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Is Social Security Survivor Benefits Taxable

Fact #: Social Security Is Especially Beneficial For Women

Social Security Spousal and Survivor Benefits (Facebook Live, October 21 2020)

Social Security is especially important for women, because they tend to earn less than men, take more time out of the paid workforce, live longer, accumulate less savings, and receive smaller pensions. Women represent more than half of Social Security beneficiaries in their 60s and 7 in 10 beneficiaries in their 90s. In addition, women make up 96 percent of Social Security survivor beneficiaries.

What Happens If The Deceased Received Monthly Benefits

If the deceased was receiving Social Security benefits, you must return the benefit received for the month of death and any later months.

For example, if the person died in July, you must return the benefits paid in August. How you return the benefits depends on how the deceased received benefits:

  • For funds received by direct deposit, contact the bank or other financial institution. Request that any funds received for the month of death or later be returned to us.
  • Benefits received by check must be returned to us as soon as possible. Do not cash any checks received for the month in which the person dies or later.

Other Considerations About Us Expat Taxes

The Social Security Administration requires that specific changes are reported to them, including:

  • Change of address
  • Return to work or improvement in disability
  • Any work overseas
  • Eligibility for a pension from work not covered by Social Security
  • Death of an individual receiving Social Security payments

Being overseas also increases the chance that your Social Security check may be lost or stolen. In that event, expats should contact the nearest US Embassy or the Social Security Administration directly. The SSA will then replace your check as soon as possible. A great way to eliminate the chance of a check being lost or stolen is to sign up for electronic payments.

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What Is Full Retirement Age

Your full retirement age depends on your year of birth. If you were born in 1937 or earlier, it is age 65. If you were born in 1960 or later, your full retirement age is 67. The table shows the breakdown for those born in between those years.

Year of birth 67

Notes:

  • Persons born on Jan. 1 of any year should refer to the full retirement age for the previous year.
  • For the purpose of determining benefit reductions for early retirement, widows and widowers whose entitlement is based on having attained age 60 should add 2 years to the year of birth shown in the table.
  • Since you mentioned that youre still working, you should also be aware that your benefits may be reduced if youre younger than full retirement age and your earnings from employment exceed $15,720 in 2016. Look out for other Social Security traps.

    For further details regarding Social Security benefits, you can go to www.SSA.gov.

    Thanks for the great question and all the best to you.

    How To Calculate Your Social Security Income Taxes

    Is Social Security Taxable Income 2021

    If your Social Security income is taxable, the amount you pay will depend on your total combined retirement income. However, you will never pay taxes on more than 85% of your Social Security income.

    Again, if you file as an individual with a total income thats less than $25,000, you wont have to pay taxes on your Social Security benefits in 2022. For the 2022 tax year , single filers with a combined income of $25,000 to $34,000 must pay income taxes on up to 50% of their Social Security benefits. If your combined income is more than $34,000, you will pay taxes on up to 85% of your Social Security benefits.

    For married couples filing jointly, you will pay taxes on up to 50% of your Social Security income if you have a combined income of $32,000 to $44,000. If you have a combined income of more than $44,000, you can expect to pay taxes on up to 85% of your Social Security benefits.

    If 50% of your benefits are subject to tax, the exact amount you include in your taxable income will be the lesser of either:

    • half of your annual Social Security benefits OR
    • half of the difference between your combined income and the IRS base amount

    The example above is for someone whos paying taxes on 50% of their Social Security benefits. Things get more complex if youre paying taxes on 85% of your benefits. However, the IRS helps taxpayers by offering software and a worksheet to calculate Social Security tax liability.

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    A Divorced Spouse May Be Eligible For Benefits

    If you are divorced, you may qualify for Social Security benefits based on your ex-spouses work record. To be eligible for benefits, your ex-spouse must have reached the age at which they are eligible to begin receiving benefits .10

    To qualify, you need to:

    • have been married to your ex-spouse for at least 10 years
    • have been divorced two years or longer
    • be at least 62 years old
    • be unmarried and
    • not be entitled to a higher Social Security benefit based on your own work history.

    If your former spouse is deceased, you may still receive benefits as a surviving divorced spouse , assuming that your ex-spouse was entitled to Social Security benefits, your marriage was at least 10 years, you are at least 60 years old, and you are not entitled to a higher benefit amount based on your own work history. If you remarry before the age of 60, you will lose the ability to receive a survivor benefit from your deceased ex-spouse.10

    If your former spouse is living, the maximum amount that you are eligible to receive is 50% of what your former spouse is due at full retirement age. To receive the maximum benefit, you will need to wait until you have reached your own full retirement age.10

    Your benefits are unaffected should your former spouse elect to take Social Security before reaching full retirement age or if your ex-spouse starts a new family.10

    Getting The Full Benefit

    If neither of you had started claiming Social Security yet, you can wait until your survivor FRA or older to apply. In this case, you will receive 100% of your late spouseâs basic benefit amount.

