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A Guide To Senior Financial Planning

Senior Financial Planning: A Guide to Social Security, Disability, Survivor Benefits, and Retirement Plans




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Social Security Benefits


Social Security is a federal program serving as a significant source of income for nearly 90% of the American population 65 and older. Social Security began in 1935 as part of Franklin Delano Roosevelt’s New Deal. In 1939, Social Security benefits were increased to include the spouses and minor children of retired and deceased workers. In 1956, Social Security was further expanded to cover benefits for disabled workers.


Thanks to Social Security, older Americans are able to live independently and out of poverty. It provides security for low-income retirees, spouses and children of retired and deceased workers, as well as disabled workers and their survivors. The benefits are progressive in that it replaces a significant proportion of  pre-retirement earnings of low-lifetime earners than high-lifetime earners. This progressive benefit structure is essential since the lowest earners are less likely to have other sources of retirement income such as pensions, savings, and other assets. The program thereby ensures their income will not be significantly diminished during retirement.


Since 1975, Social Security has been adjusted annually through a cost of living adjustment (COLA) to help the monthly check keep up with inflation. The current formula does not, however, fully account for the average 27% increase in medical costs for older Americans as compared to the rest of the population according to the Bureau of Labor Statistics. 




Benefit Amounts Depend on When You Start Receiving


You’ve probably heard that you should wait as long as possible before beginning to collect Social Security. Benefits are calculated based on the highest-grossing 35 years of earnings and also require at least ten years of work to qualify. You can activate your retirement benefits from age 62 up until age 70, with benefits higher the later you collect. This decision sets the base for the benefits you’ll get for the rest of your life in addition to annual cost-of-living adjustments, so you should delay collecting benefits for as long as possible.


Can You Work While Receiving Social Security?


If you wait before drawing from your Social Security, it is possible to work as you like without reduced benefits. However, some agencies withhold some of your benefits if you are younger and your earned wages exceed a specific limit.

As of 2019, the threshold on your earnings is $17,640. If you make more than this amount, the government temporarily withholds $1 for every $2 earned. Eventually, you will receive this money in the form of higher benefits once you hit your full retirement age. Therefore, you may increase your profits if you continue to work; however, there are more detailed, specific rules you will want to check out.


Social Security Benefits for Your Spouse, Children & Divorced Spouse


Spousal Benefits

When you apply for your own social security benefits in addition to applying for spousal benefits, the Social Security Administration will pay out your personal benefits first. If your amount of spousal benefits are higher than your own, you will have combined benefits that are equal to your spousal benefits. 

The amount will steadily be reduced by a percentage if you begin receiving benefits between age 62 and your full retirement age. This percentage is calculated by the number of months remaining until you reach the full retirement age.

Provided that your spouse is under retirement age and works while receiving benefits, their benefits may be affected by the retirement earnings test. If they also qualify for benefits, their applicationwill include both personal and spousal benefits. At full retirementage, your spouse’s benefits cannot exceed one-half of your total retirementamount.


toddler's feet

Children’s Benefits


Your children may also be eligible to receive benefits on your record. The eligible child can be a biological child, an adopted child, or a stepchild. A dependent grandchild may also qualify.

To receive these benefits, the child must: be unmarried; under age 18; or be 18-19 years old full-time student (no higher than grade 12); or be 18 or older and disabled from a disability that started before age 22.

Usually, benefits stop when a child reaches age 18 (unless they have a disability). Nevertheless, if the child is a full-time student at a secondary (or elementary) school at age 18, the benefits are extended until the child graduates or until two months after the child becomes age 19.

The benefits paid for your child do not decrease your retirement benefits. The benefits they may receive plus your benefits may help you decide if taking your benefits sooner is the best choice.


Divorced Spouse

If you are divorced, your ex-spouse can still receive benefits based on your record (even if you have remarried) on the following conditions:


  • your marriage lasted ten years or more
  • your former spouse is unmarried
  • your former spouse is age 62 or more
  • your former spouse’s personal benefits are less than the benefit they could receive based on yours
  • if you are entitled to Social Securityretirement or disability benefits.


You can learn more by visiting the Social Security Administration’s (SSA) website where you can apply for benefits by activating your account.

The SSA promotes the creation of an online account as soon as possible, to prevent scammers from setting up a fake account using your Social Security number.

