Get Your Social Security Questions Answered

Get Your Social Security Questions Answered

Get Your Social Security Questions Answered by an Expert

Webinar Transcript 2018

Retirement Experts Network

Webinar Guest Speakers

Kurt Czarnowski Former Communications Director at the Social Security Administration CzarowskiConsulting.com [email protected]

and

Tom Dickson Financial Advisor Channel Leader Reverse Mortgage Funding LLC Phone: (412) 580-5954 Email: [email protected]

To View the Webinar On-Demand and to Download a Copy of the Webinar Materials please visit: www.retirementexpertsnetwork.com

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About Kurt: Kurt Czarnowski is the former Regional Communications Director for the Social Security Administration (SSA) in New England, a position he held from December 1991 until his retirement at the end of 2010. He began his career with SSA in 1976, and during his 34 years with the agency he worked in several different management and staff positions in the Boston area. Reverse Mortgage News: Reverse Mortgage Funding is introducing a propriety product, Equity Edge, that may be a solution for those older clients with higher value homes that may need cash, i.e. house rich and cash poor, or simply need to eliminate their monthly mortgage payment. Equity Edge is available for homes with values up to $6 million. Other unique features of the Equity Edge product, especially when compared to the popular FHA reverse mortgage program (“HECM”), include lower age criterion and more liberal standards for eligible property types. That is, clients as young as 60 may be eligible and clients with condos do not require the FHA approval. We encourage you to contact Tom Dickson at [email protected] or (412) 580-5954 if you have any questions.

Social Security Overview and 2018 Updates

This information is designed to help you better help your clients, typically baby boomers, pre-retirees, who are just starting to recognize Social Security may be a bigger part of their retirement income than they had anticipated, starting to recognize they don't know as much about the program as they should. This will include updates on some changes in 2018 that you should be aware of.

First and foremost, for Social Security retirement benefits, you all know you qualify because you worked and paid into the system.

To qualify for retirement benefits, you have to have earned 40 Social Security credits. You earn credits based on the dollar amount of earnings you have in a job covered under Social Security. These days, about 94 percent of the jobs in the country fall under the Social Security umbrella. The amount of money required to earn a credit increases each year. In 2018, you get one credit for each $1,320 that you have. You can earn a maximum of four credits during the course of the year. With earnings of $5,280 or more, someone will accumulate their four Social Security credits for 2018. Once they've accumulated 40 throughout their working lifetime, they got to be good to go, be eligible for something from Social Security.

For those that don't get 40 credits based on their own work activity, it may be possible to collect based on the work and earnings of a spouse.

Last year, you got one credit for each $1,300. This year, $1,320. It'll probably go up a bit next year.

Just a quick reminder, too, about changes in Social Security's full retirement age, in helping younger baby-boomer clients, need to help them understand what their full retirement age is based under their year of birth.

When the program started, full retirement age was age 65 for everybody. In 1983, Congress increased full retirement age for anyone born 1938 or later.

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For a big chunk of the boomers, those born between 1943 and '54, Social Security full retirement age was the month they turned age 66, but it's important to note that, under current law, continues to increase beyond that point. Anyone born in 1956, for example, who reaches age 62 this year, their full retirement age is 66 and four months. Full retirement age is the age at which somebody can receive 100 percent of their benefit amount if they start to collect at that point.

You opt to collect prior to full retirement age, your payment amount is reduced. You opt to defer past full retirement age, your benefit amount is increased because you waited.

Regardless of someone's full retirement age, rules say you can start as early as 62. You can defer and collect delayed retirement credits until the age of 70, no additional increase by waiting past that point.

For clients turning 62 this year, it's important for them to note they'll have to wait until age 66 and four months before they're eligible to receive a full, unreduced Social Security payment although, as I said, they can start to collect as early as age 62.

Full retirement age continues to increase, tops out to anyone born 1960 or later, Social Security, full retirement age of 67. Again, somebody full retirement age of 66, they start at 62, they get 75 percent.

They opt to wait all the way until age 70, they accrue delayed-retirement credits, eight percent per year, for a full four-year period, and eight percent for each of those four years means their benefit at age 70's 32 percent higher. If someone's full retirement age is something other than 66, as I said, you can still start as early as 62, but you're going to get a lower percentage. In theory, you're collecting for a longer period of time. You'll also find that your benefit will have increased a smaller amount if you wait all the way until age 70. For example, if you've got clients with full retirement age of 67, people born in 1960 or later, under current rules, they can start to collect, as I said, as early as age 62, but they start at 62, they're going to get 70 percent of their full retirement age amount.

They waited all the way until age 70 before collecting, they'll have accrued delayed-retirement credits only from full retirement age to 70. That'll be only three years.

At eight-percent increase for each year they've waited means their payment, 124 percent of their full retirement age amount. That's why it's important to know what somebody's full retirement age is.

Other thing to be aware of, the benefit-calculation formula increases year over year.

