Social Security Tax Season Reminders




It’s Not Too Late for a Little Tax Planning


Tax season is right around the corner. Here are some Social Security tax tips from the Social Security Administration (SSA) that may help you.

  • If your total income, including Social Security, is $25,000 as an individual or $32,000 as a couple filing jointly, you’ll need to pay tax on some of your benefits.
  • If you get Social Security and don’t receive your 1099 from us by the end of January, request one at www. ssa. gov/1099.
  • Have children? Your child needs a Social Security Number to be claimed on your tax return. Learn more about getting one at www.ssa. gov/ssnumber.
  • You’ll want to let Social Security know if you changed your name in the past year, due to marriage, divorce, or any other reason.
  • Check your W-2s and tax paperwork to make sure your name and Social Security number are correct.
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You, Social Security, and the Affordable Care Act

The Affordable Care Act can have a major impact of when you retire and claim Social Security benefits. As you plan your retirement budget, you’ll need to consider medical insurance and health care costs. For many older Americans next to housing, healthcare related costs are the largest expense.

Many individuals will pay lower health insurance premiums due to the amount of their Modified Adjusted Gross Income (MAGI). This creates a new strategy for maximizing Social Security benefits. By not taking early Social Security retirement benefits you can often significantly lower your MAGI and qualify for lower health care premiums.

Here is an example of how this works for a Silver Plan:

Couple age 62, MAGI of $60,000, non-tobacco users:

  • Household income in 2014: 387 percent of the poverty level
  • Unsubsidized medical insurance premium in 2014: $14,567
  • Receives a government tax credit subsidy of up to: $8,867 (about 61 percent of the medical insurance premium)
  • Net amount of 2014 premium $5,700

Same couple, age 62 MAGI of $63,000, non-tobacco users:

  • Household income in 2014: 406 percent of the poverty level
  • Unsubsidized medical insurance premium in 2014: $14,567
  • Eligibility for subsidy: No
  • Net amount of 2014 premium $14,567

In other words, if this couple increases their income by just $3,000 annually they will lose the subsidy and pay $8,867 more per year (that’s $739 per month)  for medical insurance. This is a good reason to wait until you are eligible for Medicare, then take Social Security.

Calculating Where You Stand

The MAGI is generally your adjusted gross income plus any tax-exempt Social Security, Social Security Disability (but not SSI), interest or foreign income. Once you have determined your estimated 2014 household income and household size refer to the chart below from

Choose the column for your household size. The column on the left shows income levels that qualify for lower costs on premiums and out-of-pocket costs for private health insurance, and for low-cost health care through Medicaid. Additionally, there is an online calculator at the Kaiser Foundation Web site located at .


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Access your Social Security Benefit Verification Letter Online

stacked mail
Need a Proof of Income Letter Quickly?
It has been my experience, that from time to time I need to provide proof of my husband’s Social Security benefits. The Social Security Administration (SSA) provides a Letter of Verification for Social Security benefits, supplemental Security income, and /or Medicare online by using my Social Security Account at
New users must be able to verify some information about yourself and:
• Have a valid E-mail address,
• Have a Social Security number,
• Have a U.S. mailing address, and
• Be at least 18 years of age.
You can create an account only to gain access to your own personal information. You cannot use this online service to access the records of a person:
• With whom you have a business relationship;
• For whom you are a representative payee; or
• For whom you are an appointed representative.
Unauthorized use of this service may subject you to criminal or civil penalties, or both.
 To set up or use your account to get a benefit verification letter, go to Sign in or create an account at You can view, print, and save your benefit verification letter. The benefit verification letter is also called a budget letter, benefit letter, proof-of-income letter, or proof of award letter.
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Using Family Social Security Benefits to Fund Your Early Retirement

Grandfather Helping Teen


Social Security “Two-for-One”


When you start receiving Social Security retirement benefits, some members of your family may also qualify to receive benefits on your record. If they qualify, your spouse or child may receive a monthly payment of up to one-half of your full-retirement age (FRA) benefit amount. These payments will not decrease your retirement benefit. In fact, the value of the benefits your family may receive, added to your own, may help you decide if taking your benefits sooner may be more advantageous.

Eligibility Rules for Children

The following information about eligibility is a quote from the Social Security Administration (SSA) Web site. (For details please see )

When you qualify for Social Security retirement benefits, your children may also qualify to receive benefits on your record. Your eligible child can be your biological child, adopted child or stepchild. A dependent grandchild may also qualify. To receive benefits, the child must:

  • be unmarried; and
  • be under age 18; or
  • be 18-19 years old and a full-time student (no higher than grade 12); or
  • be 18 or older and disabled from a disability that started before age 22.

