Category: Couples

Understanding how the Retirement Earnings Test works

Understanding how the Retirement Earnings Test works

It’s tempting to increase income once a wage earner is eligible for Social Security—at age 62—by taking benefits early. However, those benefits are likely to be temporarily reduced because of earned income. The “retirement earnings test” is poorly understood by the public, as reported in an article from CNBC, “Social Security rule for beneficiaries who keep working is ‘poorly understood,’ report finds. This is from a study conducted by the Social Security Advisory Board, a bipartisan, independent federal agency. It helps provide an understanding of how the retirement earnings test works.

According to the study, between 20% and 50% of pre-retirees don’t know their monthly benefits may be lowered if they claim Social Security and keep working.

Even wage earners who know their benefits might be reduced don’t know this is a temporary reduction. As few as 30% to 40% understand the reductions will eventually be added back to their benefits when they reach their full retirement age (FRA).

Here’s how the retirement earnings test works. It applies to Social Security beneficiaries under FRA, generally between ages 66 and 67, depending on their date of birth. A beneficiary under FRA who continues to work will have their benefits cut by $1 for every $2 earned in 2024. The rule applies to income over $22,320.

The rule differs for the year a beneficiary reaches their full retirement age when $1 is deducted for every $3 earned over a separate limit. In 2024, this applies to earnings over $59,520 only for the months before a beneficiary reaches full retirement age.

Today’s wage earners are more likely to remain in or move in and out of the workforce before fully retiring, so this rule will likely impact more people.

The Social Security Administration’s policy directs the field office staff to discuss the retirement earnings test with all applicants. However, this doesn’t always happen, according to the Society Security Advisory Board. These conversations also don’t always happen with prospective beneficiaries who have stopped working.

The report recommends making the information on the Social Security website more accessible and doing the same for related tools on the website.

Misunderstanding the retirement earnings test often influences workers to delay claiming benefits until full retirement age. Waiting to claim at full retirement age means workers receive all the benefits they earned, while those who claim earlier have permanently reduced benefits.

For most people affected by the retirement earnings test, there’s no effect on the amount of their lifetime benefits, but not understanding the rules may keep them from enjoying more income in their senior years.

As beneficiaries continue to work, they also pay Social Security payroll taxes. This could increase their benefits if the earnings fall within their highest earnings years.

Beneficiaries must properly report wages, as the IRS reports wages to the SSA. If it is determined benefits have been overpaid, the SSA will withhold benefits until the sum is recouped. This is a situation to avoid. If you are nearing retirement age, or are considering taking social security early, understanding how the retirement earnings test works can be the difference between paying the bills and being in debt. If you would like to learn more about retirement planning, please visit our previous posts. 

Reference: CNBC (Dec. 20, 2023) “Social Security rule for beneficiaries who keep working is ‘poorly understood,’ report finds

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Estate Planning for Unmarried Senior Couples

Estate Planning for Unmarried Senior Couples

An increasing number of couples at various stages of life are choosing to live together without marrying, making estate planning a bit more challenging. This is especially true when considering estate planning for unmarried senior couples, according to a recent article from Kiplinger, “Estate Planning and the Legal Quirks of Retiree Cohabitation.”

From one perspective, living together without being legally married provides an advantage: you have your own estate plan. You may distribute assets after death with no obligation to leave anything to a partner or their biological children. In many jurisdictions, the law requires spouses to leave a significant portion to their surviving spouse. This doesn’t apply if you’re cohabitating.

However, there are downsides. For example, a surviving unmarried partner doesn’t benefit from inheriting assets without estate taxes. A non-spouse transferring assets may find themselves generating sizable estate or income taxes. To avoid this, your estate planning attorney will discuss tax liability strategies.

Owning real property together can get complicated. Consider an unmarried couple buying a property solely in one person’s name, excluding the partner to sidestep any possible gift taxes. If the sole owner dies, the partner has no claim to the property. The solution could be planning for property rights in the estate plan, possibly leaving the property outright to the partner or in trust for the partner’s use throughout their lifetime. It still has to be planned for in advance of incapacity or, of course, death.