What doesn't change is the basic formula that says Social Security adjusts somebody's prior-year earnings for inflation, then plucks out and averages their highest 35 years of work under the system, huge area of myth and misunderstanding. A lot of people think it's your high three or high five. No, it's an average of your highest 35 of inflation-adjusted years of work, regardless of when they occur. Your first 35 isn't necessarily your last 35, isn't necessarily 35 consecutive years. Then, a benefit formula is applied to that average. That formula changes each year.

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What doesn't change, see in the slide, the percentages shown on the left. It's always 90 percent of the first amount of somebody's average monthly earnings, 32 percent of a second amount, and 15 percent of the third. These are called the bend points, adjust upward each year.

What doesn't change is that basic premise. People need to understand Social Security is simply designed to provide a base or a foundation of income on being there for them.

They need to understand, it never intended to be their sole source of income in retirement. For the average earner these days, the Social Security payment only designed to replace around 41 percent of that person's free retirement income. You should be working with them, helping them move from what Social Security provides to where they need and want to be for a comfortable retirement. Also changing this year, the amount of money somebody can make if they're under full retirement age, collecting benefits but intending to work. In 2018, if you are under full retirement age, you're allowed to make up to $17,040 without any loss of benefit payments you make above that. Social Security required to hold back one dollar in benefit payments for each two dollars that you're over the threshold. In the year someone reaches full retirement age from January to the month before full retirement age what they want to collect, they're allowed to make up to now $45,360 without any loss of benefits they make above that during that period, i.e. January through the month before they pay in full retirement age. In the year that your client reaches their full retirement age, Social Security will deduct $1 in benefits for each $3 they earn above the annual limit, until the month they reach their full retirement age. Again, for 2018, the limit is $45,360. Starting with the month your client reaches their full retirement age, they will get their Social Security survivors benefits with no limit on their earnings. Whether you're collecting a retirement benefit, a spousal benefit, a survivor benefit, or a divorce spousal benefit prior to reaching your full retirement age, you're limited in how much you can earn before it begins to impact your ability to collect. What counts towards those thresholds? Two things only -- earned income, wages and/or net income from self-employment. Earned income only, unearned income via a benefit General Motors pension, and 401(k) distributions. None of that counts but earned income only. People just need to be aware of that. At full retirement age, they can work and earn as much as they want and move on. Just a quick reminder about claiming strategies, they changed the bunch. There is still one that remains in place.

You may have clients that are interested and may still be able to take advantage of a claiming strategy called claim some now, claim more later. This has been around for a while.

It's a way a couple who have both worked and paid in the system could potentially optimize or maximize their lifetime Social Security benefits. A quick reminder, what it used to be under the old law, now the program is totally gender-neutral. It works either way. Let's say you've got a husband and a wife, both of whom have worked, both have paid in the system. Husband's full retirement amount $1,000. Wife's full retirement age amount $800. They're both 66, full retirement age.

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Husband wants to wait until 70. Wife wants to start to collect right away. She starts to collect. The husband is wondering, "Is there something that I can do to get me some money while I'm waiting and under this claim?"

Now, the claim more later strategy, as long as he waited until his full retirement age, at that point he had the option of picking and choosing. Again, his wife's collecting. He could at that point opt to take just a spousal payment, receive 50 percent of the wife's full retirement age amount -- in our example 400 bucks -- and defer his own until age 70 if he wanted to.

A great thing was he could defer accrued delayed retirement credits and still be paid at the same time. A key thing was you had to be at full retirement age in order to be able to do so.

If you'd gone to Social Security prior to full retirement age, then that would be optional, just taking a spousal benefit, letting your own grow. You were deemed to be applying for your own retirement benefit and a spousal benefit at the same time. You'd be paid one of the other, whichever one were higher.

Again, under the old law, if you waited, you could pick and choose. What's the new law say? The new law basically allowed for a phase-out period. It says, "Anyone who was born January 1st, 1954 or earlier."

Another way of looking at it, anyone who had reached age 62 by the end of calendar year 2015, which was when the law was passed, anyone with that birthdate who reaches full retirement age and has a spouse collecting at that time is still going to be able to take advantage of the old rules, opt to take just a spousal benefit, and defer collecting his or her own retirement payment. Again, one more time, someone has to have been born January 1st, 1954 or earlier still have to wait until full retirement age. At that point, if their spouse is collecting, they still have the option of taking just the spousal payment and deferring collection of their own benefit. Anyone born after that date, the new rule says, "No matter what age you're at, you're going to be deemed to be applying for both your own retirement benefit and the spousal benefit. You'll be paid whichever one is higher. You won't have the option of picking and choosing.

Again, the clients who are approaching this age as they reach their full retirement age, just a strategy you may want to keep in mind.

Just a quick reminder, the Windfall Provision Government Pension Offset is still out there and haven't changed. These are provisions that impact folks who receive a public pension based on work not covered by Social Security with the Windfall Provision.

