Seniors What You Need to Know

Average SSD Payment

The average SSD payment in 2008 was $1,063 a month. Once you have received disability payments for two years, you automatically qualify for Medicare coverage.

Ohio, Michigan, Minnesota, Wisconsin, Indiana, Nebraska, Illinois, Missouri, the District of Columbia and Alabama face the 10 worst Social Security Disability Insurance (SSDI) hearing-level processing backlogs.

Hearings are held when an SSDI decision is appealed, many people have already waited 12 or more months following their application, denial and, for many, reconsideration. By the time they reach the hearing, it's not unusual for applicants to have waited two to four years for an SSDI decision.

The 10 states with the lowest wait times are Delaware, Maine, Texas, Louisiana, West Virginia, Utah, Massachusetts, Oklahoma, Connecticut and Hawaii.

The SSA reports the national average processing time for a hearing decision is now 442 days, down from 514 days in September 2008. The total hearings backlog has decreased by more than 71,000 cases since December 2008.

Last year, more than 2.8 million people filed SSDI applications, and the SSA projects 3.3 million will file disability claims in 2010. The SSA recently reported that the level of initial claims pending now exceeds 1 million people - nearly a 40 percent increase over the level from FY 2008.

High Rate Claim Denial in Texas

In Texas at the initial claim level (the application), SSD and SSI claimants have been denied at the rate of 61.5%.

For those who were denied and chose to file appeals, Texas claimants were again denied at an even higher rate: 84.2%.

More initial claims are denied than are approved and an astoundingly high percentage of first appeals are likewise denied.

Steps to protect your Social Security Disability, Veteran's or Pension Benefits:

Do NOT commingle Social Security and exempt benefits with nonexempt funds.

Do NOT obtain a loan or credit card from the bank where your Social Security or pension is deposited. If sued, go to court and demand proof of the debt.

If your bank account is frozen, file an exemption claim within 10 days.

IRS and SSD

The IRS can take money each month from a Social Security disability check.

The practice is part of the agency's Federal Payment Levy Program, which allows up to 15 percent of any federal payments a delinquent taxpayer receives to go directly to the IRS until their overdue taxes are paid in full.

The IRS employs an automated levy system that withholds Social Security payments to taxpayers with incomes below the poverty line. If this is happening to you ... call.

Ask for a person -- not a computer -- to provide a review. You may be classified by the agency as unable to pay.

IRS Taxpayer Advocate: 1-877-777-4778

If your reasonable expenses are more than your income you may be eligible to have an IRS levy from your bank account refunded. The IRS will have a telephone interview with you to determine your ability to pay. This includes and discussion of your assets and resources. They will then ask for your monthly expenses. Typically you will have to fax the IRS your last three months of bank statements.

While the IRS has ten days to decide on a refund they actually can and usually do act more quickly. You bank may require 72 hours to restore your funds. In reality the IRS may act more quickly than your bank.

There is a possibility that you will have a partial restoration of funds rather than a full restoration.

A restoration of funds for hardship and a classification of 'unable to pay' does not mean your debt is forgiven. You will continue to owe your debt. However, your funds for living expenses may be partially or fully restored.

What You Need to Know About Social Security

Social Security is an important part of you retirement plan

Social Security provides 50% of the income for more than half of married retired couples and about 20% for high earners. Moreover, it's the only source of income you're likely to have that's guaranteed to last for life and keep pace with inflation.

But given the complexity of the Social Security calculations, it's tough to figure out how to make the most of it. The amount of your monthly check will depend on when you retire, how much you and your spouse earned, and whether you work in retirement. "That makes it hard to plan," says former Social Security Administration deputy commissioner Andrew Biggs. The following guide will answer those questions and give you strategies that can help you maximize your benefits.

QUESTION 1

Can I count on Social Security to be there?

You can. Despite what you may hear about the system going broke, the funds from workers' payroll taxes will cover all retirees' payments until 2016 even if no changes are made to the current program. After that the Social Security Administration can cover full benefits until 2037 by cashing in its Treasury bonds from the Social Security trust fund. And when the bonds run out, income from payroll taxes would be enough to cover about 75% of payments for decades.

That said, the government is looking at ways to shore up the system. President Obama has talked about imposing Social Security payroll taxes on income over $200,000 (currently, earnings over $106,800 are exempt). Other possible fixes: upping payroll taxes, raising the retirement age, and scaling back payments in some way.

The good news for anyone in or near retirement: "People 55 and over are likely to see no change or just a marginal change in benefits," says actuary Bruce Schobel, who worked on the commission headed by Alan Greenspan nearly 30 years ago that fixed the system (at least until now). But even younger workers can rest assured that drastic cuts are unlikely.