Regarding healthcare communication and directives, special care must be taken to ensure that the couple can be involved in each other’s care and decision-making. By law, decision-making might default to the married spouse or kin. Without a designated healthcare proxy, a cohabitating partner has no legal authority to obtain medical information, make medical decisions, or, in some cases, won’t even have the ability to have access to a hospitalized partner. A healthcare power of attorney is essential for unmarried couples.

For senior couples living together, blending families can be challenging. However, blending finances can be even more complex. Living together later in life can create many concerns if there are former spouses or children from a prior relationship. If a senior decides to marry, they are advised to have a prenuptial agreement so children from previous unions are not disinherited. If a potential spouse has big issues signing such a document, it should raise a red flag to their motivation to marry.

Living together without the legal protection of marriage is an individual decision and may be seen as a means of avoiding legalities. However, it needs to be examined from the perspective of estate planning for the unmarried senior couple, to protect both parties and their families. Couples must prepare for the future, for better or worse, in sickness and health. If you would like to learn more about estate planning for unmarried couples, please visit our previous posts. 

Reference: Kiplinger (Dec. 6, 2023) “Estate Planning and the Legal Quirks of Retiree Cohabitation”

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Seniors are missing out on Tax Deductions

Seniors are missing out on Tax Deductions

Many seniors are missing out on tax deductions and tax savings, according to a recent article from The Wall Street Journal, “Four Lucrative Tax Deductions That Seniors Often Overlook.” The tax code is complicated, and changes are frequent.

Since 2017, there have been several major tax changes, including the Tax Cuts and Jobs Act, the pandemic-era Cares Act and the climate and healthcare package known as the Inflation Reduction Act. Those are just three—there’s been more. Unless you’re a tax expert, chances are you won’t know about the possibilities. However, these four could be very helpful for seniors, especially those living on fixed incomes.

The IRS does offer a community-based program, Tax Counseling for the Elderly. This community-based program includes free tax return preparation for seniors aged 60 and over in low to moderate-income brackets. However, not everyone knows about this program or feels comfortable with an IRS-run tax program.

Here are four overlooked tax deductions for seniors:

Extra standard deduction. Millions of Americans take the standard deduction—a flat dollar amount determined by the IRS, which reduces taxable income—instead of itemizing deductions like mortgage interest and charitable deductions on the 1040 tax form.

In the 2023 tax year, seniors who are 65 or over or blind and meet certain qualifications are eligible for an extra standard deduction in addition to the regular deduction.

The extra standard deduction for seniors for 2023 is $1,850 for single filers or those who file as head of household and $3,000 for married couples, if each spouse is 65 or over filing jointly. This boosts the total standard deduction for single filers and married filing jointly to $15,700 and $30,700, respectively.

IRA contributions by a spouse. Did you know you can contribute earned income to a nonworking or low-earning spouse’s IRA if you file a joint tax return as a married couple? These are known as spousal IRAs and are treated just like traditional IRAs, reducing pretax income. They are not joint accounts—the individual spouse owns each IRA, and you can’t do this with a Roth IRA. There are specific guidelines, such as the working spouse must earn at least as much money as they contributed to both of the couple’s IRAs.

Qualified charitable distributions. Seniors who make charitable donations by taking money from their bank account or traditional IRA and then writing a check from their bank account is a common tax mistake. It is better to use a qualified charitable deduction, or QCD, which lets seniors age 70 ½ and older transfer up to $100,000 directly from a traditional IRA to a charity tax-free. Married couples filing jointly can donate $200,000 annually, and neither can contribute more than $100,000.

The contributions must be made to a qualified 501(c)(3) charity. The donation can’t be from Donor-Advised Funds. This is a great option when you need to take the annual withdrawal, known as a Required Minimum Distribution or RMD, and don’t need the money.

