Justia Legal Resources: Social Security and Retirement Planning Legal Center

The years after retirement can be some of the most rewarding in life. But that’s only true if you’re financially secure. Justia provides a free resource with legal and practical advice to help Americans make the most of their golden years.

Approximate Read Time: 4 Minutes

As life spans in the U.S. get longer, planning for retirement becomes even more critical. The loss of income from a job, combined with increased costs in areas like medical care, can pose financial challenges if you’re not prepared. Fortunately, benefits provided by the federal Social Security Administration and private retirement plans can make life after work easier. The Social Security and Retirement Planning Legal Center in the Justia Legal Guides provides free legal information and some practical tips for developing a strategy that works for you.

When Can I File for Social Security Benefits?

You can file for Social Security retirement benefits three months before you become eligible. This gives the agency time to process the claim. (Be aware that you may not necessarily want to claim benefits as soon as you become eligible, though.) Meanwhile, you can file for Medicare benefits three months before turning 65 if you are eligible for Social Security benefits. There’s no incentive for waiting to claim them, as there is with Social Security.

How Does Collecting Social Security Early or Late Affect the Amount?

If you get your Social Security retirement benefits before your full retirement age, you’ll get 25 to 30 percent less than if you waited. This reduction applies permanently, so it’s an important disincentive to keep in mind. If you wait to get Social Security benefits until after you reach full retirement age, on the other hand, the Social Security Administration will add 8 percent to the amount for each full year that you delay. (You’ll also benefit from the additional income that you’re earning from your job.)

Can I Work While Getting Social Security Retirement Benefits?

Yes, you can work while collecting benefits. Until you reach your full retirement age, though, your benefits may be reduced according to an earnings limit that the Social Security Administration applies. Your benefits generally would be reduced by one dollar for every two dollars earned over the limit. However, the formula works differently in the calendar year when you reach full retirement age. The earnings limit is higher, and the reduction is less.

How Do Social Security Survivor Benefits Work?

Social Security survivor benefits complement retirement benefits by providing monthly payments to certain qualifying family members after the death of the recipient of retirement benefits. Survivor benefits are the same amount that the recipient would have received if they had survived. Qualifying family members are generally a spouse and a child under 18, although sometimes parents, grandchildren, and stepchildren may qualify if they are financially dependent on the recipient. A spouse usually must be at least 60, at least 50 and living with a disability, or caring for a child of the recipient who is under 16.

How Are Medicare and Medicaid Different?

Medicare is broadly designed for people who are 65 or older, while Medicaid is designed only for people with very low income and limited assets. Medicare is uniform nationwide, while Medicaid rules vary by state. If you qualify for both Medicaid and Medicare, you can use both programs to pay for your healthcare expenses. Medicaid may cover a broader range of costs than Medicare does. You can also put Medicaid toward certain Medicare-related costs, such as the monthly premiums and deductibles.

Which Property Is Subject to Medicaid Reimbursement?

The scope of the assets from which the Medicaid program can get reimbursed varies by state. Different states have different definitions of a deceased person’s “estate” for these purposes. Sometimes only the probate estate of the deceased person is subject to Medicaid reimbursement. This consists of property that they owned at their death and for which a future owner was not designated. Other states include any property that the deceased person owned at their death in the estate, even if it does not go through probate. Sometimes a state can try to get reimbursed by putting a lien on real estate owned by the recipient while they are alive. If the property is sold, even if they are still alive, the state can get reimbursed at that time.

Should I Include Retirement Benefits in My Will?

No, it’s best to name the beneficiary for any funds left in your retirement accounts in the account paperwork. If you name the beneficiary in your will, the funds would need to go through probate, which is a long and cumbersome process. (It’s also better not to name a trust as the beneficiary.) Some plans require a spouse to be the beneficiary unless they waive that right, while others are more flexible.

How Does a Reverse Mortgage Work?

In a reverse mortgage, a homeowner gets a lump sum payment, monthly payments, or a line of credit from the lender, up to a certain limit based on the equity in their home. If they sell the house or move out permanently, or if they die, the loan must be paid off. The homeowner still must keep up with payments for taxes and insurance. If the lender suspects that this won’t happen, they can include a set-aside of part of the loan amount to cover these payments.

How Are Traditional and Roth Plans Different?

The key difference between traditional and Roth plans involves their tax treatment. In a traditional plan, you don’t pay tax on your contributions to the plan. However, you will pay tax on your withdrawals. In a Roth plan, your contributions are taxed, but your withdrawals will not be. This approach may be especially useful to people who are relatively early in their careers, since their contributions may stay in the plan for a long time and increase significantly.

What Are Some Tax Breaks for Older People?

If you take the standard tax deduction rather than itemizing your deductions, you will get a greater standard deduction than the average taxpayer if you are 65 by January 1 of the year after the current tax year. Meanwhile, some itemized deductions may be especially likely to help elderly people. For example, you can get a deduction for medical and dental expenses that exceed 7.5 percent of your adjusted gross income. Other deductions may apply if you sell your home, donate to charity, or start a new business during your retirement, among other activities.

Final Thoughts

As you get older, and perhaps even before you do, it’s good to keep an eye on the future and make sure that you have a solid plan for life after work. You may have more options and opportunities than you realize. If you have a specific question about a legal strategy, there’s no substitute for consulting a lawyer near you. They can provide you with guidance tailored to your situation. In the meantime, the Social Security and Retirement Planning Legal Center offers a readable overview of some key concepts in this area. Like the other Justia Legal Guides, it furthers our mission of making the law free and accessible to all.

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