The Petrosewicz Law Firm Estate Planning Blog

No End in Sight for Social Security Scams

This is one of thousands of phone calls being made to seniors across America. The writer of the question was wise to ask before doing anything foolish. The scam, according to The Sentinel Source’s article “How to protect yourself from the Social Security imposter scam,” has led more than 76,000 people to call the Federal Trade Commission. The average loss is about $1,500, although there are others who lose significantly more to the scammers.

The scam starts with a phone call from a person claiming to be with the Social Security Administration. The caller tells the victim that their Social Security number has been suspended, because it was stolen or involved in a crime. The voice sounds very authoritative, and people are fooled by it.

The phone caller may be a person or a robocaller that next instructs the victim to press 1 to speak with a fake support representative, who next claims to be able to reactivate the person’s Social Security account.

There’s a new variation on the scam, where the victim is told that they qualify for an increase in Social Security benefits. All they need to do is provide the caller with some personal information. That information is often enough for the scammer to drain their bank accounts or steal their identity.

Here’s the thing: there have been many data breaches in recent years. So much personal information is available for purchase on the internet, that scammers have learned to use all or a part of the information to convince victims that the scammers are legitimate callers. If a caller knows their victim’s Social Security number, people are more likely to be convinced that the call is legitimate.

Don’t fall victim to this scam. Here’s what you need to know:

Don’t trust caller ID. Technology allows the scammers to create a false caller ID. Therefore, they appear to be calling from the Social Security Administration. If you see a call from Social Security, don’t answer it. Instead, call the real Social Security number at 800-772-1213.

Understand that Social Security will never suspend your number and then demand payment to fix the problem. Anyone saying that is scamming you.

Never give out any personal information, including Social Security numbers, bank account information or any personal information to anyone. If you already did, call Social Security to find out what steps you can take to protect your credit and your identity.

Just because the caller seems to know some of your information, don’t believe them. They can easily learn a host of information, just by looking at your social media accounts or buying information illegally.

No one from any government agency asks for payment in gift cards. They may describe the gift cards in some confusing term, like ‘certified official financial’ payments. However, if you can buy them at a store and they look like gift cards, they are gift cards.

If you have been scammed, don’t be embarrassed. Tell your family and friends and get the help you need. Alerting your friends and family helps them, so that they will be better prepared to defend themselves.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The Sentinel Source (June 16, 2019) “How to protect yourself from the Social Security imposter scam”

Be Aware of These Myths about Social Security

Despite everything written about filing for benefits as late as possible, more than half of seniors apply for Social Security before they reach full retirement age. It is now 66 and will rise to 67 for people born in 1960 and later. More than a third of all Americans apply as soon as they possibly can—at age 62. Only one in twenty-five applicants puts off filing to age 70, when monthly benefits max out, says the Washington Post in the article advising readers “Don’t believe these Social Security myths.”

Some people have no choice and must take their benefits early, because they’ve lost their job and have no savings. Others have better options, but they aren’t aware of them. That’s because of the many myths about Social Security. A survey found that while 77% of Americans thought they were pretty smart about Social Security, 95% couldn’t answer eight basic questions about the program.

Let’s look at these myths.

It doesn’t matter when I take Social Security. Benefits increase by about 7% every year from age 62  to your full retirement age, and then by 8% each year between full retirement age and 70. This is a planned adjustment to ensure that people who opt for a larger check for a shorter period don’t receive more than those who file earlier and receive smaller checks. It’s better to delay, both for the larger check and the benefits that the surviving spouse receives. People who live longer can run out of savings, so having a larger check in your 90s could make a huge difference.

If I don’t expect to live a long time, I should claim benefits early. Most of us underestimate our life span. A 65-year old man today can expect to live to 84, and a 65-year old woman can expect to live to 86.5. Life expectancies are even longer for those in their mid-50s. However, here’s the thing: even if one spouse doesn’t live as long, by taking Social Security earlier, their spouse will have a smaller benefit. Married couples lose one of their checks when the first spouse dies, causing a big drop in income. The survivor receives the larger of the two checks the couple was receiving. Therefore, the higher earner in a couple, whose check will be larger, should delay taking benefits, if at all possible, to benefit the surviving spouse.