Medicare premium deduction. A self-employed retiree can deduct Medicare premiums even if they don’t itemize. This includes Medicare Part B and D, plus the cost of supplemental Medigap policies or a Medicare Advantage plan. The IRS considers self-employed people who own a business as a sole proprietor (Schedule C), partner (Schedule E), limited liability company member, or S corporation shareholder with at least 2% of the company stock.

Remember, you must have business income to qualify, since you can deduct premiums by only as much as you earn from your business. You also can’t claim the deduction if your health insurance is covered by a retiree medical plan hosted by a former employer or your spouse’s employer’s medical plan.

Seniors should consult with an estate planning attorney make sure they are not missing out on possible tax deductions. If you would like to learn more about tax planning, please visit our previous posts. 

Reference: The Wall Street Journal (Nov. 29, 2023) “Four Lucrative Tax Deductions That Seniors Often Overlook”

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RLT can Help with Planning for Incapacity

RLT can Help with Planning for Incapacity

Planning for potential disability and mental incapacity is part of a comprehensive estate plan. Women, in particular, are at a higher risk of becoming disabled, with 44% of women 65 and older having a disability. Most people understand the value of an estate plan. Nevertheless, few know how to that a Revocable Living Trust, or RLT, can help with planning for incapacity, as explained in the article “Incapacity Planning: The Hidden Power Of A Revocable Trust” from Financial Advisor.

Revocable Living Trusts are highly effective tools to protect assets against failing capacity. Although everyone should have both, they can be more powerful and efficient than a financial Power of Attorney. An RLT offers the freedom and flexibility to manage your assets while you can and provides a safety net if you lose capacity by naming a co-trustee who can immediately and easily step in and manage the assets.

Cognitive decline manifests in various ways. Incapacity is not always readily determined, so the trust must include a strong provision detailing when the co-trustee is empowered to take over. It’s common to require a medical professional to determine incapacity. However, what happens if a person suffering cognitive decline resists seeing a doctor, especially if they feel their autonomy is at risk?

Do you need an RLT if you already have a financial Power of Attorney? Yes, for several reasons.

You can express your intentions regarding the management and use of trust assets through the trust. A POA typically authorizes the agent to act on your behalf without specific direction or guidance. A POA authorizes someone to act on your behalf with financial transactions, such as selling a home, representing you and signing documents. The co-trustee is the only one with access to assets owned by the trust, while the POA can manage assets outside of the trust. Having both the POA and RLT is the best option.

Trustees are often viewed as more credible than a POA because RLTs are created with attorney involvement. POAs are often involved in lawsuits for fraud and elder abuse.

Suppose there is an instance of fraud or identity theft. In that case, RLTs provide another layer of protection, since the trust has its own taxpayer ID independent of your taxpayer ID and Social Security number.

Your co-trustee can be the same person as your POA.

Adding a trusted family member as a joint owner to accounts and property provides some protection without the expense of creating a trust. However, it does not create a fiduciary obligation, enforceable by law, for the joint owner to act in the original owner’s best interest. Only POAs or trustees are bound by this requirement.

Once a POA is in place, it is wise to share it with all institutions holding accounts. Most of them require a review and approval process before accepting a POA. Don’t wait until it’s needed, when it will be too late because of incapacity, to have a new one created.

If you know that planning for incapacity is in your family’s future, consider how an RLT can help. Talk with your estate planning attorney about planning to create an RLT and POA to ensure that your assets will be protected in case of incapacity. If you would like to learn more about incapacity planning, please visit our previous posts. 

Reference: Financial Advisor (Oct. 18, 2023) “Incapacity Planning: The Hidden Power Of A Revocable Trust”

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Beware of Social Security Scams using AI

Beware of Social Security Scams using AI

Beware of Social Security scams using AI. Seniors now need to be extra careful about Social Security scams since fraudsters have embraced AI (Artificial Intelligence) to manipulate people into revealing secure information, says a recent article from U.S. News & World Report, “AI and the Risks of Social Security Fraud.” The schemes are sophisticated and appear entirely legitimate, making them harder to discern from real messages from the Social Security Administration.