If you prefer to speak to an agent by phone, call 1-800-772-1213 or (TTY 1-800-325-0778) from 7 AM to 7 PM Monday through Friday. If you prefer to talk to someone in person you can go to your local Social Security office (to avoid long waiting time, call to set up an appointment). If you don’t live in the United States or one of its territories, you can contact the nearest U.S. Social Security office, U.S. Embassy, or consulate.  


Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI)


The odds of your becoming disabled before reaching full retirement age are 1-in-4. Disability benefits are paid either through the Social Security Disability Insurance (SSDI) program funded by the Social Security trust fund or through the Supplemental Security Income (SSI) program funded by general fund taxes.

The Social Security Administration (SSA) oversees and manages these programs, and medical eligibility for disability is determined in the same manner for both.

The main difference between Social Security Disability (SSDI) and Supplemental Security Income (SSI) is that SSDI is funded through payroll taxes while SSI is funded through the general fund. SSDI recipients are “insured” because they have worked enough years while making contributions to their trust fund utilizing FICA Social Security taxes.

To be eligible, SSDI candidates must have earned a certain number of “work credits” and be younger than 65, while SSI disability benefits are available to low-income individuals who either have never worked or haven’t worked enough to earn the requisite work credits to qualify for SSDI. A disabled person becomes eligible for Medicare after receiving SSDI benefits for two years.

The SSI program is strictly needs-based, according to income and assets. To meet the SSI’s program income requirements, you must have a limited income (less than $2,000 or $3,000 for a couple).

Eligibility under the income requirements for SSI includes eligibility for Medicaid in your state. The majority of people who qualify for SSI will also be eligible for food stamps with the amount dependent upon the state and the recipient’s regular, monthly income. When submitting your application for the first time, the SSI benefits will begin on the first of the month.




The Social Security Disability Insurance (SSDI) program enforces a rigorous definition of disability. Social Security pays disability benefits for those who cannot work because they have medical conditions that will last a minimum of one year or result in death. While some programs, such as Workers Compensation insurance, give benefits to people with partial or short-term disability, Social Security does not.

To obtain SSDI benefits there is a five-month waiting period, which means the first five months of your disability will not be covered. Similarly to the Social Security retirement benefit, the amount of the monthly benefit relies on the earnings record.

On average, approval rates for SSDI are higher than they are for SSI. It is more difficult to win disability without seeing a doctor regularly, and since SSDI applicants are more likely to have a higher income and medical insurance coverage, they generally have better medical records. Applicants who have a long work history might be given more credibility. This is because most SSI applicants don’t have long work histories.


What to Expect from the Social Security Administration’s Disability Adjudication Process


Initially, the SSA will review your case and send you a letter explaining their decision when you apply for Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI). If the SSA denies the benefits, it is possible to request a reconsideration appeal. The SSA takes another look at your case. If the SSA denies you a second time, you must then request a hearing with an administrative law judge for further adjudication.

This means that the SSA must deny your claim twice before a case ever reaches an Administrative Law Judge (ALJ) at the Office of Disability Adjudication and Review (ODAR). The ALJ cannot influence the original decision or the reconsideration appeal that was made by the SSA.

ODAR has 160 hearing offices located in major cities across the nation; therefore, the disability hearing, which requires your attendance is usually within 75 miles of your home.

You may choose to have a disability attorney represent you at the hearing. Based on the information in your case, a judge will make a decision. The SSA will send a letter with a copy of the final decision.

If you disagree with this decision, it is possible to ask for a review of Social Security’s Appeals Council. They look at all requests for review, but they may deny it if the council believes the decision was proper. If the Appeals Council decides to review your case, it will either decide your case or return it to an ALJ for review. If the Appeals Council denies your case, you may file a lawsuit in a federal district court.


Pros and Cons of Hiring an Attorney for Your SSDI Case


As we’ve seen, navigating Social Security disability benefits can be challenging, and by now, you may be wondering whether you should consult an attorney for your case.

A survey by Lawyers.com found that 33% of applicants for SSDI and SSI hired a lawyer for their initial application to the SSA. Another 71% hired a lawyer for their appeal hearing with the Administrative Law Judge (ALJ) at the Office of Disability Adjudication and Review (ODAR). The survey further found that 60% of respondents who hired an attorney were approved for disability benefits compared to 34% of those who didn’t use an attorney.