This impacts somebody who gets that public pension but who has also worked and accrued 40 Social Security credits. They're still going to receive something each and every month with Social Security.

Even though they get the public pension, that hasn't changed. With government pension offset, that applies to somebody who gets the government pension but is looking to collect a spousal survivor or a divorce spousal benefit. What hasn't changed here is that Social Security is required to reduce that spousal, divorce spousal, or survivor benefit by two-thirds of the amount of the pension. If two-thirds of their pension is more than what they could collect in their spouse's work record, they don't get anything more.

That's the quick rundown of some changes and some things that have stayed the same in 2018.

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Webinar Q & A

Q : How would you determine if it's worth taking a reduced Social Security benefit at age 60 or 62 versus the full retirement amount when you contemplate survivor benefits

Kurt : It's important to note that you need to distinguish between spousal benefits, which are paid when the primary worker is alive, and survivor benefits, which are paid when somebody has passed away.

When we talked about the claiming some now, claiming more later strategy, that pertains simply to spousal benefits. With the survivor benefit program, though, widows and widowers, it's important to know that the rules there haven't changed, and under the rules of the program, you can collect on one account or the other at a time. You don't get both amounts at once, but it's possible for someone to sequence the collection. For example, widows can collect as early as age 60, widows and widowers, where retirees and spouses can collect no earlier than 62. A survivor could opt to collect a reduced survivor benefit starting at age 60, collect, collect, collect, collect, collect, and then, say, at full retirement age opt to file for that person's own retirements benefit. The fact they've been collecting that reduced survivor benefit doesn't prevent them from getting a full unreduced retirement benefit. In fact, start to collect that reduced survivor benefit, collect, collect, collect, collect, hit full retirement age, continue to collect the reduced survivor benefit, and then at age 70, apply for the person's own retirement benefit and recruit the maximum of delayed retirement credit. An overarching issue to keep in mind is whether you're collecting a retirement benefit, a spousal benefit or a survivor benefit prior to reaching full retirement age and still working, you're going to be subject to that earnings limitation that I'd mentioned a few slides ago. A widow at age 60, old enough to collect a widow's payment, but say is still working making $150,000 a year, not going to be able to receive a widow's payment not because they're not old enough, but because they're continuing to work. Here's the thing. In terms of helping people plan in survivorship situations like that, you can get a social security statement by setting up a social security account. You can use social security's online retirement estimator, but those tools only give someone a benefit estimate of their own retirement benefit amount. Unfortunately, at this point, there is no online tool that someone can use to find out how much they would receive in social security survivor benefit. A person actually needs to reach out to social security and say, "I'd like a benefit estimate as a widow at 60 or 62 or 66," or whatever age you're interested in. That in concert with the benefit estimate for the individual, you can get off the website at socialsecurity.gov/estimator or using that person's social security statement, you can figure out the best way to sequence the collection. As I said, you collect one amount or the other at a time. You don't collect both at once, but it's possible to collect one and then switch to the other. The key thing is you collect on one account, one amount at a time. You don't get both at once, but it is possible to sequence the collection and decide which way it makes more sense to collect.

The last point I want to make though is a reminder. With retirement benefits, as we said, you start to take the money before you hit your full retirement age. You take a lower monthly amount, but if you opt to defer you

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own retirement benefit past full retirement age, the payment amount increases because you wait, and you get these delayed retirement credits.

With survivor benefits, you start to take that survivor payment prior to reaching full retirement age, your monthly benefit amount is reduced, roughly again, half a percent per month. With survivor benefits, there's no equivalent to that delayed retirement credit increase. The amount that someone would get at 66, if that's full retirement age, is going to be the same they'd get at 67 or 68 adding cost of living increases in the meantime. There are no equivalent delayed retirement credit increases in the survivor benefit, although there are if someone defers collecting their own retirement benefits. It's a question of getting a benefit estimate on the survivor side from social security, taking a look, and figuring out which sequence, which schedule of payments works best for the individual. It is possible to take one and then the other, but again, you don't get both full amounts at once.

Q: What if a client’s spouse died and she is entitled to a spousal benefit since she remarried after age 60. Can she take the spousal benefit and then suspend her benefit for later? Her date of birth is February 23, 1954.

Kurt : The answer is no. First part, absolutely correct. Under the social security rules, generally, if you're collecting a survivor benefit and you remarry, you usually lose eligibility to that benefit.

The law now says -- and has for the past 25 years -- as long as you remarry after the age of 60, you don’t lose eligibility for that benefit payment amount, so remarriage after the age of 60, she doesn't lose eligibility as a widow. What is possible is what I just mentioned in answering Geoffrey's question that she could continue to receive that widow's payment and defer collecting her own, and wait until age 70 to collect her own and accrue delayed retirement credits in the meantime. That's the only way, or she's collecting that survivor benefit, remarries after the age of 60, she doesn't lose eligibility, and she still has the right to claim her own at whatever point she wants. If she waits all the way until age 70, she'll have accrued the maximum delay of retirement credit.