The Office of the Inspector General recently launched a task force to investigate the use of AI and deter AI-related Social Security scams. The OIG recognizes the risk of criminals using AI to make their schemes easier and faster to execute and the deceptions more credible and realistic.

You’ll want to know about AI risks if you receive Social Security benefits. Here are some guidelines to keep both your identity and finances safe.

Criminals commonly use robocalls or chatbots. The messages sound as if they come from legitimate government representatives and trick seniors into disclosing personal information or even making fraudulent payments using voice synthesis and natural language processing. This can also happen on a website, with an AI-generated video of the U.S. president or an official with the Social Security Administration announcing a new Social Security benefit and encouraging retirees to sign up by following a link on the video. The link takes the user to a fraudulent website, where they are asked to provide essential information, including their Social Security number and other details. Once the information is provided, thieves can re-route the monthly benefit to an unauthorized account.

Be wary if you receive an email from a source you don’t recognize. Don’t respond to text messages from people or organizations you don’t know. If you receive a suspicious phone call, hang up. If someone claims to be calling from Social Security, hang up, call the local Social Security office yourself, and explain what happened.

If you haven’t already, set up a my Social Security account online at ssa.gov. That’s where you’ll indicate the bank account to receive your benefit, and you can tell SSA not to change it unless you appear in person at the local SSA office.

The SSA doesn’t initiate contact with recipients by email, text, or phone. Anyone saying they are from the SSA using these methods is a scammer. Even if your phone displays the call is coming from the SSA, know that it’s very easy for criminals to manipulate caller ID to make the call appear to come from whomever and whatever number they want.

Thieves now use digital technology to trick seniors into revealing personal information. As technology changes, so do the means of stealing. Beware of Social Security scams using AI. Stay current on common scams and protect your retirement benefits and finances from AI-driven fraud. If you would like to learn more about social security benefits, please visit our previous posts.

Reference: U.S. News & World Report (Sep. 29, 2023) “AI and the Risks of Social Security Fraud”

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Immediate Annuity might be a useful Option for Retirees

Immediate Annuity might be a useful Option for Retirees

An immediate annuity might be a useful option for retirees who want to add funds for ongoing expenses or are concerned about outliving their savings. They can provide a sense of security during volatile markets. However, the downsides must be considered.

An immediate annuity is, in simplest terms, an insurance plan created with a lump sum payment designed to pay a guaranteed amount for a set period. In the first quarter of 2023, sales hit $3.3 billion in the first quarter of 2023, as reported in a recent article from U.S. News & World Report, “The Pros and Cons of Immediate Annuities.” This figure, representing single premium annuities, increased by 120% for this segment from the first quarter of 2022.

Set up as an insurance plan, an immediate annuity is funded with an initial amount, and payouts begin. The funds might come from savings accounts, a 401(k) or an IRA. The tradeoffs are in the form of fees and growth limitations on the total assets if you decide to cancel the payments and retain the account balance.

Other types of annuities may be more appropriate, including deferred annuities, where the money is invested, and payouts begin later. These are useful for individuals who want market protection and have only an occasional or reasonable need for cash.

When purchasing an immediate annuity, the insurer will look at factors including the annuitant’s age and how long the payments will last. From an income perspective, you can calculate your fixed expenses and use this amount to determine your needed income.

Some annuities include a rising income stream to keep pace with inflation.

An immediate annuity might be a useful option for retirees. Payouts depend on the timeline and details of each annuity. In many cases, you can start getting payouts within a month of the deposit. However, usually you have to take it within the first 12 months. You can also ask to have payments made monthly, quarterly, or annually. You’ll also select a payout period, which may consist of a certain number of years or for the rest of your life. Many people prefer the lifetime annuity plan, meaning their payments will continue for as long as they live. If you would like to learn more about annuities in estate planning, please visit our previous posts. 