    If they were able to get $1,650 a month at their FRA, you would get $1,650 a month by waiting until your full retirement age to start claiming.

    Survivorâs benefits include the effect of delayed retirement credits. If your spouse was already past age 66 or 67 and had not started taking Social Security, you may get a higher survivor benefit than if they had filed sooner.

    When you start claiming your survivor benefit, you would get what their payment would have been at that later age. This will be a larger amount than if they had started sooner.

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    If You Haven’t Applied For Retirement Benefits Yet

    Spouses who are eligible for both the survivor benefit and the retirement benefit based on their own work record can maximize their total benefits by taking them in the most advantageous order. The Social Security Administration explains how this works:

    If you are also eligible for retirement benefits, but haven’t applied yet, you have an additional option. You can apply for retirement or survivors benefits now and switch to the other benefit later.

    The right order for you will depend on the size of each benefit. If both payouts currently are about the same, it may be best to take the survivor benefit at age 60. It’s going to be reduced because you’re taking it early, but you can collect that benefit from age 60 to age 70 while your own retirement benefit continues to grow. Then you can collect your own benefit starting at age 70 when it maxes out.

    Conversely, if your own benefit is small compared to the survivor benefit , you could take your own benefit at age 62, which is the earliest age at which you’re eligible. Then, at age 66, you could switch over to the survivor benefit. However, the survivor benefit would be reduced since it was taken early or before full retirement age.

    How Long Do You Have To Be Married To Get Social Security Survivor Benefits

    Is Social Security Taxable?

    A surviving spouse must have been married for at least one year to be eligible to receive their spouse’s Social Security death benefits. However, if the surviving spouse is the parent of the spouse’s child, the one-year rule is waived. A divorced spouse may be eligible to receive benefits if they were married to their former spouse for at least 10 years.

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    Who Can Get Survivor Benefits And At What Age

    After the death of a spouse, you can get a monthly Social Security survivor benefit. This is true as long as you have been married for at least nine months.

    If you are caring for the child of your deceased spouse, and the child is under the age of 16, you can claim your spousal payment after their death even if you were married much less time.

    You can collect a Social Security survivor benefit as early as age 60. If you are disabled, you can collect this payment as early as age 50.

    At age 60 you will receive only about 70% of the amount you could get if you wait until your Full Retirement Age . This is age 66 for people born in 1945-1956. FRA increases for people born in 1962 or later. The highest FRA for collecting a spousal benefit is 67.

    Fact #: Social Security Is Particularly Important For People Of Color

    Social Security is a particularly important source of income for groups with low earnings and less opportunity to save and earn pensions, including Black and Latino workers and their families, who face higher poverty rates during their working lives and in old age. The poverty rate among Black and Latino older adults is roughly 2.5 times as high as for white seniors. There is a significant racial retirement wealth gap, leading older adults of color to face more retirement insecurity than their white counterparts. Black and Latino workers are less likely to be offered workplace retirement plans, and they are likelier to work in low-wage jobs with little margin for savings. Social Security helps reduce the economic disparities between older white adults and older adults of color.

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    The Basics About Survivors Benefits

    Your family members may receive survivors benefits if you die. If you are working and paying into Social Security, some of those taxes you pay are for survivors benefits. Your spouse, children, and parents could be eligible for benefits based on your earnings.

    You may receive survivors benefits when a family member dies. You and your family could be eligible for benefits based on the earnings of a worker who died. The deceased person must have worked long enough to qualify for benefits.

    For more information, please read How Social Security Can Help You When a Family Member Dies.

    Social Security Is A Critical Source Of Retirement Income

    What You Need To Know About Social Security Retirement Benefits

    Some have the perception that Social Security is of secondary or even tertiary importance in retirement. But according to a recent report by the Employee Benefits Research Institute, Social Security represents a major source of income for 64% of retirees.1

    Keep in mind that Social Security makes annual cost-of-living adjustments based on the Consumer Price Index, and under current laws, pays income for life and the life of your spouse.2

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    Beware The Blackout Period

    As noted earlier, a widow or widower generally doesn’t qualify for their benefits until age 60. However, that person can collect payouts as the caregiver for the deceased’s children until they turn 16.

    Children qualify for benefits until they turn 18 . But between the child’s 18th birthday and the spouse’s 60th birthday , no one in the family is eligible to collect. That’s what’s known as a blackout period.

    For example, a woman is left widowed at the age of 30 with a two-year-old son. As her son’s caregiver, she is entitled to collect Social Security benefits for 14 years, until his 16thbirthday. After that, her son continues to receive his survivor benefits for two more years, until he’s 18. His mom will be 46 at that point, leaving the family ineligible for any payments until her widow’s benefits become available when she’s 60. In this case, the Social Security blackout period lasts 14 years.