Normally, benefits stop when children reach age 18 unless they are disabled. However, if the child is still a full-time student at a secondary (or elementary) school at age 18, benefits will continue until the child graduates or until two months after the child becomes age 19, whichever is first.

 Comparing Early versus FRA Social Security Benefit Retirement Strategies

As stated earlier, benefits paid for your child will not decrease your retirement benefit. In fact, the value of the benefits he or she may receive, added to your own, may help you decide if taking early retirement may be more advantageous. The following two scenarios illustrate this concept:

Scenario #1

A 62 year-old single parent with a 14-year old child with a FRA of 66 and monthly FRA benefit of $1,000. If this single parent retires at 62 he or she can collect $750 per month and the child can collect 50 percent of the FRA benefit of $500 for a total of $1,250. The $1,250 can be collected for four-years until the child is 18.

Scenario #2

A 62 year old single parent with a 14-year old child with a FRA of 66 and monthly FRA benefit of $1,000 waits until FRA to begin benefits.

Deciding Which Social Security Strategy is Best

The break-even age of Scenario #1 and Scenario #2 is 78. Therefore if the single parent does not expect to live beyond age 78 (due to health problems or other issues) he or she should take advantage of Scenario #1 and collect the the child’s benefit for four years.

The SSA states that it is important to keep in mind that there is a Family Maximum. The total varies, but generally the total amount you and your family can receive is about 150 to 180 percent of your FRA benefit. For more information about the Family Maximum amount see an earlier blog at .

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Six Speedy Ways to Increase Your Social Security Benefits (Part 2 of 2)

Increase social security benefits



Make it Easy on Yourself with These Quick Tips


This is the second part of a two part series on quick ways to increase your Social Security benefits. If you are adverse to using complex planning scenarios or computer programs this series provides six quick strategies to increase your monthly Social Security benefits. After seeing which Social Security Benefit strategy works best, you may want to compare strategies or fine tune your approach by using a Social Security Calculator at

4. Wait Longer to Apply for Social Security Benefits

Social Security benefits are increased by a certain percentage (depending on date of birth) if you delay claiming your retirement benefits beyond Full-Retirement Age (FRA). The chart below indicates the yearly and monthly rate of increase by year of birth. For example, If you were born in 1948, your FRA is 66. If you work until 70 you will receive 32 percent more than your base FRA benefit. That is, let say your FRA benefit is  $1,000 your do not apply for benefits until age 70. You FRA benefit with Delayed Retirement Credits (DRCs) will be $1,320 per month [$1,000 + (4 X 8 percent = 32 percent X $1,00)] = $1,320.

Increase for Delayed Retirement

Year of Birth*

Yearly Rate of Increase

Monthly Rate of Increase



11/24 of 1%



1/2 of 1%



13/24 of 1%



7/12 of 1%



5/8 of 1%

1943 or later


2/3 of 1%

Note: If you were born on January 1st, you should refer to the rate of increase for the previous year.

The benefit increase is not compounded and increases no long apply after the age of 70, even if you continue to delay taking benefits. If you’ve already reached full-retirement age, you can choose to start receiving benefits before the month you apply. However, the Social Security Administration cannot pay retroactive benefits for any month before you reached FRA or more than 6-months in the past.

Here’s An Important Point: If you decide to delay your retirement, be sure to enroll in Medicate at age 65. For more information see If you do not enroll, your Medicate coverage may be delayed and cost more.

5. Take advantage of Spousal Benefits with File and Suspend

If you and your current spouse are FRA, one of you can apply for retirement benefits now and have the payments suspended, while the other applies only for spousal benefits (for more information see This approach allows for both individuals to delay receiving retirement benefits on their own earnings records and paves the way for both individuals to receive Delayed Retirement Credits (see above for details).

If you are already entitled to benefits you can Suspend current or future retirement benefit payments up to age 70 beginning the month after the month when you made the request. (Remember, the SSA pays benefits the month after they are due.) You do not have to sign your request to Suspend benefits, you can ask the SSA orally or in writing. (However, I would make certain you have a receipt of your request. You want to make certain that you will receive your DRCs.)

Let’s stay that you started to receive benefits less than 12-months ago and you changed your mind about when you want to start benefits. You can withdraw your Social Security Claim (called Reset Your Application) For details see . Keep in mind that this is a one time action and you will have to repay all the benefits you and your family received based on your retirement application.