Again, once she starts to collect her own, she collects one or the other, she doesn't continue to get the widow's payment, and her own full benefit amount, one or the other, whichever one is higher.

Q: When is the breakeven point in time -- I think he means number of years or what age -- if one waits until later after age 66 to collect a social security benefit? I think he means in terms of number of years, Kurt.

Kurt : Sure. Let me give you all a very simple, in fact oversimplified breakeven calculation, because there are a lot more factors that come into play. In our example, we'll have two people both of whom have a full retirement age of 66, and both of whom at age 66 would receive $1,000 a month. First person decides they want to start collecting at full retirement age, begins to receive $1,000 a month. Second person says, "No. I want to wait until ages 70 before collecting, because I want to accrue the maximum of four years' worth of delayed retirement credits." We'll oversimplify the example, because we want factoring cost-of-living increases.

The first person, by starting at 66, between 66 and 70 will have received $1,000 a month for each of the 48 months in that four-year period meaning he will have accrued $48,000 in social security payments.

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Second person, between 66 and 70, has nothing but beginning at age 70 starts to receive $1,320 per month, that's full four years' worth of delayed retirement credits meaning their benefit amount's 32 percent higher.

The question is at $320 more per month how long does it take the second person to make back that $48,000 pile of money the first person had accrued? Simple math, it's 150 months or 12.5 years or until age 82.5.

This first person, by starting at 66 as opposed to waiting, will until the age of 82.5 have more money in social security in total payments than the first person. Starting at age 82.5 the second person will continue to receive that higher amount, so will become ahead and ahead. Ultimately, it's a longevity decision on any of these things. It's a question of how long you're going to live, how long do you think your spouse is going to live. That's it. This breakeven calculation's oversimplified. It doesn't factor in the ability you might have to do something with the money or other things like that. Here's the thing. Two points. When the program started, it's always designed to be a social insurance program, social goals built in, always designed so that people end up with roughly the same amount of lifetime benefits regardless when they start to collect, and so that's why you start sooner, you get less, you wait longer, you get more. It was always designed based on average life expectancy to come out about even. The thing is congress hasn't adjusted the reduction rate and increase rate for many, many moons, and in the interim average life expectancy has increased. Social security numbers say if you're a 65-year-old man today, on average you're going to live to age 84. A 65-year-old woman on average, you're going to live to age 86. Using that, if you live just to average life expectancy, you're ahead by waiting, but again, you're not going to know how long you're going to live. The other issue to factor in is this. It's the way the survivor benefit program operates because the survivor benefit in the married couple, one member passes away the survivor begins to receive the higher of the two benefit amounts going forward. Somebody opting to defer, say they're a member of a couple, by opting to wait, not only is that person's own benefit higher once they start to collect it, but it also means that any survivor payment that could be made upon his or her passing is going to be higher as well. It isn't just how quickly does one person pass way, but you really have to look at how long does either member of the couple live. Ultimately, a longevity decision you can't know the right answer, you've got to make your best guess. You factor in health, longevity, and all of those things. Q : Am I correct that a lower earning spouse who claimed on her own account at age 62 can begin to receive 50 percent of the higher earning spouse once he claims at age 70? If so, I missed it and wonder if she can go back and claim the difference from the previous years. He's been collecting his max benefit for about seven years. Kurt : Here's how spousal benefits work. As I mentioned, absolutely, totally, completely gender neutral. Works either way. For purposes of our illustration today, we'll assume the husband has been the higher earner, the wife has been the lower earner just so we don't get caught up in spouse and this and that. This is a long-winded answer to say. It's roughly a 12-12.5-year breakeven point, but there are other factors that need to be considered as well.

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The way spousal benefits work. The wife as the lower earner is going to be eligible to collect a monthly amount equal to 50 percent of the husband's full retirement age amount or her own. One or the other whichever one is higher and don't collect at once. The key thing is in looking at spousal benefit payments, what Social Security compares is 50 percent of the husband's full retirement age amount with 100 percent of the wife's full retirement age amount. If the wife's full retirement age amount exceeds a 100 percent of the husband's full retirement age amount there are no spousal benefits paid. I hear this a lot because you have a situation where say the wife has a full retirement age amount of $1,000. She starts to collect at age 62 so she's receiving 750 bucks a month. Once the husband comes on in determining whether spousal benefits are going to be paid, Social Security doesn't compare that $750 reduced benefit amount she may be collecting. In many cases, say the husband has opted to wave his benefit amounts as accrue delayed retirement credit so it's higher than his full retirement age amount, but it may well be the case where his full retirement age amount is less or 50 percent of his full retirement age amount is less than her full retirement age amount. That's the key thing. You got to be comparing apples to apple. A spousal benefit payment it's 50 percent of his full retirement age amount not 50 percent of the amount he may actually be collecting with 100 percent of her full retirement age amount, not the reduced amount that she may actually be collecting. That may well be the case that there were no additional spousal benefits do once you compare full retirement age amounts, whereas at first brush with her reduced actual payment amount and his higher payment amount you might initially think there'd be spousal benefits too. They're going to look at her full retirement age amount and compare that with his full retirement age amount.