Reference: U.S. News & World Report (Sep. 5, 2023) “The Pros and Cons of Immediate Annuities”

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The Estate of The Union Season 3|Episode 2

The Estate of The Union Season 2|Episode 10 is out now!

The Estate of The Union Season 2|Episode 10 is out now!

Criminals and criminal law are the focus of this edition of The Estate of of the Union. Brad Wiewel talks with the best criminal lawyer in Austin, Sam Bassett. They discuss a variety of topics related to criminal law.

Sam’s knowledge and experience make this a great conversation. Sam answers two critical questions: “What to do if you war stopped by the police?”  And “How can you defend someone who you think may be guilty?” This fast-paced episode is crammed with good stories too. You’ll enjoy it.

You can request a consultation with Sam Bassett by reaching him at Minton, Bassett, Flores & Carsey, 512-476-4873 or at their website:

 

 

In each episode of The Estate of The Union podcast, host and lawyer Brad Wiewel will give valuable insights into the confusing world of estate planning, making an often daunting subject easier to understand. It is Estate Planning Made Simple! The Estate of The Union Season 2|Episode 10 is out now! The episode can be found on Spotify, Apple podcasts, or anywhere you get your podcasts. If you would prefer to watch the video version, please visit our YouTube page. Please click on the links below to listen to or watch the new installment of The Estate of The Union podcast. We hope you enjoy it.

The Estate of The Union Season 2|Episode 4 – How To Give Yourself a Charitable Gift is out now!

 

Texas Trust Law focuses its practice exclusively in the area of wills, probate, estate planning, asset protection, and special needs planning. Brad Wiewel is Board Certified in Estate Planning and Probate Law by the Texas Board of Legal Specialization. We provide estate planning services, asset protection planning, business planning, and retirement exit strategies.

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Tools to Minimize or Avoid Estate Taxes

Tools to Minimize or Avoid Estate Taxes

The tax cuts of 2017 temporarily doubled the amount individuals could give away without paying taxes. However, those cuts are due to expire in 2026, pushing well-to-do Americans to move fast, says a recent article from The Wall Street Journal, “The Moves Wealthy Families are Making to Skirt Estate Taxes.” According to recently published stats from the Internal Revenue Service, wealth transfer began to escalate in 2021, with more than $182.6 billion given away. Nearly $100 billion went into trusts, some of which can last for generations. A total of roughly $14.8 went to charity. There are tools available to minimize or avoid estate taxes.

For Americans with a net worth over $10 million, it’s urgent to consider a range of moves before these tax cuts expire. There are a number of options, from simple gifts to heirs to setting up complex dynasty trusts to protect wealth over generations. The macabre alternative is to die before these cuts expire.

The $10 million figure in the Tax Cuts and Jobs Act of 2017 was indexed for inflation. For 2023, the combined gift and estate tax exemption is $12.9 million per individual, or $25.84 million per married couple. This is the amount you may give away during your life or at death tax-free.

Next year, the amount will be adjusted to $13.61 million. For 2025, it may be as high as $14 million per person. But in 2026, it will drop by half to about $7 million.

The tax cuts expire after December 31, 2025. Anyone facing an estate tax bill who hasn’t made any preparations will likely have a somber New Year’s Eve.

A couple who transfers their full exemption amount of $28 million by 2025, before the law sunsets, will benefit from $5.6 million in tax savings, if they die in 2026. If they make a gift to grandchildren, skipping a generation, there would be nearly $9 million in tax savings.

These tax savings might become significantly larger over time. The appreciation is exempt from the transfer tax system when money grows in trusts. Therefore, if the trust value goes up to $100 million at the time of death, the family could save $40 million in estate taxes at the current 40% rate. This is just the federal tax savings. There are also state estate-tax savings in states like New York that continue to levy their own estate taxes.