6. Use Your Taxable Assets First

Some folks pay taxes on their Social Security benefits. Claimants pay taxes on their total income (investment earnings, pension payouts, wages, tax-exempt interest and half of their Social Security income). To reduce your tax liability remember that Roth IRAs are not counted as taxable income.  Withdrawals from 401(k), 403(b), IRAs and other tax-deferred accounts are included as taxable income. There may be real advantages to using your taxable accounts before you apply for Social Security benefits. This will allow those non-taxable accounts (like Roth IRAs) to increase in value.

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Six Quick Ways to Maximize Your Social Security Benefits

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Innovative Strategies to Increase Your Social Security Benefits (Part 1 of 2)

This is the first of a two part series on quick ways to increase your Social Security benefits. If you are adverse to using complex planning scenarios or computer programs this series provides six quick strategies to increase your monthly Social Security benefits.  After seeing what works best, you may want to compare strategies or fine tune your approach by using a Social Security Calculator at

1.      Increase Your Social Security Benefits by Working 35-Years

Retirement Age is when you begin receiving Social Security benefits. Your Stop Work Age is the age you are when you leave the work force. Your retirement benefit is based on your highest 35-years of earnings and your age when you begin benefits. If you stop work before retirement age the Social Security Administration (SSA) will use zero (0) for each year without earnings when they calculate your benefits. Additionally, some of your 35-years may be low-earnings years, those low earning years will be averaged in, creating a lower benefit than if you had continued to work.

SOLUTION: If you have low earning or zero earning years in your earnings record, you may want to work before you retire to give your benefits an extra bump.

2.      Don’t Take Early Retirement

If your Full-Retirement Age (FRA) is 66 and you retire at 62 your benefits will be permanently reduced by 25 percent. Additionally, if you are forced to go back to work,  your benefits will be reduced by $1 for every $2 you earn over $15,480 in 2014.

SOLUTION: Bite the bullet. There are many regional, state and federal programs that can assist you during your four-year FRA  “waiting” period. For example, the State of Illinois has a 32-page guide titled the, “State & Federal Programs for Older Americans 2013” located at This guide is designed to assist older Americans in need and includes sources of financial assistance for energy, tax relief, food, and health care.

3.      Collect Your Extra Credit Social Security Benefit Dollars for Military Service

According to the SSA under certain conditions special extra earnings credits are granted for periods of active duty or active duty for training. Special extra earnings credits are not granted for inactive duty training. For example, if  your active military service occurred:

  • From 1957 through 1967, the SSA will add the extra credits to your record when you apply for Social Security benefits.
  • From 1968 through 2001, you do not need to do anything to receive these extra credits. The credits were automatically added to your record.
  • After 2001, there are no special extra earnings credits for military service.

Note: According to the SSA in January 2002, Public Law 107-117, the Defense Appropriations Act, stopped the special extra earnings that have been credited to military service personnel. Military service in calendar year 2002 and future years no longer qualifies for these special extra earnings credits

SOLUTION:  The SSA provides the following guidelines for claiming extra credit for military service:

  • The information that follows applies only to active duty military service in 1957 through 1977,  you are credited with $300 in additional earnings for each calendar quarter in which you received active duty basic pay.
  • Active military service in 1978 through 2001 for every $300 in active duty basic pay, you are credited with an additional $100 in earnings up to a maximum of $1,200 per year. If you enlisted after September 7, 1980, and didn’t complete at least 24 months of active duty or your full tour, you may not be able to receive the additional earnings. Check with Social Security for details at
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2014 Earnings Limits May Affect Your Early Social Security Retirement Benefits



New Earnings Limits May Result in a Decrease in Your Early Retirement Benefits

According to the Social Security Administration (SSA) you can collect  retirement and survivor benefits while working.  If you are receiving benefits before Full-Retirement Age (FRA ) you will receive a reduced benefit.  FRA  for individuals born between 1943-1954 is 66. Taking early retirement at age 62 results in a 25 percent reduction, retiring at age 63 results in a 20 percent decrease, retiring at age 64 has a 13.3 percent drop, and retiring early at age 65 has a 6.7 percent reduction.

For people born later than 1960 FRA age is 67.  If these folks retire at age 62 they can expect a 30 percent cut in benefits. If you can wait to start retirement benefits you can get more than 100 percent of your full benefit by gaining  Delayed Retirement Credits (DRCs). These additional benefits cease at age 70.

