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Social Security Disability Benefits – An Introduction

We’ve outlined the steps to calculate social security benefits you’ll get in your retirement before. Part of the formula takes into account your work history. But what if you can’t work? Can you still receive benefits if you’re disabled?

The quick answer is yes – but there’s a long list of criteria for qualifying. Here we’ll take a brief look at what you can receive if you qualify.
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Social Security Benefits for your Spouse

You may know how to calculate social security benefits for yourself when you retire. But did you know that when you retire, your spouse also receives benefits? As a retired worker eligible for social security, benefits for your spouse will be 50% of your benefits, if he or she retires at full retirement age.
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How To Determine If Your Social Security Benefits Are Taxable

How To Determine If Your Social Security Benefits Are TaxableYou may think it’s unfortunate enough that social security taxes are already taken out of your paycheck each pay period. The theory behind the social security retirement benefits program is simple. You pay taxes during your working years, become covered under its umbrella of benefits after a certain amount of time, and finally receive benefits during your retirement.

But did you know that when you receive your social security benefits in retirement, they may be taxed again?



How To Determine If Your Social Security Benefits Are Taxable

The taxable amount of your social security benefits, if any, depends on a combination of your benefits and your other income. Usually, as this total increases, a bigger percentage of your benefits is subject to tax.

More specifically, if your total other income, which is described below, plus half of your net benefits (box 5 of Form SSA-1099) is greater than the base amount attributed to your filing status, some of your benefits will be taxable. We’ll discuss the base amount later.

Total Other Income

Your total other income includes taxable pensions, wages, interest, dividends, and tax-exempt interest income. In addition to this, some exclusions – such as interest from qualified U.S. savings bonds, exempt adoption benefits from your employer, foreign-earned income, foreign housing, and income earned in American Samoa or Puerto Rico by bona fide residents – must also be included in your other income.

Other Income And Half Of Your Social Security Benefits

To calculate this number to compare to your base amount, go through these following steps:

  1. Calculate the total amount from box 5 of all your Forms SSA-1099.
  2. Calculate half of the amount from line 1.
  3. Calculate the total amount of your taxable pensions, wages, interest, dividends, and other taxable income.
  4. Calculate the total amount of any tax-exempt interest income (such as interest on municipal bonds) plus any exclusions from income (listed earlier).
  5. Add lines 2, 3, and 4.

Compare the amount on line 5 to the base amount for your filing status. If the amount on line 5 is less than or equal to the base amount, none of your benefits are taxable. If the amount on line 5 is more than your base amount, some of your benefits may be taxable.

Base Amount

Your specific base amount is:

  • $25,000 if you are single, head of household, or qualifying widow(er),
  • $25,000 if you are married filing separately, and lived apart from your spouse for all the tax year,
  • $32,000 if you are married filing jointly, or
  • $0 if you are married filing separately, and lived with your spouse at any time during the tax year.

Other Important Points

In most cases, up to 50% of your benefits will be taxable. However, up to 85% of your benefits can be taxable if either of the following situations applies to you.

  • The total of half of your benefits and all your other income is more than $34,000 ($44,000 if married filing jointly).
  • You are married filing separately and lived with your spouse at any time during the tax year.

If some of your benefits are taxable, use the social security benefits worksheet – found in the instructions for IRS Form 1040 (page 28) or 1040A (page 29) – to calculate the actual amount of your taxable benefits. And for more detailed information, check out IRS Publication 915.

For more needed information on social security and how it affects you read these great articles.

Social Security Disability Benefits – An Introduction
Social Security Benefits for your Spouse
Social Security Benefits – The Six Categories Of Benefits

This post was included in the Carnival of Financial Planning at My Trader’s Journal.

 

Image by Stuart Miles at FreeDigitalPhotos.net

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Social Security Benefits – The Six Categories Of Benefits

Social Security Benefits – The Six Categories Of Benefits
The Social Security Administration offers six categories of benefits: retirement benefits, disability benefits, family benefits, survivors’ benefits, medicare, and supplemental security income benefits. Here’s a brief overview of each benefit and its qualifications.



Retirement Benefits

This is the one that most people are aware of. Full benefits are available at full retirement age – while reduced benefits can be taken at age 62 – to those born in 1929 or later who have earned 40 Social Security credits. Because of a change to Social Security law in 1983, full retirement age began to rise from age 65 for people born in 1937 or earlier, increasing in two-month increments to age 67 for people born in 1960 or later. Those who delay retirement beyond full retirement age will get an increase in their benefit when they retire.

Disability Benefits

Recipients of this benefit must have a medical condition that is expected to prevent them from doing “substantial” work for at least a year, or result in death. For 2010, earnings of $1,000 (if not blind) and $1,640 (if blind) or more per month are considered substantial. The number of credits you need in order to qualify depends on your age when you become disabled, and is separated into three age ranges: before age 24, between 24 and 30, and age 31 or older. This program has incentives to smooth the transition back to the workforce, including continuation of benefits and health care coverage.

Family Benefits

This is provided to certain family members of workers who are eligible for retirement or disability benefits. Such members include spouses age 62 or older, spouses under age 62 who are caring for a child under age 16, unmarried children under age 18, unmarried children under age 19 who are full-time students in a secondary school, and unmarried children of any age who were disabled before age 22.

Survivors’ Benefits

This benefit applies to members of the deceased worker’s family, if the worker earned enough Social Security credits. The members who are entitled to this benefit include those listed for family benefits, and may also include the worker’s parents if the worker was their primary means of support. In addition, a one-time payment of $255 may be made to the spouse or minor children upon the death of a worker covered by Social Security.

Medicare

The two major parts of Medicare provide hospital insurance (Part A) and medical insurance (Part B). Workers who have reached full retirement age, or who have been receiving disability benefits for at least 2 years automatically qualify. Others must fill out an application.

The other parts of Medicare include a prescription drug coverage plan (Part D), and a plan to receive all health care services through one provider organization (Part C).

Supplemental Security Income Benefits

This is another benefit that provides monthly payments to those who reach full retirement age or are disabled. However, workers must have a low income and few assets to qualify. Generally, those who receive SSI also qualify for other governmental assistance such as Medicaid and food stamps.

This post was included in the Carnival of Personal Finance during the week of July 12, 2010. Check out Funny About Money’s blog for a variety of great articles!

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How To Calculate Social Security Benefits

how to calculate your social security benefits

Understanding the steps to calculate social security benefits may not be the easiest thing in the world to do, but here’s my attempt to demystify the process.

There are two basic steps to determining your monthly benefits. The first step is computing your average indexed monthly earnings, or AIME. The second step, which incorporates the AIME, is to determine your primary insurance amount, or PIA. The PIA is the basis needed to calculate social security benefits that are paid to you when you retire.




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