I can claim benefits early and invest the money to come out ahead. No investment today offers a guaranteed return as high as what can be obtained from delaying benefits. You’d have to take a lot of risk to get close to the 7% or 8% guaranteed by Social Security.

As soon as I stop working, I have to file for Social Security benefits. Not true. You don’t have to file for Social Security benefits until you want to. Even delaying four years, from 62 to 66, can translate into a sustainable 33% increase in your standard of living.

I better apply before Social Security runs out of money and closes down. This myth becomes more widespread every year. If Congress doesn’t act, which is unlikely, by 2035, the system will still be able to make payments, although they may be curtailed by 20%. Eighty percent of your Social Security check is not zero. It’s also more than likely that Congress will address Social Security fixes.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Washington Post (June 10, 2019) “Don’t believe these Social Security myths”

Are You Sure You’re Financially Prepared for Retirement?

It’s a popular number in financial news: every day, 10,000 Baby Boomers turn 65. That’s not everyone’s retirement year, but it is for many people. When the time to retire finally comes, according to the article “Nearing retirement? This checklist can help you make sure you’re financially prepared” from CNBC, some people are ready. Others are not. Whatever your status, here are some things you need to be sure of before you retire:

How much do you spend? When income is steady, we tend not to think about what we spend. However, when we transition into retirement, a budget is our best friend. If you don’t know what you spend monthly or annually, pre-retirement is the time to start tracking your cost of living. Remember that you may be spending less on work-related items, but more on leisure. If you can get rid of debt before retiring, you’ll also be in a better situation. Not everyone can go into retirement debt-free, but try to minimize as much debt as you can.

The big unknown: health care costs. This is the biggest unknown of retirement. If you are 65, it’s time to sign up for Medicare, which pays for much, but not all, of your health care costs. You’ll need to pay for dental, vision and long-term care costs. If you haven’t already purchased a long-term-care insurance policy, take care of that soon. Medicare does not cover the cost of care for daily living costs, like bathing or dressing.

How much you pay for Medicare depends on your recent income, if you signed up on time, and what additional coverage you select. If you didn’t sign up when you were first eligible, or if you don’t meet an exclusion, or if you have a high income, you’ll pay more.

You can’t get Medicare coverage until you turn 65, so if you retire younger than age 65, you’ll need to secure your own health insurance.

What happens if you retire before you turn 65? A federal law, COBRA, requires employers with at least 20 workers to allow ex-employees, including those who have retired, to remain in the employer-sponsored plan. The catch? The former employees must pay the full cost of the premiums. That can be expensive.

Are there other options? You might be able to sign up for a health insurance exchange program (the Affordable Care Act plan), if they are available. There are short-term plans that cover the gap between employment and retirement, if you can qualify. They are mostly available for healthy people with no pre-existing conditions.

Do you have a Social Security strategy? The longer you can delay taking Social Security benefits, the larger your checks will be. Even knowing this, many people start taking benefits as soon as they become eligible, because they need the income. However, if you can wait, your benefits will increase by 6-8% yearly until you reach 70. These days, more people celebrate their 65^th birthday and keep right on working. At least 55% of people ages 60-64 are working part time, as reported by the Bureau of Labor Statistics. People age 65 to 69 are also working—nearly 31%.

What does your retirement income look like? Retirement income comes from a variety of sources and everyone has their own mix. You might have a Roth IRA, or a traditional IRA. If you have a traditional IRA, you’ll have to consider that your withdrawals are going to be taxed as regular income. An IRA of $1 million may leave you with $700,000 in after-tax income, depending upon your tax bracket.

If your investment accounts are healthy and you’ve been investing for decades, you will probably have to pay capital gains taxes on some of the withdrawals.