An attorney can charge up to 25% of back-pay with a maximum cap of $6,000 but only collects if your case wins as these are, similar to auto accidents and contingency cases. The attorney must also keep track of their time spent on your case, which means he or she cannot merely charge the maximum unless it’s warranted. The average fee for an SSDI case is $3,750 and in an SSI case is $2,900.

Many attorneys may have a policy of declining to take a case unless it has already been denied twice by the SSA and is now ready for the appeal hearing to the ODAR. It is recommended to consult an attorney that specializes in SSDI and SSI cases as they have the expertise to take your case from the initial application to the SSA and, if that phase is successful, you can circumvent the hearing process altogether, saving yourself time and money.




This can give you an advantage as a specialist attorney will know how to fill out the initial application to SSA to your best advantage. A skilled attorney will assess work credits to qualify; analyze of the disability listing(s); check whether your medical records are adequate or if you need an exam and can also arrange for Social Security to pay for it; select a doctor experienced in SSA’s disability requirements and procuring a prompt report from the examining doctor; professionally prepare your case for the ODAR hearing; cross-examine the vocational expert; and fight for your best onset date which affects your benefit award; and estimate your benefit and the likelihood of winning.

Many, if not most, attorneys will have a free initial consultation appointment with you to determine the potential value of your case. They may request your medical records ahead of the consultation to review them and better assess your situation.

Besides giving you a better chance at maximizing the effectiveness of your initial application to SSA, it will undoubtedly reduce the possible two year wait time to get the hearing if you have an attorney directing your case from the start.

Regardless of your choice, you may want to check out the Disability Kit at the SSA’s website.


Disability Benefits for Your Family


Only adults over 18 are eligible to receive disability benefits from SSDI. However, a disabled person’s spouse and child dependents are eligible to receive what are called “auxiliary benefits.”

Family members may qualify for benefits based on your work history. Your spouse qualifies if he or she is age 62 or older. Your spouse may also qualify at any age if he or she is caring for a child of yours who is under 16 or disabled. A child, even an adopted child, and sometimes stepchildren and grandchildren may also qualify. To qualify, the child must be under 18 (or under 19 if still in high school). A child over 18 may also qualify if they suffer from a disability that started before they turned 22. Sometimes, a divorced spouse may qualify for benefits based on your earnings if he or she was:


  • married to you for at least ten years
  • is not currently married
  • is at least age 62


The benefits paid to a former spouse do not reduce your benefit or any benefits allocated to your current spouse or children.


Benefits to Your Survivors


The amount of benefits your family receives is calculated by using your lifetime earnings average. The higher your lifetime average earnings were, the higher their benefits will be. We calculate these benefits amounts by assuming you had reached full retirement age before you die.


family and sunset


If you are receiving reduced benefits when you die, survivors’ benefits will be a certain percentage of that amount.

The following are examples of monthly benefit payments:


  • Widow or widower, full retirement age or older—100 percent of the benefit amount
  • Widow or widower, age 60 to full retirement age—71½ to 99 percent of your necessary amount
  • Disabled widow or widower, age 50 through 59—71.5  percent
  • A widow or widower, any age, caring for a child under age 16—75 percent
  • A child under age 18 or disabled—75 percent
  • Your dependent parents, age 62 or older
  • One surviving parent—82.5 percent
  • Two surviving parents—75 percent to each parent.


The percentages for a divorced spouse are the same as those for a current spouse.

Although the limit varies, there’s a limit to the amount that family members can receive each month. It is usually between 150 and 180 percent of the basic benefit rate.


Retirement Plans: IRAs, 401ks, Pensions and Annuities


The next section is an overview of the most used retirement plans, each with its limitations and advantages such penalties, contribution limits tied to your modified adjusted gross income and caps on annual contributions. A brief look at these options will help you zero in on the one best for your situation.


Individual Retirement Arrangements (IRAs)


This is a tax-favored investment account. It is possible to use it to invest in stocks, bonds, mutual funds, ETFs, and other types of investments. After you place money into it you’re free to make your own investment decisions.


If your boss does not provide you with a retirement plan, you should consider investing in an IRA. As of 2019, you can contribute up to $6,000 per year. If you are 50 years old or older, this amount increases to $7,000. You’ll pay no taxes on your contributions or investment gains until you retire.