According to UBS and Credit Suisse’s global wealth report, about 1.5 million Americans have a $10 million to $50 million net worth, and nearly 125,000 worth even more.

Direct gifts of cash or securities are the simplest way to make gifts to reduce your estate. The limit on annual tax-free gifts is $17,000 for 2023. It is expected to increase to $18,000 in 2024. Anyone can make tax-free gifts of up to $17,000 to an unlimited number of people. These gifts don’t count against the larger $12.92 million combined gift and estate tax exemption. Gifts made over $17,000 require reporting to the IRS using Form 709.

Making gifts to a dynasty trust can preserve more wealth for children. The trust removes the assets from both your estate and your children’s estates, benefiting children, grandchildren, and future generations.

Trusts also offer asset protection. If assets are given to children directly, and they are sued or divorced, they could lose some or all of their assets. If gifts are made to a trust, it’s harder for a creditor to go after assets in the trust.

There are tools available to minimize or avoid estate taxes. Do a careful analysis with your estate planning attorney before you design a gifting program. Make sure that you have enough to maintain your lifestyle. There are instances where people are so eager to gift their assets they don’t plan for the impact of inflation or volatile markets. If you would like to learn more about estate taxes, please visit our previous posts. 

Reference: The Wall Street Journal (Aug. 19, 2023) “The Moves Wealthy Families are Making to Skirt Estate Taxes”

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Consider Hiring a Lawyer for Medicaid Applications

Consider Hiring a Lawyer for Medicaid Applications

Medicaid can be a complicated and ponderous process to navigate. As with many government programs, it is easy to make mistakes that could potentially devastate your family’s finances. You might consider hiring a lawyer for Medicaid applications. Film Daily’s recent article, “Do You Need a Lawyer to Apply for Medicaid?” says that hiring a lawyer for Medicaid applications can provide many benefits. Let’s look at some of the big ones:

Expert Knowledge: Attorneys specializing in Medicaid are well-versed in the complex rules and regulations of the program. They stay updated with policy changes and can provide accurate guidance based on your unique circumstances.

Maximizing Eligibility: An experienced elder law lawyer can help structure your finances and assets to maximize your eligibility for Medicaid. They can also advise you on strategies to protect your assets, while satisfying the program’s requirements.

Streamlined Application Process: A Medicaid application can involve a ton of paperwork and documentation. A lawyer can help you gather the necessary information, complete the application correctly and submit it on time, reducing the chances of delays or mistakes.

Handling Complex Situations: If your situation is complicated, like owning a business or having multiple sources of income, a Medicaid lawyer can work through the intricacies and ensure that all relevant information is presented correctly in your application.

Appeals and Legal Support: If your application is denied or there are other issues, a lawyer can represent you in appeals or hearings. They can advocate for your rights and help resolve any disputes that arise during the application process.

While hiring a lawyer when applying for Medicaid is not mandatory, their expertise can be invaluable in navigating the complexities of the program.

A lawyer specializing in Medicaid can provide guidance, streamline the application process, and help you maximize your eligibility.

Sit down as a family and consider hiring a lawyer for your Medicaid applications. Depending on your circumstances, hiring a Medicaid attorney can be beneficial in complex financial situations, long-term care planning, dealing with denied applications, or staying informed about changing regulations.

With the right legal support, you can also increase your chances of a successful Medicaid application. If you would like to learn more about Medicaid and estate planning, please visit our previous posts. 

Reference: Film Daily (July 25, 2023) “Do You Need a Lawyer to Apply for Medicaid?”

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Costly Social Security Mistakes to Avoid

Costly Social Security Mistakes to Avoid

Social security was created to do just what it’s title intends – to help bring some financial security to seniors beyond retirement age. With so many ways to claim benefits, especially if you are married or were divorced at some point in your life, small mistakes can add up to a big difference in the amount of Social Security benefits you receive, says a recent article, “11 Social Security Mistakes That Can Cost You a Fortune” from Nasdaq. With so many Americans relying on social security benefits to help supplement their lives, there are some costly social security mistakes to avoid.