HOW MUCH THE SYSTEM CAN PAY

Social Security will get enough from payroll taxes to cover scheduled benefits until 2016 Eventually, taxes will have to rise, benefits will have to decline, or both.

[The following text appears within a chart. Please see hardcopy or PDF for actual chart.]

QUESTION 2

How much will I get every month?

Like all things Social Security, there's a complex formula involved. But essentially, the amount you'll get at your full retirement age is based on your average lifetime earnings, adjusted for rising wage levels over the years. Depending on when you were born, your full retirement age varies between 65 and 67. Grab your payments earlier than your full retirement age, and they'll be reduced: Wait, and you'll get more.

Spouses can also qualify for up to 50% of their husband or wife's full retirement age payment; if that amount is larger than what you would get based on your own earnings, you'll get the higher figure. Similarly, if your spouse dies, you would receive a survivor's benefit of up to 100% of what your deceased spouse was collecting, if that amount is higher than your own payment.

Divorced? You may still be eligible for spouse and survivor benefits as well.

Your checks are also automatically adjusted for inflation each January. Payments increased by 5.8% for 2009 But given the near-term inflation outlook, the Congressional Budget Office estimates there may not be a cost of living increase for the next few years.

HOW THE AGE YOU CLAIM AFFECTS YOUR PAYMENT

You can boost the size of your Social Security checks by waiting until your "full retirement age" or later to collect. To see how your numbers would change, use the Retirement Estimator tool at ssa.gov.

QUESTION 3

At what age should I begin collecting?

The majority of people take Social Security before full retirement age. But it often pays to wait. Just in terms of benefits accrued, if you have an average life expectancy or better, you'd probably come out ahead waiting for a larger payment that you won't collect as long. More important, you'll have a bigger check at an age when your retirement savings are diminished and you aren't likely to be able to work to supplement your income.

The math gets more complicated for married couples, however, since in addition to what they get from their own earnings, one of them may also qualify for spousal benefits and eventually collect payments as a surviving spouse. So married couples should aim to max out their benefits over both their lifetimes. Generally, the best strategy is for the higher-earning spouse to delay taking Social Security for as long as possible. That's because survivor benefits are based on the larger of the couple's checks. The lowerearner, meanwhile, should usually claim benefits earlier. That will often, though not always, provide the greatest amount of income as well as security in old age.

WHY YOU MAY WANT TO WAIT

A larger benefit is a form of longevity insurance. A 62-year-old man has a 65% chance of reaching age 81; a 62-year-old woman has a 73% chance.

LIVE PAST THIS AGE AND YOU WILL COLLECT MORE IN TOTAL BENEFITS

NOTE: Breakeven calculation assumes annual inflation of 2.5% and investment return of 5.5%.

QUESTION 4

Will I lose benefits if I work?

It's true that if you collect early and work at the same time, your payments may be reduced (once you reach full retirement age, feel free to toil away; your golf game might suffer, but there's no effect on your Social Security). Your checks will be reduced by $1 for every $2 you earn over an annual limit, currently $14,160 (the hit is considerably less during the calendar year you hit full retirement age).

But despite what you often read or hear, you don't actually "lose" that money. At full retirement age Social Security will begin compensating you with a larger check for the benefits that were withheld. And you'll receive that higher payment for the rest of your life. If you are reasonably long-lived, you'll wind up collecting more--and you'll have extra income from your additional years as a wage slave.

Working in retirement can also up your payments in other ways. Your check is based on your 35 highest years of wages. If you work fewer during your career, your benefit will be adjusted to reflect any extra years of work. Even if you clocked all 35 years pre-retirement, you could still get a bump if your annual earnings during your golden years were higher than some years earlier in your career.

WHY WORKING CAN PAY

The example below assumes an early retiree makes enough to cut his annual benefit in half until he hits full retirement age. At that point, his check is increased.

QUESTION 5

Will my benefits be taxed?

You thought Uncle Sam would cut you a break after retirement? Fat chance. Currently, about a third of Social Security recipients pay income tax on a portion of their benefits, and the Social Security Administration projects upwards of 42% of recipients will be doing so by 2018

To see whether you'll owe taxes and, if so, to estimate what the bill might be, use the simplified worksheet below (or fill out the extremely detailed one in IRS Publication 915: Social Security and Equivalent Railroad Retirement Benefits, available at irs.gov).

If you want to lessen the tax bite, there are a couple of options. One is to wait at least until full retirement age to claim Social Security, if you think that income from a post-retirement job could result in a big tax bill.

Another way to avoid taxes is to pull money from a Roth IRA instead of a traditional IRA or 401(k). That's because Roth withdrawals don't count as income in figuring whether your benefits are taxable. So if you don't already have money in a Roth, you may want to fund one or convert some of your traditional IRA to a Roth. After all, in retirement, you're likely to need all the cash you can get.

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