Lucky enough to have a pension? Fewer and fewer Americans can count on a pension from their employer. However, if you have a pension in place, chances are you must take either a lump-sum payment or receive income over your lifetime. Pull out your paperwork and read it carefully. What will the benefits be for a surviving spouse? Do you have the option to leave the pension to a beneficiary?

Creating a plan for your retirement income in advance will help you avoid some of the common pitfalls, like spending so much in the first five years of retirement that the next decade or two is fraught with financial worries. While you’re at it, start preparing your estate plan with an experienced estate planning attorney.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: CNBC (July 5, 2019) “Nearing retirement? This checklist can help you make sure you’re financially prepared”

Will You Return to the Work World in Retirement?

Retirement income is often described as a three-legged stool, with money coming from three different sources: retirement savings accounts, other investment accounts and Social Security. However, as reported by the New Hampshire Register in the article “Returning to work after you retire,” often that’s not enough income to provide a comfortable retirement. For some people, work is an enjoyable and fulfilling experience and they see no reason to retire. Others feel their identity is wrapped up in what they do, so they keep working.

A study from the Employee Benefit Research Institute found that almost half of Americans expect to work past age 65. However, that doesn’t always work out for everyone.

Many people become unable to work before they retire, due to illness or an injury. Others lose their job in their early 60s and have problems finding a new position with the same level of salary.

Even if you can work after retiring, there are several factors to consider. If you claim Social Security benefits before reaching Full Retirement Age (FRA) and then return to work, the IRS will deduct money from your Social Security benefits, if you earn above a certain amount. In 2019, that number stands at $17,640. You’ll lose $1 in benefits for every $2 you earn above that threshold, which changes every year, until you reach FRA.

For the year you reach FRA, that threshold takes a leap, to $46,920 in 2019, and then $1 is deducted for every $3 over the threshold, but just for that year. Once you finally do reach FRA, there is no limit to what you may earn.

For some people, retirement is the time to strike out in a new direction. It could be one they have wanted to explore for years but were limited by a need to pay a mortgage, put children through college, etc. For others, working part time is a way to ease into retirement, while still bringing in some income.

If you intend to work again after retirement, start by clarifying exactly why you want to do so. For instance, if you love your profession and would prefer to remain in it, maybe a consulting position with a prior employer would be enough to keep yourself in a field you love, while giving you more leisure time.

For someone who wants to become active in their community, working at a nonprofit organization that serves a cause or a group that you believe in could give you a fulfilling and productive role.

For those who like to travel, consider a new occupation. A teacher who retired early became a stewardess on an airline, because she wanted to visit a daughter who was going to college in Australia.

It’s okay to want to work up to or long past your retirement. A recent television news segment featured a gentleman who was well into his late 90s, who worked four hours a week at a local supermarket, bagging groceries.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: New Haven Register (July 7, 2019) “Returning to work after you retire”

Scammers Now Claim to be From Social Security Instead of the IRS

For a long time, the callers identified themselves as calling on behalf of the IRS, pretending to be a representative wanting to collect taxes, personal information or both from their prey. However, in the last year, federal authorities say they have seen the number of scammers claiming to be from Social Security take a massive leap and have now overtaken the fake IRS calls, as reported in the article “Latest Rash of Calls Come From ‘Social Security’” from The New York Times.

That doesn’t mean to say that the IRS scam isn’t still around. The IRS lists the “imposter calls” as one of its dirty dozen scams. Scam artists are flexible and quick to adapt to changing circumstances and trends.

More than 76,000 reports about fake Social Security calls were made in the twelve months ending in March, with reported losses of $19 million. That’s according to the Federal Trade Commission (FTC), which investigates consumer fraud.

By comparison, consumers reported $17 million in losses to the IRS scam during its peak time, the twelve months that ended in September 2016. This information comes from the FTC’s Consumer Sentinel Network database, a pool of millions of consumer complaints.

The typical loss to an individual consumer is about $1,500. However, those are only the people who have contacted the FTC to report their situation.

