Article originally written by Theodore J. Sarenski, CPA/PFS on Nov 04, 2014, posted to AICPA
Helping clients plan for Social Security benefits may involve a lot of information gathering and research, but doing so could save them a heap of headaches and a lot of money. Here are 12 planning tips that stand out to me as potential opportunities. These can provide great relief and keep your clients out of the danger zone.
- If a person is past their full retirement age (age 66) and is submitting the initial application for Social Security retirement benefits, be sure to claim the allowed six months of retroactive benefits. One important question to consider is if your clients should start full retirement age at age 66 or wait until age 70. Life expectancy data shows that a person who retires at age 66 will live until 86.2, and a person who retires at age 70 will live until he or she is 87. With this in mind, I suggest waiting until age 70 to begin receiving benefits. Keep in mind there is an exception; the break-even point is age 81, so if your family history shows that most members do not live beyond their early 80s, it may not be beneficial to wait.
- If you suspended Social Security benefits at or after full retirement age and are on Medicare Part B, pay the premium out of your own pocket. The government will pay your Medicare Part B premium if you have suspended benefits, but then you will not get the eight percent per year delayed retirement credits. Medicare Part B premium increases are limited to the increase in Social Security benefits if you are collecting benefits, but not if you have suspended benefits. You will be subjecting yourself to potentially higher increases in the Medicare Part B premium by suspending benefits between full retirement age and age 70. This applies to singles with less than $85,000 of income and joint filers with less than $170,000 of income. People with incomes greater than those amounts are currently subject to much higher premiums for Medicare Part B. –
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