    One possible solution is for families to make sure they have adequate life insurance to support a surviving spouse during any blackout period. Take, for instance, a couple, both 31 years old, who recently had a child. If either parent dies, the surviving spouse is eligible to collect benefits until they are 47 years old . If they both buy 30-year term life insurance policies and keep up with the premiums, they’ll be assured of coverage until age 61one year after Social Security eligibility is reinstatedin case one of them dies.

    Couples Who Haven’t Claimed Benefits Yet

    If you haven’t started getting benefits yet, waiting longer will help both of you get a higher benefit. This includes the survivor benefit once one of you passes away.

    You can get the most out of the survivor benefit by having the spouse who earns more wait until age 70 to begin collecting. This creates a larger monthly payment. That larger payment will go to the surviving spouse when the first spouse passes away.

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    State Taxes On Social Security Benefits

    Everything weve discussed above is about your federal income taxes. Depending on where you live, you may also have to pay state income taxes.

    There are 12 states that collect taxes on at least some Social Security income. Two of those states follow the same taxation rules as the federal government. So if you live in one of those two states then you will pay the states regular income tax rates on all of your taxable benefits .

    The other states also follow the federal rules but offer deductions or exemptions based on your age or income. So in those nine states, you likely wont pay tax on the full taxable amount.

    The other 38 states do not tax Social Security income.

    State Taxes on Social Security Benefits
    Taxed According to Federal Rules Minnesota, Utah

    Control Your Taxes Now & Later

    How Social Security Benefits are Taxed

    The longer you wait to claim Social Security benefits, the better chance you’ll have to boost the overall tax efficiency of your retirement income plan. Here’s how.

    Drawing down traditional tax-deferred assets before collecting Social Security can enable you to control both your current and future taxes.

    The amount you withdraw from a traditional IRA, for example, lowers your account balance, which may reduce your future required minimum distributions .

    Since your RMD is considered ordinary income, having smaller distributions while you’re collecting benefits may reduce the taxes on your benefitsor keep you from paying taxes altogether.

    In addition, managing your retirement income in this way can also help you qualify to pay lower Medicare parts B and D premiums, which are income-based.

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    Survivor Benefits For Ex

    If you were married to your ex for at least 10 years, and you do not get married again before age 60, then you can collect a benefit when your ex dies. You can collect this benefit even if they got married again before their death.

    If you are caring for your ex-spouse’s child, and the child is under 16, the 10-year rule does not apply. In general, the benefit is the same as it would be for a spouse who isnât divorced.

    When Should You Claim A Survivor’s Benefit

    There are pros and cons to taking your survivor benefit before your FRA.

    If you start at a lower age, you get this income for a longer time. The amount you get, though, may be lower than if you started later.

    Many people can start to collect a survivor benefit before their reach FRA. It may make sense to start collecting now, then switch to your own retirement benefit at age 70 if it would be larger at that point.

    For example, you could have these two options:

  • At age 60, take a deceased spouse’s benefit of $18,180 a year. Then at age 70, switch to your own benefit of $20,304.
  • At age 62, take your own benefit of $10,752 a year. Then at 66, switch to your own benefit of $24,480 a year.
  • At first glance, taking the money at 60 might seem like a good idea. But choosing option 2 will provide at least $30,000 more income over your life.

    It will also provide a more secure income at age 66 and beyond once you take into account. If your goal is to reduce the risk of living longer than you have money for, you will want to use the option that gives you the most income over the rest of your life.

    This might mean not starting benefits right away, even if you are able to get them. If you wait until age 66 or 67 and get more, you will have a higher total payout from Social Security over your lifetime.

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    Fact #: Social Security Is More Than Just A Retirement Program It Also Provides Important Life Insurance And Disability Insurance Protection

    Over 65 million people, or more than 1 in every 6 U.S. residents, collected Social Security benefits in January 2022. While older adults make up about 4 in 5 beneficiaries, another one-fifth of beneficiaries received Social Security Disability Insurance or were young survivors of deceased workers.

    In addition to Social Securitys retirement benefits, workers earn life insurance and SSDI protection by making Social Security payroll tax contributions:

    • About 96 percent of people aged 20-49 who worked in jobs covered by Social Security in 2020 have earned life insurance protection through Social Security.
    • For a young worker with average earnings, a spouse, and two children, thats equivalent to a life insurance policy with a face value of nearly $800,000 in 2020, according to Social Securitys actuaries.
    • About 89 percent of people aged 21-64 who worked in covered employment in 2020 are insured through Social Security in case of severe disability.

    The risk of disability or premature death is greater than many people realize. Some 7 percent of recent entrants to the labor force will die before reaching the full retirement age, and many more will become disabled.

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