Note: If you are working outside of the United States the receiving early retirement benefits and working rules are different.  For details see

The Negative Impact of Working and Receiving Early Retirement Benefits

Individuals who are FRA and working can work as much as they like and their benefits will not be reduced.  There are earning limits for early retirees that are receiving benefits and working. These earning limits change each year.  In   2014 the maximum early retirees can earn is $15, 480.   If you are under FRA for the entire year the SSA will deduct $1 from your benefit payments for every $2 you earn above $15,480.

The SSA provides this example of someone who retires mid-year:

John Smith retires at age 62 on June 30, 2014.  He earned $37,000 before he retired.

On October 5th, John starts his own business. He works at least 15 hours a week for the rest of the year and earns an additional $3,000 after expenses. His total earnings for 2014 are $40,000.

Although his earnings for the year substantially exceed the 2014 annual limit ($15,480), John will receive a Social Security payment for July, August and September.  This is because he was not self-employed and his earnings in those three months are $1,290 or less per month, the limit for people younger than full retirement age.

John will not receive benefits for October, November or December 2014 because he worked in his business over 45 hours per month in all three months.

Beginning in 2015, the deductions are based solely on John’s annual earnings limit.  For more information see

Note: Good news, if your earnings for the year are higher than one of the years originally used to compute your retirement benefit, the SSA will substitute the new year of earnings. This can assist in bumping up your monthly benefit amount.

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Do I Have to Pay Taxes on My Social Security Benefits?


Couple Walking Along Beach


Are You Ready for April 15th?

Some people have to pay federal income taxes on their Social Security benefits. According to the Social Security Administration (SSA) this usually happens only if you have other substantial income (such as wages, self-employment income, interest, dividends and other taxable income.) About one third of all Social Security claimants pay taxes. It is important to note that, Internal Revenue Service (IRS) rules state that no one pays federal income tax on more than 85 percent of his or her benefits. Here are a few of the guidelines, if you:

  • file a federal tax return as an “individual” and your combined income* is
    • between $25,000 and $34,000, you may have to pay income tax on up to 50 percent of your benefits.
    • more than $34,000, up to 85 percent of your benefits may be taxable.
  • file a joint return, and you and your spouse have a combined income* that is
    • between $32,000 and $44,000, you may have to pay income tax on up to 50 percent of your benefits
    • more than $44,000, up to 85 percent of your benefits may be taxable.
  • are married and file a separate tax return, you probably will pay taxes on your benefits.

Here is how “combined income” is calculated

Your adjusted gross income
+ Nontaxable interest
+½ of your Social Security benefits
= Your “combined income

According to the SSA each January you will receive a Social Security Benefit Statement(Form SSA-1099) showing the amount of benefits you received in the previous year. You can use this Benefit Statement when you complete your federal income tax return to find out if your benefits are subject to tax. If you receive Social Security and don’t receive your 1099 by the end of January 2014, you can request one online at

Here are your options if you do have to pay taxes on your Social Security benefit


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Strategies for an Unplanned Early Retirement and Social Security Benefits



Maximize Your Early Retirement Benefit

According to research by the Pew Charitable Trust in the first quarter of  2012, approximately 29.5 percent of the nearly 13.3 million Americans who were unemployed were jobless for a year or more (based on data released by the U.S. Department of Labor Statistics). The Pew Charitable Trust points out that this percentage translates into about 3.9 million workers, slightly more than the population of Oregon.

Is it no wonder that many of these individuals elected to start early Social Security retirement benefits. For individuals who had pared down their spending, had reliable health insurance coverage, relatively few debts, financially independent children, and other assets to supplement their lifestyles this unplanned early retirement decision may not have been a bad choice. For others who were not prepared for early retirement this was not a welcomed event.

THE BREAK-EVEN POINT  Let’s say that the Full Retirement Age (FRA) of John is 65. John elects to retire at age 62. If John retires at age 62 he will receive 80 percent of his FRA benefit. If John retires at 65 he will receive his full FRA benefit. When comparing these two strategies, John will receive the same cumulative amount of benefits at age 77. After this “breakeven” point John will receive less cumulative income if he selects the early retirement strategy.

Maximizing Your Early Retirement Benefits

The spousal benefit is 50 percent of the primary worker’s benefit. If the spouse decides to take early Social Security spousal retirement benefits the amount the household receives can be permanently lowered if the spouse is not FRA when he or she applies for benefits. A spouse can choose to retire as early as age 62, but doing so may result in a benefit of as little as 32.5 percent of the worker’s monthly benefit amount. A spousal benefit is reduced 25/36 of one percent for each month before normal retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of one percent per month. The amount of reduction depends on when the person reaches full retirement age.