In most cases, the criminals are aggressive and try to scare their targets into action. The caller tells the person that their Social Security number has been suspended, because it has been involved in a crime or due to suspicious activity. The caller often asks the victim to confirm their Social Security number. They tell their victims that they must act fast and that their bank accounts will be frozen, if they don’t act quickly.

Some people, especially seniors, are scared into action. However, the calls are not real.

The Social Security Administration does not make phone calls to individuals out of the blue. Don’t reveal or confirm your Social Security number to anyone who calls.

Don’t trust the number that appears on your caller ID. Thieves use technology to make it appear that the calls are coming from a government agency, but they are not.

In April, the inspector general of Social Security warned consumers that fake calls had spoofed the agency’s own fraud hotline number. That number will never appear on a consumer’s phone, as it is never used to make outgoing calls.

The best thing to do is hang up.

If you are concerned that the call might be real, call the agency directly yourself, using a phone number that you have found and not the number given to you by the scammer.

Older adults are more vulnerable to these calls, because they have access to their lifetime savings and they often exhibit behavior that puts them at risk. During a study of scam awareness, more than three fourths of seniors participating in the study answered the phone when it rang, even if they didn’t recognize the number. They also said they listened to telemarketing calls and struggled with ending unsolicited calls. The study also noted that falling prey to a telephone scam may be an early warning sign of cognitive problems in the future.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: The New York Times (May 3, 2019) “Latest Rash of Calls Come From ‘Social Security’”

Little Known Issues When Health Savings Accounts Meet Social Security

For those who regularly contribute to a health savings account and plan to claim Social Security benefits long after their full retirement age, be warned, says CNBC in the article “Near retirement and have a health savings account? Beware of snags when claiming Social Security.” Once you’re on Medicare, no matter whether you just sign up for Part A hospital coverage or if you are paying premiums for other parts of the program, you are no longer entitled to contribute to a health savings account (HSA).

If you have put off filing claims for both Social Security and Medicare, there may be complications.

When Social Security benefits are delayed beyond Full Retirement Age (FRA), there’s generally a lump sum in retroactive benefits of as much as six months offered. Sounds like a great deal, right? However, if you are not yet on Medicare when that lump sum is accepted and you’re also contributing to an HSA, there are some costly issues that may occur.

By accepting the lump sum from Social Security, you also trigger Medicare Part A being effective retroactively. Therefore, any contributions made to an HSA during that time, are now subject to an excise tax of 6%, in addition to income taxes.

If that is something you have unwittingly done, or might do in the near future, the solution is to alert your employer (or the HR department) to remove any matching contributions made on your behalf. You’ll also need to do that by the tax return filing date for the year it happened in.

If you signed up for Social Security this year, remove those contributions by April 15 of next year.

With more and more people remaining in the workplace into their sixties and seventies, this is a situation that is more and more likely to occur.

As long as you have qualified health insurance through your employer, you can delay going on Medicare without facing a late-enrollment penalty. You may continue to contribute to your HSA, in combination with a high-deductible health plan.

What about that lump sum from Social Security? Rejecting it and the retroactive claiming date isn’t necessarily a bad idea. If you reject it, your base benefit will be 4% higher. Based on an 8% increase in benefits for each year claiming Social Security is delayed (up to age 70), the effective date that is six month later would mean a permanent 4% increase in monthly benefits. If you take the lump sum, your base benefit will be pinned to the early date of claim.

The lump sum may be tempting but consider whether or not you’d prefer to receive the higher monthly benefit, before jumping at the offer.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: CNBC (May 16, 2019) “Near retirement and have a health savings account? Beware of snags when claiming Social Security”

Retirement-Age Workers Crack the 20% Mark

At some point last century, single income families vanished.  It now seems the idea of Americans being able to retire after age 65 may be headed in the same direction. For the first time in 57 years, the participation rate in the work world of people of retirement age has gone to more than 20%, says Crain’s New York Business in the article “America’s elderly are twice as likely to work now than in 1985.”

