4 US Social Security Traps and How to Avoid Them - ForumDaily
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4 US Social Security Traps and How to Avoid Them

If you are among the millions of Americans who are planning to apply for a pension, disability benefits or any other type of Social Security, it would be wise to consider all the options for what could go wrong, writes USA Today.

Фото: Depositphotos

Support representatives are not consultants

You might think that the representative of the Social Security Administration support service you are talking to will help determine the best application strategy. But this is a mistaken assumption.

The POMS Social Security Policy Guidance System (POMS) says that customer service representatives can “provide enough information so that applicants can make an informed decision, but they are not allowed to give advice.”

For example, many claimants are unaware that if they have not yet filed for their own retirement benefit and lose a spouse, they can alternate between using their own retirement benefit and the survivor's benefit, receiving the lesser and then the more. But without the right information, users may decide that they should apply for both benefits at the same time and end up choosing the one that offers the larger amount.

Retroactive benefits

The Social Security Administration may offer you a lump sum payment (the so-called retroactive allowance). A lump-sum payment may amount to six months of benefits if the application was filed after reaching the full retirement age (FRA). But the trick is that if you choose retroactive payouts, your monthly allowance will be reduced.

Now this offer has been circulated, and representatives of customer support of the Social Security Service are actively advertising it to applicants.

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For example, applicants are offered to postpone the start date of payment of benefits, and in return they will receive a retroactive payment of approximately $ 25. Moreover, their further monthly benefit will be reduced by approximately $ 000 per month. For many, such an offer seems very profitable.

Indeed, paying $135 a month for a $25 check here and now is not a bad prospect. It will take about 000 years to raise $25 in amounts of $000 per month. Therefore, everyone should look at their own situation, assessing what is more important to them: a large amount now or a small but noticeable increase in their pension every month.

Work and social benefits

Applicants who decide to apply for social benefits until they reach full retirement age and continue to work should be aware of the special restrictions on earnings.

For example, let's say John plans to file for benefits at age 62 and expects to earn another $30 a year in salary. The income limit in 000 was $2020 for a person receiving Social Security benefits. This means that our John has $18 over that limit, and the Social Security Administration will withhold 240% of that amount (that is, $11) before sending the remaining monthly benefits to John.

Very often people do not know about this rule. It is important to note that the income limit applies only to the applicant’s earned income, and not to his spouse’s income. In addition, this income limit does not apply to working retirees who have reached full retirement age.

The impact of taxes on social security

Most consumers understand that their earnings were likely to be taxed on social security when they were received, while they often did not understand that some of the benefits they received could be subject to federal income taxes.

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When determining whether part of your benefit is taxable, you must first look at your estimated income—the sum of your adjusted gross income, plus 50% of your Social Security benefits, plus the tax-free percentage.

For example, if you are married and file a joint return and your income is less than $ 32, your benefits are not subject to federal income tax.

However, if your qualifying income is between $32 and $000, up to 44% of your benefits may be taxable, and if your income is over $000, up to 50% of your Social Security benefits may be taxable.

Therefore, it is important to consider all sources of income when you retire when you decide to set an age for retirement.

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