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Tag: retirement benefits

Between A Velvet Glove And A Straw Pillow

Q: I am 64 years old and have just been laid off. Instead of looking for another job, I’ve decided to retire. But I am struggling so much with my Social Security choices, and I hope you can help.

I went to the Social Security office, and they presented me with some options. They suggested I take widow’s benefits — my husband died several years ago — of about $2,000 per month. Then they said that at age 66, I could switch to my own Social Security and get $2,400 per month. Or they said I could wait until age 70 and collect $2,900 per month. Another option would be to take my own retirement benefit now (foregoing any widow’s benefits) and get about $2,200 per month.

I really don’t need the money, and I come from a family of people who live into their 90s. I just don’t know what to do, and I’m worried sick that I’ll make the wrong decision. I feel like I’m stuck between a rock and a hard place! Can you help me?

A: You aren’t between a rock and a hard place. At least with respect to your Social Security decisions, you’re between a velvet glove and a soft pillow! So I think you should relax and not worry about this decision so much. Frankly, no matter what you choose to do, you’ll come out way ahead of what most people can expect to get from Social Security.

You could keep things simple and just start drawing your own retirement benefit now. A monthly stipend of $2,200 is a very high Social Security check. And for someone who doesn’t need the money, that’s a lot of icing on your retirement cake.

But if you want to maximize your Social Security “investment,” then you should go with one of the other plans presented by your local Social Security representative. You should take your widow’s benefits now and collect $2,000 per month. You could keep getting that rate and then at age 70 switch to your own retirement benefits, which would come with a delayed retirement bonus (for waiting until age 70 to start your own Social Security). That’s why you’d get $2,900 per month.

You could make the switch from widow’s benefits to your own retirement at age 66 at the lower $2,600-per-month rate. But because you’ve got good genes that should keep you alive into your 90s, you’re probably ahead to wait until 70 to make the switch.

Q: I am a 72-year-old single woman who gets $980 per month from Social Security. That’s my only income. My local Social Security office is trying to get me to sign up for Supplemental Security Income (SSI). It would apparently mean about $100 extra per month for me.

But I don’t like the idea of going on welfare. They told me SSI isn’t welfare. They said it’s a “needs-based program for low-income seniors.” I don’t really need the money so I’m not really concerned about the issue. But I am feeling pressure from Social Security and my family to take the SSI. What would you do?

A: I purposely printed your letter following the email from the much more well-to-do widow, because I was struck by the fact that both of you said you don’t really need the money, yet you seem to have entirely different financial circumstances. I was also intrigued by the fact that the rich widow is apparently giving herself an ulcer over her Social Security decision, while you seemed to not really care. Isn’t it interesting that the more money you have, the more you tend to worry about it?

Anyway, let me help you make your decision. First, let’s call a welfare program a welfare program. And SSI is definitely a welfare program. But because that term has such negative connotations, Social Security Administration employees have been trained to use softer and more politically-correct terms like “needs-based program” when discussing SSI with potential clients. You get SSI if you’re poor and if your income and assets are below certain limits. Those are the general rules for any kind of welfare program.

But don’t let that dissuade you from applying for benefits. One hundred dollars is one hundred dollars, and to someone who has less than $1,000 per month in income, that would be a healthy addition to your financial well-being.

But more important, most people who qualify for SSI automatically get free Medicaid benefits. And Medicaid provides much better and more extensive coverage of your health care expenses than the Medicare program does. (Medicare generally goes along with Social Security benefits and Medicaid accompanies SSI payments.)

If I were you, I would apply for SSI. There is nothing to be ashamed of in taking a government benefit for which you are eligible. You are 72 years old, and you are living on less than $1,000 per month — and even though you say you don’t need the money, I say take the extra hundred bucks a month and live it up a little. You deserve it!

If you have a Social Security question, Tom Margenau has the answer. Contact him at thomas.margenau@comcast.net.