As of February 2019, the ranks of people who are 65 and older who are either employed or seeking employment has doubled from a low of 10% in 1985. The biggest group of older workers? Those who have a college degree. The share of employees age 65 and older with at least an undergraduate degree is now at 53%, up from 25% in 1985.

The dramatic increase has pushed the demographics inflation-adjusted income to an average of $78,000, which is 63% higher than what older workers earned in 1985. By comparison, American workers below age 65 saw their average income increase only by 38% over the same period.

A study by United Income, which drew on data from the Census Bureau and the Bureau of Labor Statistics, shows a mismatch between older workers who need the money the most and those who are college educated and still working.

The wealthier, college-educated workers who are in better health are working, but the less-educated workers are more in need of the income.

The Bureau of Labor Statistics expects the aging baby boomers to continue to represent the strongest growth in the labor force participation through 2024. At that point, they’ll be between 60–78. Many will likely continue to work, even after starting to receive Social Security benefits.

The outlook for retirement for all Americans is not great. Most people will need at least 80% of their pre-retirement income to maintain their lifestyles, when they stop working. Social Security only covers about 40-50%. The typical worker on the bottom half of the income distribution has no retirement savings and is completely dependent upon Social Security.

People in the middle range have a median of $60,000 saved, so they are not really prepared for retirement either.

The top 10% of earners have a median amount of $200,000 saved. While this number does not include real estate or other tangible assets (and it does not include any potential inheritances), they aren’t fully ready either.

With most experts recommending people have at least $1-2 million saved to retire comfortably, it’s no wonder that most Americans will be working well into their so-called “golden years.”

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Crain’s New York Business (April 22, 2019) “America’s elderly are twice as likely to work now than in 1985”

Estate Planning When a Family Member Is Disabled

This kind of mistake can wreak havoc on many lives, which is why it is so important to work with an experienced estate planning attorney who is knowledgeable about special needs planning. The article, “Crafting an estate plan to include disabled family members” from The Ledger explains what is involved in special needs planning.

Supplemental Security Income (SSI) is a federal program that pays monthly benefits to disabled or blind adults and children. To qualify, an individual must have fewer than $2,000 of countable assets and very limited income. Medicaid is a Federal and State health insurance program that helps people with limited assets and income pay for their medical costs.

While it is common for people to name their spouse or children as beneficiaries in their estate plan, if your spouse or child is disabled and receiving government benefits, an inheritance will result in their loss of benefits, unless special planning is done.

A Special Needs Trust (SNT) is designed for disabled beneficiaries so that cash, real property, or any other assets are available for the person’s benefit, while still allowing the disabled person to receive their means-based government benefits.

There are several different ways to accomplish this, depending on your family’s situation. One way is to have a testamentary Special Needs Trust created within a will or trust that goes into effect, when the creator of the trust or the will dies. A SNT can also be created while you are living and can be funded, instead of waiting for it to go into effect at your death.

A third-party SNT can be named as the beneficiary of life insurance policies and retirement accounts, investment accounts or real property. The third-party SNT assets that are not used for the disabled beneficiary during their lifetime, can pass to non-disabled beneficiaries upon the death of the disabled beneficiary.

These assets will be free from Medicaid recovery efforts, since the property used to set up the third party SNT did not originally belong to the disabled beneficiary.

A first party SNT is set up and funded with assets that do belong to a disabled person, and no other funds can be contributed to this type of trust by any other donors. These are often used when a large settlement following an injury is awarded. In Texas and in other states, first-party SNTs are subject to Medicaid payback to reimburse the state.

Special needs trusts are complicated trusts and require the knowledge of an experienced attorney who devotes most, if not all, of their practice to SNTs and trust and estate planning.

The Petrosewicz Law Firm can assist you with special needs planning.  Contact us today at (281) 344-9455 or [email protected]. 

Reference: The Ledger (May 2, 2019) “Crafting an estate plan to include disabled family members”

Could You Lose Your Social Security Benefits to Creditors?

