survivor can continue to receive the larger of their own benefit or the benefit amount being received by the spouse at their time of death. Therefore, it is important for a higher earning spouse to understand that aging benefits early not only reduces benefits during their lifetime, it endures when the surviving spouse begins collecting the survivor benefit.
During longer life expectancies, this reduction in benefits has an even greater effect. 8 Warning: This information is not intended to constitute legal advice and should not be relied upon by itself to give advice to the public. It is for training purposes only and not intended for use or presentation to the public. USA Tax and Insurance Services Social Security Marketing System Alternatively, when married couples choose to maximize the higher earning spouse’s benefit by delaying unifies until age 70, it acts as a powerful form of life insurance.
After death, the higher benefit continues to pay the lower earning spouse and in many cases can provide the equivalent of $50,000 – $250,000 of life insurance benefit; depending on how long the surviving spouse lives. A surviving spouse living in the same household is eligible to receive a one-time lump sum payment of $255 upon the death of their File and Suspend – As previously mentioned, a spousal benefit cannot be collected until one’s spouse has applied for their own social security retirement benefit.
But, what if that spouse isn’t want to begin their benefits; instead wanting to maximize benefits by accumulating delayed retirement credits? The good news: the higher earning spouse can file for social security and then immediately suspend their benefit. This allows the lower earning spouse to begin collecting a spousal benefit, while also letting their own social security benefit continue to grow. As mentioned above in the spousal benefit section, this strategy will also result in a higher survivor benefit, assuming the higher earning spouse predeceases the lower earning spouse.
Caution: In order to SE this strategy, your spouse will need to file a “restricted application”; which they can do once they reach their full retirement age. If the lower earning spouse has not reached full retirement age this strategy does not work; as they will receive a reduced benefit and will not later be able to switch from the spousal benefit to their own benefit. The lower earning spouse should wait until their full retirement age to claim the spousal benefit; they then allow their own benefit to accumulate delayed retirement credits and can switch to their own benefit amount at their age 70; assuming it is then higher.
In many cases, to get the most out of Social Security benefits, a retiree will need to use something called a restricted application. Because there are different types of Social Security benefits they may be eligible for, a restricted application, sometimes referred to as “restricting the scope” of the application, specifies to the Social Security office that they are not simultaneously applying for all benefits they are eligible for.
USA Tax and Insurance Services Social Security Marketing System To understand why to do this, take a look at some of the types of Social Security benefits they may be eligible for: A benefit based on earnings record, referred to as a Retirement Insurance Benefit (RIB). A benefit based on a spouse or ex-spouse’s earnings record, referred to as a spouse’s insurance benefit (SIB) or spousal benefit. A benefit based on a deceased spouse’s or deceased ex-spouse’s earnings record, referred to as a Widow/Widower’s Insurance Benefit (WBI). A benefit if you are disabled referred to as disability insurance benefits (DIB).
If your client is married, or if they are eligible for a benefit based on an ex-spouse’s record, once they reach full retirement age, they can SE a restricted application to claim the spousal benefit, while also letting their own benefit continue to grow because of delayed retirement credits. In Social Security’s Programs Operations Manual System (POMP) their Scope of the Application section says: “A claimant may choose to limit or restrict the scope of the application to exclude a class of benefits he/she may be eligible to on one or more Sans for any reason (except where deemed filing applies).
The reason may be to receive higher current benefits or to maximize the amount of benefits over a period of time, including the effect of delayed retirement credits (Dress). Likewise, your client may wish to collect a spousal benefit at age 60, while at the same time allowing their own benefit to grow through the use of delayed retirement credits. Again, you will need a restricted application to accomplish this. Restricted application rules 1 .
A spouse must be full retirement age to file a restricted application for the spousal benefit. 2. A widow/widower, or survivor of a deceased ex-spouse, does not have to be full retirement age to file a restricted application. 3. A claimant who is caring for a child (under age 16 or disabled adult child) who is entitled to child’s benefits may have the option to restrict the application to a spousal benefit only if they have not yet reached their full retirement age.