Not checking your earnings record during your working life can add up to significant losses. Even if you’re decades away from claiming, you should check your earnings record annually since this is what Social Security benefits are based on. Common mistakes include employers recording incorrect earnings or earnings not showing up because you changed your name and the name change wasn’t processed correctly.

Check your statement annually to avoid losing the right number of benefits because of earnings record mistakes. If you see an error, send proof of your earnings to the Social Security Administration. You might submit your W-2 form if you’re a salaried employee or your tax return if you are self-employed. Once the SSA verifies your claim, your record will be corrected. This is a “sooner is better than later” task because you may not have a paper trail going back 30 years.

Another mistake people make is not working long enough. To qualify for Social Security, you need at least 40 work credits. Taxpayers earn up to four credits each year based on earnings. For example, in 2023, you must earn $1,640 to earn one credit or $6,560 to earn four credits. Benefits are calculated based on the average of the 35 highest earning years. If you haven’t worked for 35 years, $0 will be averaged for each year you don’t have earnings.

It’s wise to do the calculations for Social Security before retiring. As you approach your retirement date, check your earnings statement first to be sure you have enough credits to qualify for Social Security. If you don’t have 35 years, consider working another year or two. If you worked at a job where you weren’t paying into Social Security, adding another year of work could ensure you qualify and may also boost your monthly benefit amount.

Taking Social Security too early can take a big bite out of benefits. While everyone eligible can start taking benefits at age 62, for everyone born after 1959, the reduction for benefits at age 62 is 30%. This lower benefit is permanent and won’t increase until you reach Full Retirement Age (FRA). It’s best to wait at least until FRA. If you can wait past FRA, your benefits could increase by as much as 8% per year up to age 70.

Another mistake is waiting too long to claim benefits. If you live to the average life expectancy, it won’t matter if you claim benefits too early or late. The amount of the benefit reduction for claiming early and the increase in delaying a claim evens out. But if you are in poor health or have cash flow trouble, a benefit check at a younger age could be the right move.

If you file for Social Security benefits solely on your earnings record, you might miss out on a larger benefit. Let’s say you were a stay-at-home parent while your spouse worked. You may not have enough work credits to qualify, or your benefits may be small. However, you could still qualify for benefits under your spouse’s work record. Check to see how much you would be eligible to receive under your spouse’s work record before deciding how to claim benefits.

If divorced, you might claim benefits under your ex-spouse’s earnings record if you meet all the requirements. Suppose the marriage lasted at least ten years. In that case, you are 62 or older, unmarried, and your ex-spouse is eligible to receive Social Security retirement or disability benefits. Your benefit from your work is less than what you would receive under your ex-spouse’s earnings record; it’s worth exploring this option.

If you are married, it’s best to coordinate claiming strategies with your spouse. A low-earning spouse could start claiming benefits based on the higher-earning spouse’s income at full retirement age. Meanwhile, the higher-earning spouse delays benefits to increase retirement credits.

Finally, remember that up to 85% of Social Security benefits could be subject to federal income taxes if you earn substantial income from wages or dividends. The percentage of benefits subject to income taxes depends on the couple’s combined income, which includes the household Adjusted Gross Income (AGI), any nontaxable interest income, and half of your Social Security benefits. The best way to avoid these costly social security mistakes it to make sure you are working closely with your estate planning attorney and financial advisor or CPA. If you would like to learn more about social security benefits and estate planning, please visit our previous posts. 

Reference: Nasdaq (July 2, 2023) “11 Social Security Mistakes That Can Cost You a Fortune”

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Information in our blogs is very general in nature and should not be acted upon without first consulting with an attorney. Please feel free to contact Texas Trust Law to schedule a complimentary consultation.
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