Be aware of what to ex­pect from So­cial Se­cu­rity

Daily Local News (West Chester, PA) - - BUSINESS - Janet Col­li­ton Colum­nist

Max­i­miz­ing So­cial Se­cu­rity ben­e­fits has joined the ranks of other plan­ning tech­niques to add to re­tire­ment in­come. Rec­og­niz­ing just one fact, for in­stance, that there can be a 32 per­cent in­crease in ben­e­fits be­tween col­lect­ing ben­e­fits at age 70 in­stead of at full re­tire­ment age at age 66, can make most peo­ple think. How many safe in­vest­ments to­day, af­ter all, gen­er­ate a pre­dictable re­turn of 8 per­cent per year for four years with the higher ben­e­fit con­tin­u­ing on for life?

One of the least rec­og­nized facts about So­cial Se­cu­rity, how­ever, is that not work­ing in the So­cial Se­cu­rity sys­tem for a given num­ber of years may dra­mat­i­cally af­fect life­time ben­e­fits. I came to this re­al­iza­tion my­self based on read­ing and ex­pe­ri­ence with clients.

The ar­ti­cle that orig­i­nally got me think­ing was is­sued by Bos­ton Col­lege and ti­tled “Why Are So Many Older Women Poor?” It in­cluded So­cial Se­cu­rity.

As I watched women clients, I no­ticed how low the monthly So-

cial Se­cu­rity ben­e­fit was. Where both spouses had worked, while a hus­band’s ben­e­fit might be $2,000 a month or more, his wife’s ben­e­fit could be $400 or $500 a month. This can be im­proves by re­quest­ing So­cial Se­cu­rity to base the wife’s monthly check on one-half of her hus­band’s.ben­e­fit but ad­justed for the age when her ben­e­fits be­gan.

Women his­tor­i­cally have had lower earn­ings than men es­pe­cially for women now beyond re­tire­ment age. Still, the gap re­mained un­ex­plained un­til I made a dis­cov­ery.

So­cial Se­cu­rity is cal­cu­lated con­sid­er­ing the worker’s high­est 35 earn­ing years. It ad­justs for in­fla­tion, de­ter­mines the av­er­age ad­justed monthly earn­ings, and mul­ti­plies by a for­mula.

Sup­pose an em­ployee has not worked 35 years in her or his life­time be­fore re­tire­ment? The years not worked in So­cial Se­cu­rity are counted as ze­ros. While a worker might think that work­ing fewer than 35 years would mean an av­er­age would be taken only of the years worked, ac­tu­ally those years out­side the sys­tem are counted but they are counted as ze­ros to ar­rive at the best of 35 years.

It does not take a math­e­ma­ti­cian to fig­ure that work­ing fewer than 35 years can se­ri­ously un­der­mine ben­e­fit cal­cu­la­tions. This is one way that women, es­pe­cially older women, tend to have lower So­cial Se­cu­rity re­tire­ment ben­e­fits on their own work record.

When a mother (or fa­ther) stays home to raise the chil­dren, un­less they also work a job from home and pay into So­cial Se­cu­rity, she (or he) is out of the So­cial Se­cu­rity sys­tem. Later, if it is nec­es­sary to re­main at home to care for ag­ing par­ents or in-laws, the worker is again out­side the sys­tem un­less she works from home and pays into the sys­tem.

Tak­ing a com­mon ex­am­ple, if you grad­u­ated from col­lege at age 22 and spent ten years rais­ing your fam­ily and then re­turned to work and re­tired at 62, you would have lost 5 years from the sys­tem not to men­tion re­tir­ing at a lower early re­tire­ment ben­e­fit. If you also grad­u­ated at age 22, not hav­ing worked prior and then spent ten years rais­ing your chil­dren while later spend­ing from age 56 to 66 car­ing for ag­ing par­ents with­out con­tribut­ing as an em­ployee into the So­cial Se­cu­rity sys­tem, you would have lost 11 years. Those years would be av­er­aged into the to­tal for 35 years as zero.

Rec­og­niz­ing this as a po­ten­tial prob­lem, one ob­vi­ous way to deal with it if you are not yet age 70 is to work at a job that pays into So­cial Se­cu­rity on your be­half even where the job is not the high­est pay­ing one. Although lower in­come for So­cial Se­cu­rity pur­poses can re­duce over­all ben­e­fits on re­tire­ment, it does not af­fect it as much as no in­come would. Ob­vi­ously high in­come is best.

An­other pos­si­bil­ity is to re­view what half of your spouse’s ben­e­fit would be and de­ter­mine whether this would be higher than ben­e­fits on your own work record. Re­mem­ber to ad­just for age when you are tak­ing the ben­e­fit. If you claim at age 62 it is less than at age 66, for ex­am­ple. The rules are com­pli­cated so get help if you need it.

For wid­ows or wid­ow­ers whose de­ceased spouse’s So­cial Se­cu­rity ben­e­fit was higher, the widow or wid­ower can “step up” to her or his de­ceased spouse’s ben­e­fit.

Many So­cial Se­cu­rity re­sources are avail­able on­line at­cialse­cu­rity. gov. Seek help where help is needed.

Janet Col­li­ton is an el­der law and es­tates at­tor­ney with of­fices at 790 E. Mar­ket St., Suite 250, West Ch­ester, PA 19382, 610-436-6674, col­li­ton@col­li­ton­ She is also, with Jef­frey Jones, CSA, co-founder of Life Tran­si­tion Ser­vices LLC, a ser­vice for fam­i­lies with long-term care needs.

For more, lis­ten to “50+ Plan­ning Ahead” a weekly ra­dio pro­gram on WCHE 1520 on Wed­nes­days from 4 to 4:30 p.m. with Janet Col­li­ton, Col­li­ton El­der Law As­socs., PC, and Phil McFad­den of Home In­stead Se­nior Care.

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