Q: How can you coordinate a reverse mortgage (“HECM”) line of credit with delaying Social Security as a long-term care planning option?

Tom: For those of you out there aren't familiar with the term HECM, it's the Home Equity Conversion Mortgage, that's the acronym. It's the most popular form of a reverse mortgage. It's one backed by the FHA insurance essentially. It's the only government insured program. Here's the answer. Assuming today if it's a husband-and-wife or same-sex couple, only one has to be 62 of age. Based on that age and based on whatever interest rate program they opt into, we determine the amount of money available to them in a credit line.

As an example, 62-year-old couple with a home worth close to $680,000 would start with a credit line of $216,758.

One of several possibilities is they can draw off the line for a four-year period as they defer their Social security benefit from say age 62 to 66 or 66 to 70. They could set the draw up as a fixed amount per month for whatever period you define and have that in place, along with the credit line. It's a hybrid option, i.e. a monthly payment plus a credit line. On the other hand, the other option is you could just set up a credit line and the client can draw on that if and when needed. That is to say, the amount they can draw can vary. NOTE : I have a set of Excel workbooks that I've created to model just this kind of situation. In other words, I could take this case and I enroll the numbers into the Excel template I already have and then model any one of the scenarios that you might contemplate, such as if you draw $3,000 a month for four years or eight years. I can help you determine what that scenario looks like in terms of the available monies in the credit line.

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I collaborate with many planners, using this Excel workbook, in tandem with their financial planning programs, to include MoneyGuidePro, eMoney, NaviPlan, or RightCapital.

Q: I have clients that are husband and wife. The husband is 67 retired claiming Social Security on his account. The wife is 64 retired but not claiming on her account as she is waiting for her FRA. So far so good. Can she claim a spousal benefit on the husband's account now and switch to her account when she reaches that far end? Again, Kurt, she's 64 today.

Kurt : The answer is Mark, no she cannot. At this point, she goes to Social Security and says, "I just want to take 50 percent of my husband's and defer collecting my own," and they're going to say, "No, you can't."

Under the rules, you don't have the option of picking and choosing because you're under your full retirement age you are deemed to be applying for both your own and a spousal benefit at the same time you collect one or the other whichever one were higher. If when she reaches her full retirement age of 66 if she was born January 1, 1954 or earlier, then she has the option of taking just 50 percent of her husband's full retirement age amount and deferring collection of her own. Depends on her specific date of birth if she waits till her full retirement age of 66, she can do it. In no case, no matter what her date of birth is, she can't do what you're proposing at any point prior to full retirement age. She's always deemed to be applying for both at the same time, it will be paid one or the other whichever one is higher. Kurt : Right now, there's only a limited number of countries where Social Security payments cannot be made and they're the ones you would normally think of off the top of your head the axis of evil countries North Korea, Iraq, Iran, places like that. Thailand absolutely permissible. Social Security benefits can be paid even though person may be living in Thailand. Maybe some additional reporting requirements that need to be done to continue to receive those payments. Yes, payments can be made if somebody is a resident of Thailand. Q: Does a spousal or a widow benefit continue if the spouse moves out of the US in particular to Thailand?

Q: Is there a better software program to use over one...What program would you recommend to use the model?

Tom: There are programs out there from www.MaxMySocialSecurity.com that I think is a pretty strong program.

Also, if you look at the capabilities within like a MoneyGuidePro and some of the mainstream financial planning programs, they have some excellent capabilities to help model out different claiming strategies.

Q: When projecting Social Security income in retirement what rate of inflation increases do you suggest? Kurt, I don't know if you just based on your experience, whatever, an opinion on that?

Kurt : I think a two percent number is the safe number to use in terms of projecting obviously. Just quick reminder. Social Security since legislation passed in 1972 which went into effect in 1975, Social Security beneficiaries receive an annual automatic guaranteed cost-of-living increase each year. What the legislation specified is that that cost-of-living increase is going to be based on the increase in a measure called the consumer price index for urban wage earners abbreviated as the CPIW. It's a measure of inflation in a market basket of goods and services tracked by the Federal Bureau of Labor Statistics.

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The period of time that Social Security is required to look at is the increase in that CPIW from the third-quarter of one calendar year July, August, and September to the third-quarter of the following calendar year.

Whatever increase has occurred in the CPIW in that period of time, that's what gets passed on automatically to Social Security beneficiaries and the payments that they receive beginning in January of the following year.

You can go back take a look at inflation over time in the late '70s, early '80s, Social Security one year gave a 14 percent COLA, the next year it was like a 9 percent COLA. Fortunately, since the mid-80s or so, inflation has been reasonably well in check and you've seen some fluctuations.