What if you are retired and the only income you have is your Social Security benefit? “Can Creditors Come After Your Social Security Benefits” is the question posed by Yahoo! Finance. While for the most part, you don’t have to worry about creditors coming after your Social Security benefits, there are others who can get them, if you haven’t paid certain debts.

Personal loan payments, credit card payments, or medical bills are usually not able to take your Social Security benefits. But there are some exceptions you’ll need to know about:

• The IRS will not blink at taking up to 15% of your benefits, if your taxes are not paid.
• If you owe on student loans, the loan companies can come after your Social Security benefits, even if the debt is decades old.
• The same is true if you are behind on either child support or alimony payments.

As long as your outstanding debt is not tax-related, the first $750 of your benefits is protected from being garnished. However, if you’re behind on child support or alimony, you could lose more than 50% of those benefits.

There are steps to take if debt is an issue. First, if you owe money to the IRS, contact the local IRS office to work out a payment plan. They will almost always work with people to reach an agreement on an installment payment agreement. This will avoid having your benefits garnished.

If you’re behind on student loan payments, reach out to the lender and work out an arrangement. If you can prove that your financial situation is dire, you might be able to come up with a deferred payment plan or change the repayment schedule.

If things are really bad, consider filing for bankruptcy. If you do, realize that not all your debt will be dischargeable. For the most part, the same debts that can cause Social Security benefits to be garnished, like overdue taxes and student loans, are not forgivable by a bankruptcy. If those are your key issues, bankruptcy is not your best option.

This might be a situation where a bankruptcy attorney or a debt settlement firm is needed. Be very cautious about working with a debt settlement firm, to be sure that they are credible and trustworthy. The firm or the attorney will be able to help negotiate the debts. Remember that the ultimate goal of any creditor is to get paid, and sometimes getting paid half of the amount is better than not being paid at all.

Your best bet is to approach this problem and tackle it before you file for Social Security. If your sole source of retirement income is compromised, you want to contact the local county Office for Aging services to find out what kind of help is available in your community. Don’t leave this hanging and hope that it will be resolved by itself.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Yahoo! Finance (April 27, 2019) “Can Creditors Come After Your Social Security Benefits”

How Many Social Security Mistakes are There?

What happens when there is an age and an earnings gap and it’s time to think about when to file for Social Security benefits? That’s the question posed in the article “How couples can avoid a costly Social Security mistake” from Considerable.

Start by looking at the higher and lower earners levels. As the Social Security rules stand now, it makes sense for the higher earner to defer filing for Social Security, so that her benefit can be maximized. It also ensures that the spouse who lives longest, will have the largest household benefit, when one dies. This is the side of Social Security that is often overlooked, because who wants to think about what will happen when a spouse dies? However, in most cases, one survives the other, usually by as many as 10 years.

In a case where the lower earning spouse is also the younger spouse, one strategy is to have that spouse file first for his own retirement benefit, while the older and higher earning spouse files as late as possible.

The key variable: How old are the spouses when they file for benefits? One common misunderstanding is how Social Security benefits are determined. To claim a maximum spousal benefit, the filing spouse must not file for this benefit before his full retirement age (FRA). If either spouse files earlier, the potential for large reductions in the percentage of the benefit the spouse would otherwise receive will be significant.

If the lower earning spouse files early for his own retirement, it not only reduces his own retirement benefit, but also the potential for the spousal benefit in the future.

That additional benefit would equal the amount by which the lower-earners spousal benefit exceeded his own retirement benefit. There’s no double dipping here. You can’t get the full amount of both benefits, but you can get the amount equal to the higher of the two benefits.

Because the lower earner in this case would already be receiving benefits, the additional benefit would be termed “an excess spousal benefit” by Social Security.

Social Security benefits take a fair amount of figuring out, so do your homework before filing. Include this topic in your conversation, when you sit down with an estate planning attorney and financial advisor to update your estate plan and related documents.

The Petrosewicz Law Firm can assist you with your estate planning needs.  Contact us today at (281) 344-9455 or [email protected].  

Reference: Considerable (April 18, 2019) “How couples can avoid a costly Social Security mistake”