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Social Security Overview – Social Security provides benefits for individuals and families who meet specific qualifications regarding time spent working, earnings, and age. There are several types of benefits that can be received by individuals including:

  • Retirement benefits for a worker
  • Spousal benefits for a worker’s current or previous spouse
  • Child benefits for qualifying child of a worker
  • Disability benefits for disabled worker or family members.

Most of these benefits are distributed based on the Primary Insurance Amount (“PIA”). The PIA is the benefit that would be received if you begin receiving retirement benefits at your “full retirement age” (See the table below for the age based on birth date). The PIA is calculated using the individual’s highest earnings during a 35-year calculation period.

Full Retirement Age Workers and Spouses
Birth Date Full Retirement Age
Before 1/2/38 65 years
1/2/38–1/1/39 65 years and 2 months
1/2/39–1/1/40 65 years and 4 months
1/2/40–1/1/41 65 years and 6 months
1/2/41–1/1/42 65 years and 8 months
1/2/42–1/1/43 65 years and 10 months
1/2/43–1/1/55 66 years
1/2/55–1/1/56 66 years and 2 months
1/2/56–1/1/57 66 years and 4 months
1/2/57–1/1/58 66 years and 6 months
1/2/58–1/1/59 66 years and 8 months
1/2/59–1/1/60 66 years and 10 months
1/2/60 and later 67 years

Spousal benefits – In order to receive these benefits, a spouse of a worker must be age 62 or above or have a qualifying child at the time the worker retires. The benefit is one-half of the worker’s PIA. However, this amount could be less than half based on certain limitations. If a spouse is eligible for retirement benefits on their own, they will receive the higher payment between spousal or retirement benefit.

Child benefits – A child is entitled to child’s insurance benefits on the Social Security record of a parent if the following conditions are met:

  • An application for child’s insurance benefits is filed.
  • Child is (or was) dependent upon the parent.
  • Child is not married.
  • Child is :
    • Under age 18,
    • Age 18–19 and a full-time elementary or secondary school student, or
    • Age 18 or older and under a disability (must have begun before age 22), and
  • Parent is:
    • Entitled to disability insurance benefits,
    • Entitled to retirement insurance benefits, or
    • Deceased and either fully or currently insured at time of death.

The child will receive a benefit similar to the spousal benefit, one-half of the parent’s PIA (three-fourths if the parent is deceased).

Disability Benefits – In order to qualify for disability benefits a worker must pass the “recent work ” and “duration of work tests”. If you would like to read about these tests please visit:

Survivors Benefits – If an insured worker dies, cash benefits may be paid to an eligible survivor as:

  • Monthly widow(er)’s insurance benefits
  • Monthly surviving child benefits
  • Monthly father’s or mother’s benefits
  • Monthly parent’s benefits
  • Or Lump-sum death payment

The benefit rate equals 100% of deceased worker’s PIA, plus any additional amount the worker was entitled to because of delayed credits.

Supplement Security Income (“SSI”) – Many people who are eligible for SSI may also be eligible for Social Security benefits. It is designed to help individuals age 65 or older, the blind, and disabled, who have little or no income. It provides cash to meet basic needs for food, clothing, and shelter.

Taxes – The following tables are the taxes that will be paid on Social Security benefits received based on your provisional income.

Filing – Single, head of household, qualifying

widow(er), or married filing separate and live

apart for entire year:

Provisional Income Tax on benefits
25,000-34,000 50%
>34,000 85%

Married filing joint:

Provisional Income Tax on benefits
32,000-44,000 50%
>44,000 85%

Your provisional income is the adjusted gross income (“AGI”) that is reported on your Form 1040, plus any nontaxable interest and half of your Social Security benefits.

Timing for retirement age is a key part of tax planning. If you decide to retire late you will receive a credit of 8% per year up to the age 70.

If you decide to retire early, earliest is age 62, your benefits will be reduced by up to 25% of what they would have been at full retirement age. However, you will gain an additional 3-5 years of payments depending on your birth date. Your benefits might be further reduced past the 25% depending on an earnings test. This includes a $1 deduction for every $2 earned over a threshold prior to full retirement age, and $1 for every $3 in the year you will reach full retirement age.

All of the following can be used to defer income in order to avoid AGI limits that will require a tax on your benefits:

    1. Charitable Contributions of appreciated property.
    2. Pension Plan Distributions.
    3. IRA Contributions.

For a more thorough understanding of the Social Security benefits and issues regarding timing and taxes, please do not hesitate to call our offices.

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