I think a 2 percent COLA is a safe number to use like Goldilocks who had three bears probably not too high probably not too low that's a safe number.

Again, in the end, it comes down to that CPIW. A lot of discussion these days about whether or not that's the appropriate measure for Social Security to use in determining the amount of a COLA, that's a whole separate issue for discussion.

As the great philosopher Bill Belichick says, "It is what it is," and until Congress changes that's what they look at. If you look historically, 2 percent it's not a bad number to use.

Q: What is the best way to find out how many credits one has? I'm assuming the Social Security Statement?

Kurt : Great question. A little bit of history lesson. If you remember starting back in 1999, Social Security began to mail out a paper document each year the Social Security Statement. Statements started going out that year to anyone who's 25 years of age or older, who would ever paid into the Social Security program and who is not yet collecting benefits. That automatic mailing will show up in somebody's mailbox about three months before their birthday each year giving important retirement planning information. From working with clients and maybe you personally, you're aware of Social Security no longer mails paper statements to everyone over 25 on an annual basis. Instead, first and foremost, they put in place this system whereby if you go to socialsecurity.gov/my account and set up your individual Social Security account, a byproduct of having that account in place is you'll be able to download an individual Social Security statement for yourself at whatever point you would like. In terms of helping your clients' better plan for retirement, you should be encouraging them to set up their own Social Security account. When they're going to come in meet with you do some retirement planning have them download and have in hand a current Social Security statement, because that's going to make that exercise more worthwhile. That's a long-winded introduction to saying on the top of page two of the Social Security statements it indicates how many credits somebody has and will say something like, "In order to receive retirement benefits, you need to have 40 Social Security credits. According to our records, you have 32, 28, 27." That's the best place. If somebody has over 40, Social Security statement says, "To receive retirement benefits you need 40 credits. According to our records you have at least 40." That's what I would recommend. That's the simplest and easiest way Social Security statement contains that information.

By the way, Social Security has decided to resume mailing paper documents but it's only to people who are 60 years of age or older as in who have not yet set up an individual account. If you get clients that are under the

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age of 60 the only way they're going to get a statement is by setting up that account so encourage them to do that.

If they're over the age of 60 they will get a paper document mailed about three months before their birthday, but that Social Security statement is the best source of information as to how many credits somebody may have.

Q: A US citizen works overseas. He's paid out of country. Again, he's in again a foreign land. The employer, of course, does not withhold for Social Security.

Looking at his Social Security benefit statement, 2011 was the last year in which earnings were reported for Social Security. Does the taxpayer need to pay into Social Security to retain his benefits? He's aged 45.

Kurt : It's a couple of things. Again, to qualify for a retirement benefit you simply need the equivalent of 10 years of work under the Social Security program. You have to have accumulated 40 Social Security credits.

You can accrue as I mention the maximum of four during a calendar year so 40 credits that's the equivalent of 10 years of work under the system. You don't have to earn four in a year, one here, two here. Once you've got your 40, you're good to go get your foot in the door you're always going to get something. Then the second question then is how much is that something going to be? In calculating anybody's retirement benefit as I mentioned before, Social Security averages their highest 35 years of inflation-adjusted earnings under the Social Security program. Your high is 35 not necessarily a first 35, not necessarily your last 35, not necessarily 35 consecutive years. If you have someone who takes time out of the workforce raise kids, care for aging parents, prep work on our own job and we weren't paying into Social Security who then reaches retirement age and doesn't have 35 years of actual contributions, their average earnings are going to be based on an average of however many years they do have, plus the additional number of years of zeros lowering their average monthly wage. Another long-winded introduction in answer to the question Tiffany, for this individual if they've been working outside the country not paying into the Social Security program in a job where they were not covered under Social Security, they're not going to get credit for those earnings in calculating their ultimate Social Security retirement payment. Again, as long as they've got 10 years of time, they're always going to get something. That something will be based on an average of their highest 35, so even if they don't have a few years where they've paid in, time spent prior to going overseas or after, they may obviously be able to cobble together 35 years. They can't go back and pay in, like buy back years like you can in certain other public-sector jobs. If the job was not covered under Social Security, then you don't get credit, if you will, for those earnings in calculating your benefit. Just a quick reminder, though, there are in place between the United States government and close to 30 different countries what are called "totalization agreements" whereby the US Social Security system and the social insurance system of that other country are able to coordinate and pay benefits perhaps for people who haven't worked long enough under either system. Maybe a possibility that they can get some credits for that time with the other country based on their work activity. If they're not in a job covered under Social Security, those earnings are not going to be credited to them for Social Security purposes.

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Q: How is the growth rate for the reverse mortgage credit line calculated?

Tom: The growth in the amount available in the line is based on a formula. It is the available line multiplied by the lender margin, FHA MIP (50 basis points) and the 10-year LIBOR swap rate, which is the equivalent of the historical for the LIBOR rate. Today, we are projecting annual growth rates of 6% or more.