For example:

  • If FRA is 65, a spouse can get 37.5 percent of the worker’s unreduced benefit at age 62;
  • If FRA age is 66, a spouse can get 35 percent of the worker’s unreduced benefit at age 62;
  • If FRA age is 67, a spouse can get 32.5 percent of the worker’s unreduced benefit at age 62.

To sum it up, the amount of the benefit increases at later ages up to the maximum of 50 percent at FRA. If FRA is other than those shown here the amount of the benefit will fall between 32.5 percent and 37.5 percent at age 62.

Here is an example of how this decline in benefits works. For a spouse who is not entitled to benefits on his or her own earnings record, a reduction factor is applied to the base spousal benefit, which is 50 percent of the worker’s monthly benefit amount. For example, if the worker’s monthly benefit amount is $1,600 and the worker’s spouse chooses to begin receiving benefits 36 months before his or her FRA, the Social Security Administration (SSA) will first take 50 percent of $1,600 to get an $800 base spousal benefit. Then compute the reduction factor, which is 36 times 25/36 of one percent, or 25 percent. Applying a 25 percent reduction to the $800 amount gives a spousal benefit of $600. Therefore in this example, the final spousal benefit is 37.5 percent of the worker’s monthly benefit amount. Note: This reduction is permanent and will not increase when the spouse reaches FRA.

If you are a married couple and the primary earner is forced to take early retirement because he or she can’t find full-time work or you have day-to-day cash needs, if at all possible do not apply for spousal benefits until FRA.  

There are two strategies that can assist you in maximizing your early retirement benefits:

  1. During the first 12-months that you begin to receive your Social Security benefit you may want to withdraw your application and re-apply at a later time. This is called the “Reset Approach” and it is a once in a lifetime SSA approved option. You must repay all benefits that you have already received as per your original retirement application. Additionally, repayment includes any benefits received by family members and taxes that are due.
  2. Working part-time is an excellent way to maximize your early retirement benefit. Early retirees can earn $15,480 a year and not lose any benefits in 2014. For early retirees, the Social Security Administration (SSA) will deduct $1 in benefits for every $2 earned above $15,480. The same earnings limits apply to a child or spouse who works and receives benefits on your record. Note: After FRA Social Security claimants can earn as much as they want without any loss of benefits.
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New Year’s Resolutions for Baby Boomers

Man and woman shaking hands isolated on a white background.



Resolutions to Set the Stage for Retirement

Many Baby Boomers find themselves in the transition zone of being within five to ten years from retirement. Decisions made during this time period have long-range consequences. Therefore the New Year’s Resolutions for many individuals in this age group should include ways to set the stage for this transition period.  It is not uncommon for many folks find it difficult to switch from the retirement accumulation stage to the transition zone. Here are a few tips to help you get started:

1. Determining Your Retirement Expectations
Do you have dreams of sailing around the world, playing golf each day, or going back to school? Do you want to move to a location that has a lower cost of living or live next door to your grandchildren? And most importantly, do you and your spouse agree on what you want to do after retirement? A recent Fidelity ( survey of 808 couples showed that 38 percent of pre-retirement couples do not agree on when they will retire, and 35 percent have different retirement lifestyle expectations.

2. Saving More Money is Not Enough
After the financial crisis of 2008 many individuals have improved their financial habits. However, curbing spending, being smarter with money, and saving more is not financial planning. Many pre-retirees do not how how much to increase savings to reach their retirement goals. For example, should you be making additional catch-up contributions for 2013 and 2014 to your Individual Retirement Accounts (IRAs)? Allianz Life Insurance Company ( found that only 16 percent of surveyed respondents would include financial planning in their 2014 resolutions. This is less than half of the 33 percent of respondents who were asked the same question in 2009.

3. Understanding When is the Best Time for You to Claim Social Security Benefits
The importance of maximizing Social Security benefits cannot be overemphasized. The role that Social Security benefits plays in retirement planning is different for each individual and requires a customized strategy. This customized strategy needs to take into consideration other retirement assets and longevity.

For example, according to data compiled by the Social Security Administration (SSA) a man reaching 65 today can expect to live, on average, until age 83.  A woman turning 65 today can expect to live, on average, until age 85. Additionally, about one out of every four 65-year olds today will live past age 90 and one out of 10 will live past age 95. The SSA provides an online Life Expectancy Calculator that is useful for determining when you should apply for your Social Security Benefits. Remember, the online calculator does not take into consideration your current health, lifestyle, and family history which could increase or decrease your individual life expectancy. You’ll find the SSA Life Expectancy Calculator at

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