Social Security Rules That May Affect Your Benefits

Social Security provides benefits to around 1 in 5 citizens but there are some little known rules that can impact their benefits. This often comes up as we speak with seniors as they plan to downsize and relocate. These rules need to be figured into financial planning.

An article from The Motley Fool looks at two Social Security rules that are particularly relevant today as many seniors are still in or returning to the workforce.

1. Working After Claiming Social Security Early: A Potential Reduction in Benefits: The first is for those who collect Social Security retirement benefits before reaching their full retirement age (FRA). Shockingly, between 25% and 50% of pre-retirees are unaware that continuing to work after claiming Social Security early can lead to a benefit reduction.

>If you receive Social Security retirement benefits before your FRA, your benefits will be reduced by $1 for every $2 you earn above an annual limit. For 2024, this limit is set at $22,320. The rules change in the year you reach your FRA, with a higher threshold of $59,520 and a reduction of $1 for every $3 earned above this limit.

2. Temporary Reduction: A Social Security Advisory Board report finds that only 30% to 40% of those informed about the reduction understand its temporary nature. The Social Security Administration rules mean benefits will no longer be reduced starting from the month you reach FRA and that your benefit amount will be recalculated to provide credit for any amount previously withheld.

So many retirees these days are engaging in partial retirement or they move in and out of the workforce before fully retiring and that trend is expected to continue. It’s all the more reason to be aware of the potential benefit reduction and the temporary nature of the reduction. A retirement strategy taking these rules into account will help ensure you make the most of your benefits.

>>Click here to read the full article from The Motley Fool.

Is a Reverse Mortgage Loan for you?

What Is a Reverse Mortgage Loan?

A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage loan, is a federally insured home loan that allows borrowers age 62 and over to access a portion of their home equity to supplement their retirement income. Like their traditional cousins, reverse mortgage loans have financial obligations, requirements and qualifications, but repayment is structured differently. Whereas traditional loans require borrowers to make loan repayments each month for a designated period of time, reverse mortgage loan borrowers aren’t required to make monthly mortgage payments, so long as they pay property taxes, homeowner’s insurance and comply with loan terms. Instead, non-taxable loan proceeds are made available to the homeowner to use at their discretion, such as paying off other expenses, building up a financial buffer for future unanticipated expenses, or planning for the retirement of their dreams.

How Can a Reverse Mortgage Help with Retirement Planning?

According to American Advisors Group (AAG), there are many features of reverse mortgage loans that can benefit seniors who are looking to supplement their retirement income.

  • Eliminate monthly mortgage payments. Rather than paying money to the lender each month, you receive funds to enhance your retirement savings. The loan is repaid when you sell your home, move to another primary residence or when the last borrower leaves the home.
  • You remain the homeowner and stay in your home. You maintain ownership of and the title to your home as long as you comply with the terms of the loan.
  • How you spend the proceeds of the loan is up to you. The loan proceeds have very few restrictions and can be used to pay for common senior expenses like medical care, in-home care, household repairs and remodeling, or paying off other debt. Disbursement options vary: you choose a full or partial lump sum, monthly payments or a line of credit.
  • Social Security, Medicare, your 401(k) and pension are not affected. A reverse mortgage loan is considered a loan and not income, so proceeds are not taxable. However, need-based benefits such as Medicaid and Supplemental Security Income (SSI) may be affected.

Want to know more? Click here to read the full article from AgingCare including:
*How to qualify for a Reverse Mortgage Loan
*What are the obligations as a borrower?
*How Does the Government Regulate HECM Loans?
*How to Apply for a Reverse Mortgage