Q: What amount of earned income is taxable when drawing Social Security?

Kurt : Yeah, beats me. What I can answer though is what amount of Social Security benefits are taxable when collecting Social Security benefits.

Prior to 1983, Social Security payments were absolutely, totally, completely federal tax free, completely tax free. That year, Congress changed the IRS code and said if you are a "higher incomed Social Security beneficiary" then you'd be required to pay federal income tax on a portion of the benefit payments that you had received in the prior year. How did they define higher income? It said if you're a single tax filer, if you had something called combined income or modified adjusted gross income -- and I'll tell you what constitutes that in a second -- in excess of $25,000. Or if you are a couple filing jointly and have that combined income in excess of $32,000, then you'd be required to pay federal income tax on 50 percent of the benefit payments that you had received in the prior year. 50 percent of what you had received would be treated as ordinary income tax that whatever marginal tax rate you happen to fall under. Now, how did they define combined income or modified adjusted gross income? It consists of three things -- your adjusted gross income up the bottom of your 1040, plus any tax-free interest that you had received in the prior year, plus 50 percent of the Social Security payments that you had received in the prior year. You add those three things up. Again, first year if you're a single tax filer that number was below $25,000. A couple filing jointly below 32, no part of your Social Security benefits would be subject to federal income tax, but above that 50 percent treated as ordinary income tax so whatever marginal tax rate you are at. What Congress didn't do though is index those two thresholds and in fact in 1983 added in yet a second threshold for consideration. Here we are, 2018, 35-plus years later, if you're a single tax filer and you have combined income under $25,000, no part of your Social Security benefit subject to federal income tax. That number still adds up those three things. If that number falls between $25,000 and $34, 000 then you'll pay federal income tax on 50 percent of the benefit payments that you would have received in the prior year. Those three numbers add up to more than that 35,000 to 34,000 you pay federal income tax on 85 percent of the payments that you would have received in the prior year. For a couple filing jointly under $32,000, still no part of your benefit subject to federal income tax. Number falls between 32,000 and 44,000 you pay federal income tax on 50 percent of your benefits. Above that number 85 percent. That first year, only about 10 percent of Social Security beneficiaries found themselves paying federal income tax on a portion of their benefits.

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Again, it's treated as ordinary income subject to federal income tax and taxed at whatever marginal tax rate you're under. These days about half of all Social Security beneficiaries do find themselves paying federal income tax on a portion of the benefit payments that they have received.

In terms of helping your clients help them understand above that threshold they're going to pay federal income tax on an 85 percent of the benefits that they had received.

Whether payments are subject to state income tax varies from state to state. Last time I looked, there's 37 states with Social Security benefits are not subject to state income tax. 13 states where it is to some degree or another so something that people need to plan for. Incidentally, people also need to understand proceeds from the taxational benefits gets transferred back to the Social Security and Medicare programs and that change in 1983 and then again in '92 designed to improve the long-range solvency of Social Security and Medicare.

Again, taxational benefits something that people need to plan for has about half of all beneficiaries do pay federal income tax on a portion of their payment these days.

Q : If someone was born after 1954 what would be the percentages be?

Kurt : Again, you can look on Social Security's website and they'll give you a specific breakout. For a full retirement age, you get 100 percent of your benefit if you collect after month you attain your full retirement age based on your birth. You start to collect at 62 because now there will be a longer elapse period between age 62 and the month you reach full retirement age, you will get less than 75 percent of your benefit. They worked backwards. You get to the point where if you have a full retirement age of 67 and you start right at age 62, you're going to get 70 percent of your full retirement age amount. Working the other way, again you accrue delayed retirement credits by increasing your payment by two-thirds of a percent for each month past full retirement age you opt not to collect but no delayed retirement credits accrue past age 70. It's basically an eight percent per year increase but it is really two-thirds percent per month. If you have a full retirement age of 67 you wait all the way until age 70 that's just a three-year period from full retirement age to 70 so the amount you'll receive is only going to be 124 percent of your full retirement age amount. Again, for intervening full retirement age is you can figure out the difference, but it's going to vary because let's say roughly half a percent per month reduction prior to full retirement age, two-thirds percent per month increase past full retirement age.

Q : How does Canada and the US integrate each other's benefits for a Canadian worker living in the US?

Kurt : Let's use a common scenario; someone who has worked in Canada accrued a Canadian pension. But then, they come to the United States, work in the US, and accrue 10 years of time, so they qualify for a Social Security benefit.

If they've got enough time to collect benefits under both programs, they're going to collect monthly payments under both programs, except something to keep in mind is this.

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Early in the program, I talked about the Windfall Elimination Provision, the WEP, which impacts somebody who receives a Social Security benefit, but who in addition to their time under the Social Security program has worked and earned a public pension based on work not covered under the Social Security program. Most people think about certain state and local employees, teachers, firefighters or whatever in certain jurisdictions as being impacted by the Windfall Provision if they are in a system where they're not contributing to Social Security, but they've got their 10 years of time under Social Security through part-time work or work prior, during or after their public service.