COPYRIGHT 2011 CREATORS.COM

The Apple Giveth And the Orange Taketh Away

Q: I am 64 and receive Social Security retirement benefits, although I am still working part time. Last year, I got a letter from Social Security telling me that because of my extra earnings, they increased my monthly benefit — plus, I received a retroactive check that paid me the extra amount back to the beginning of the year. But just last month, I got a letter from Social Security telling me they want all that money back. The letter said that because of my extra earnings, I have been overpaid more than a thousand dollars.

I don’t get this! I have no intention of paying the money back because it was their fault for giving it to me in the first place. Can you help me understand?

A: I find myself spending a lot of time in this column talking about apples and oranges, and the messy fruit salad they can sometimes make. And that’s what’s going on in your case. You were paid the extra money last year because of one law that we’ll call the apple. And you’ve been asked to repay some funds because of another law that we’ll call the orange. I’ll explain.

First, we will discuss the apple. Let’s start with this premise: Your retirement benefit is essentially a percentage of your average monthly wage based on your highest 35 years of earnings. When you initially applied for Social Security, your benefit calculation was obviously based on the earnings that were posted to your Social Security account at the time. But you indicated that you are still working. That means you are adding new earnings to your Social Security record. And if those extra earnings raise your average monthly wage, they also increase your Social Security benefit.

The Social Security Administration has a computer program that tracks people’s earnings and automatically refigures their Social Security benefits to find out if any increase is due. This generally happens between May and October of each year. People who are due an increase get a letter (as you did last year), which informs of an increase in the monthly benefit and also of the retroactive payment due — because the increase is effective with January of each year. In other words, the increase you got last year (probably about June 2010) was based on your 2009 earnings that had been added to your Social Security record, and your increase was retroactive to January 2010.

SSA calls the computer program, which performs that annual recalculation of benefits, the “automatic earnings reappraisal operation” or AERO. But again, for the purposes of this column, I’m calling it the “apple.”

Now let’s talk about the orange.

If you are under age 66 and getting Social Security benefits, but you are still working, the law places a limit on how much money you can earn and still get all benefits you are due. For the past couple years, that limit has been $14,160 per year. So if you keep your outside earnings under that limit, you are eligible for all of your Social Security payments. But for each $2 you go over that limit, $1 must be held back from your benefits. So, for example, if you made $16,160 last year or $2,000 over the earnings limit, then SSA must hold back $1,000 from your Social Security benefits for that year.

People are supposed to notify SSA of their anticipated earnings, so benefits can be adjusted during the year in question. But if that doesn’t happen, SSA has a computer program that checks the prior year’s earnings to determine if a beneficiary made more than the annual earnings limit. If so, that program generates a letter to the beneficiary that advises him or her that he or she has been overpaid.

So, you got a letter this year (in 2011) telling you that because you made over the $14,160 limit last year, you were paid too much money in 2010. That means one-half of whatever you earned over $14,160 must be refunded to the government.

SSA refers to this computer operation as the “annual earnings test.” It checks to make sure those Social Security beneficiaries who earn over the annual earnings limit have had some of their benefits withheld. But for the purposes of this column, I’m calling it the “orange.”

Real apples and oranges are related in that they are both fruits, of course. The apple and orange computer programs I just explained are related because both are involved with your earnings. But they still are completely separate fruits … or computer programs. Each handles a separate aspect of Social Security law.

The apple program paid you the extra Social Security benefits you were due because you had extra earnings added to your Social Security account. The orange program is asking you to return some of your Social Security payments because you earned over the $14,160 annual earnings limit.

To deal with the overpayment, you have three choices. You can file an appeal if you disagree with the amount or with the fact that you are allegedly overpaid. If you agree with the overpayment decision, but you are convinced it was not your fault AND you can prove that repaying the money would be a financial hardship, you can ask that the overpayment be “waived” or written off. Your third choice is to simply repay what you owe the government. You can do so in a lump sum or by having them withhold your current benefits until the overpaid amount has been recovered.

If you have a Social Security question, Tom Margenau has the answer. Contact him at thomas.margenau(at)comcast.net.

COPYRIGHT 2011 CREATORS.COM