Regarding number 2 above, POMP says (section GNU 00204. IEEE. 4. A): “A widow(re) or surviving divorced spouse may wish to exclude a reduced RIB from the scope of the application and defer filing for an unreduced RIB because of the increasingly greater amount payable after full retirement age because of delayed retirement credits,” and that in order to do so the Social Security office needs to get a statement such as “l do not wish this application to be considered an application for reduced benefits on my own record. 0 Warning: This information is not intended to constitute legal advice and should not be relied upon by itself to give presentation to the public. USA Tax and Insurance Services Social Security Marketing System Reduced benefits and taking Social Security early If a claimant files for their own benefit or their spousal benefit prior to reaching full retirement age, they are deemed to have filed for both benefits at the same time and will be unable to switch at a later date. This is a “reduced benefit situation”.
Additionally, the reduction in their worker benefit is permanent, as if they had filed or that benefit alone. A “reduced benefit situation” means filing before you reach full retirement age. If someone files for their benefits prior to reaching full retirement age, they are deemed to be filing for both their own worker benefit and their spousal benefit at the same time; if one is available. However, doing this prevents them from using claiming strategies that might otherwise allow them to later switch between benefits.
One exception comes when the spouse applying for spousal benefits is caring for a disabled child or a child under the age of 16. POMP says (GNU 00204. OFF. 2. ): “A claimant who is between the age of 62 and FAR (full retirement age), has in his/her care a child (under age 16 or a disabled adult child) of the NH (number holder) who is entitled to child’s benefits, and is filing for spouse’s benefits is not deemed to have filed for reduced RIB. He/she may exclude RIB from the scope of the application for spouse’s benefits by a clear declination. In addition to this, there are also special provisions concerning eligibility for disability insurance benefits that may allow them to file for spousal benefits, while not yet applying for their own retirement unifies. Many of your clients will be wondering if they should start taking their benefits at age 62. It’s only natural to ask this question. After all, 62 is the earliest age they can begin drawing on social security benefits. And, like many people, they’re probably inclined to start drawing those benefits as soon as they can.
However, as we now know, they will take a reduced benefit at age 62. That reduction will not only affect their payout but, if they’re married, it may also affect their spouse. So, unless they meet a few clear cut criteria, it’s likely they’ll want to give the idea of taking social security at age 62 considerable thought before they apply for benefits. Below are a few general guidelines you can use to determine if it makes sense for them to start taking social security benefits at age 62.
Reasons Not to Take Social Security at Age 62 11 USA Tax and Insurance Services Social Security Marketing System If they plan on working and will earn in excess of the annual earnings limit before reaching full retirement age. (Social security benefits are reduced if they collect benefits before full retirement age and earn more than the annual earnings limit. ) You will find a link irking during retirement in Appendix A of this manual. They are single, have little savings, and have a longer life expectancy.
In this situation they should consider working as long as possible to maximize their benefits. Their spouse is still working and has earned income which may cause a larger portion of their benefits to be taxed. If their income and, presumably, their tax rate will be lower in a few years, by waiting to collect social security they can draw a larger benefit and keep more of it. They have a long life expectancy. In general, the longer the life expectancy, the longer hey should wait to begin drawing on social security. If they are married and their spousal benefit is smaller than their own.
Assuming the higher earning spouse predeceases the lower earning spouse, the surviving spouse will continue to receive the larger of the two benefits. This means if the higher earning spouse took social security early at age 62, because their spouse’s survivor benefit is based upon their benefit when they pass, it will mean a significantly reduced benefit for the surviving Reasons to Take Social Security at Age 62 You will not have earned income in excess of the annual earnings limit between age 2 and full retirement age.
You have health issues and/or a shorter than average life expectancy, and, if married, your spouse’s benefit is larger than your own. You are more comfortable having the money in hand, rather than waiting an extra three to five years; even if it means a reduced benefit and fewer dollars paid out over your lifetime. Survivor benefit Upon the death of a spouse, the surviving spouse is eligible for a social security “survivor benefit” as long as they were married for at least 9 months. (Length of marriage requirement is waived if they are caring for a child of a deceased spouse who is under the age of 16.