That's the most common application of the Windfall Provision. The law also says the Windfall Provision applies in cases where that public pension may be earned in a foreign country.

Again, that Canadian citizen earns a Canadian pension, works in the United States long enough to accrue a Social Security benefit, they will always get something from the US Social Security system.

That benefit will be calculated using the Windfall Elimination Provision, which means the person's ultimate payment won't be as high as it would have been if they didn't have the public pension.

Q: A husband is the high-earner, who is 61, has a very low-earner wife who is five years older, (66 now) who started collecting at age 62. Can she switch to the spousal benefit when her husband starts to claim?

Kurt : Again, unless and until he applies for benefits and starts to receive his own retirement benefit, she's not going to be eligible for any type of spousal payment and will only receive benefits based on her own work record, which she's currently collecting. Then, he applies for benefits. At that point, Social Security is going to compare her full retirement age amount. Not the reduced amount she may be collecting because she started early, but her full retirement age amount with 50 percent of his full retirement age amount and the difference between her full retirement age amount, 50 percent of his full retirement age amount, that spousal portion. She then becomes eligible and it is added on to the benefit that she had been receiving on her own account. If you peel away the onion a little bit, it means that she won't end up with a payment amount equal to 50 percent of his full retirement age amount if she had started collecting her own retirement benefit prior to full retirement age. That reduction she will have incurred in her own benefit by starting payments early carries over and precludes her from getting a full 50 percent of his. She'll be due additional money once he starts to collect. If she started collecting her own prior, then she won't be eligible for a full 50 percent of his. That's the bad news. The good news though is if he dies and the way survivor benefits operate, as long as she is at or over her full retirement age when he passes away, she'll be eligible to move from whatever amount she's been collecting on her own up to 100 percent of what he was collecting at the time he passed away. The fact she had opted for reduced retirement benefits, it impacts what she can collect while he's alive, but it doesn't prevent her from getting a full unreduced survivor benefit. Long as she's at her full retirement age when he passes away, she'll move from what she's been collecting up to 100 percent of his. Again, survivor benefits treated differently than spousal benefits, but with spousal benefits, again, unless and until he starts to collect, she can't get anything. That was one of the changes from a couple years ago with the elimination of the file-and-suspend strategy.

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Because in the old days prior to April 30th of 2016, if somebody had reached full retirement age, say, the husband reached full retirement age, he had the option at that point of applying for his own retirement benefit and then asking to have his payments suspended so he could accrue delayed retirement credits. By having his payments suspended, he wouldn't receive anything. Benefit amount would then begin to increase eight percent per year, right up until age 70. Under the old rules, his merely having applied in the first place meant that Social Security would make a spousal payment to her. That's what the big change is. Now, yeah, it's full retirement age, you can still ask to have your payments suspended if you'd like, but under the new rules, if you ask to have your payments suspended, Social Security is also required to suspend the benefit payments to anyone else who might be collecting on your record. That old situation where he could file and suspend and she could still get a spousal benefit, that's what's been eliminated. Now, as I said, the only way she can collect money as a spouse is that he is actually collecting himself.

Q : Does WEP affect non-public Canadian pension benefits? For example, the Canadian version of Social Security?

Kurt : Yes, it does. Any type of public pension based on work where you're not paying into the Social Security program impact your Social Security benefit subject to the Windfall Provision.

Q: My client is married to a UK citizen. Is there a totalization agreement there for a spousal benefit?

Kurt : There's a totalization agreement between the United States and UK, but basically, her citizenship doesn't preclude her from collecting regular spousal benefits from Social Security.

Receipt of a public pension based on work outside the United States, that doesn't trigger government pension offset. Meaning if say she gets a UK pension it doesn't reduce what she could collect as a spouse. She could collect regular spousal benefits whether she's a UK citizen or not.

There has been no totalization agreement entered into between the United States government and Mexico yet.

Q: What is the highest Social Security benefit at age 62 and 66 for a high wage earner?

Kurt : In 2018, somebody who is at full retirement age of 66 this year who for each of the past 35 years has had earnings at or above whatever the taxable maximum amount has been for each of those past 35 years, and that's an important point. 2018 you could make half a million dollars, but each year there's a maximum level of earnings upon which Social Security taxes imposed. This year, pay Social Security taxes for the first $128,420 that you make. If you make anything above that, not subject to Social Security tax. At a full retirement age of 66 each of the past 35 years they had earnings at or above whatever the taxable maximum had been, he or she this year will receive $2,788 a month. $2,788 at full retirement age. Somebody at full retirement age at 66 is going to get 25 percent less than that age 62, but $2,788 max at full retirement age this year.

Q: Are there claiming strategies for Social Security for those with a government or 403 plan?

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