Also, many taxpayers can deduct their IRA contributions from their income tax returns even if they don’t have a 401(k) retirement account, which reduces their taxable income for that year. There are some restrictions based on your salary. The moment money is withdrawn in retirement taxes must be paid on the income you contributed as well as on any gains.


You have the ability to buy and sell investments within the IRA. However, if you try to take money out before you reach the age 59, this is considered an early distribution and you will probably have to pay a 10 percent early withdrawal fee. Additionally, you’ll be subject to federal and state and income taxes on the withdrawal.


money savings

Roth IRAs


Roth IRA contributions are made with after-tax dollars. Any money generated within the Roth IRA is never taxed again.

Provided that five years have passed since the first contribution, you can withdraw from a Roth IRA before retirement age without any penalty. It is not mandatory to begin taking withdrawals at age 70 as it is with other retirement savings plans.

Placing money in a Roth is a great place to invest extra cash if you’re just getting started preparing for retirement and you think your income will grow. Plus you’ll give your future self a tax break. It is possible to contribute to an IRA as well as to a Roth IRA. Nevertheless, the total contributions to both plans can’t exceed the $6,000 contribution limit for the year.


401(k)s Plans


A 401(k) plan is offered by employers as an employee benefit. With this type of account, it is possible to contribute a portion of your paycheck to tax-deferred investments, thereby reducing the amount of taxable income for any given year. For example, your taxable income would be $80,000 if you earned $85,000 and contributed $5,000 to your 401(k).

Unfortunately, your choices or 401(k) plans are often limited to ones with high management and administrative fees. The IRS imposes contribution limits per year, but restrictions for 401(k) plans are often more generous compared to other plans with a limit of $19,000 as of 2019. After age 50, your contribution limit increases to $25,000 per year.

Until you withdraw the money in retirement, investment gains grow tax-deferred. A 10 percent penalty is charged if you withdraw funds from the plan before age 59½ and the withdrawal is subject to federal and state income taxes. However, if you have an emergency and need cash, some programs do offer 401(k) loans.

Typically, many employers match employee contributions to a 401(k) plan up to 6 percent. On the other hand, employers might stretch out their contributions over a period of years, which means you’ll lose the matching funds if you leave before the prescribed period. You are still guaranteed your contribution to the match, but the employers’ matching contribution would be forfeited.

Regardless of this drawback, an employer match is essentially free money. Often with these plans, employers will allow contributions through automatic payroll deductions, making saving more steady and consistent.

Other forms of this type of account include the 403(b) (for educators and nonprofit workers), and 457(b) (for government employees).


Roth 401(k)


A Roth 401(k) is a hybrid of a 401(k) and a Roth IRA. Similar to a Roth IRA, contributions are taken from your after-tax income. If you remain in the plan for a minimum of five years, contributions and earnings in a Roth are never taxed again.

However, there’s a catch with this type of plan as well. Contribution limits become stricter if your modified adjusted gross income (MAGI) reaches a certain point. Contributions are also prohibited if you earn too much. Phaseouts begin at MAGIs of $122,000 for single filers in 2019, and you can’t contribute if your MAGI tops $137,000. The limits for married taxpayers filing joint returns begin at $193,000 and tops out at $203,000.


The Savings Incentive Match for Employees (SIMPLE) IRA


The SIMPLE IRA is a retirement plan designed for small businesses with up to 100 employees. In this investment plan, contributions are made with pre-tax paycheck withdrawals, and the money remains tax-deferred until retirement.

Distributions start to be collected within two years of opening the plan. Taking distributions from a SIMPLE IRA before age 59 can result in severe penalties. Unlike a 401(k), you cannot borrow money from a SIMPLE IRA.




A SEP IRA allows you to designate part of your salary to your retirement account. If you’re a freelancer and have no employees, you can fully deduct these contributions from your taxable income.

As of 2019, the maximum annual contribution limits are the lesser of $56,000 per year or 25 percent of your annual income.




A pension is a type of retirement account that some companies offer their employees. Pensions are typically offered by government employers. Your employer creates and maintains the pension fund for you and manages the investments on your behalf.


This means you will have no control over what or how investments are made. The investments are funded with pre-tax income so you will have to pay taxes on any gains when you retire. You can choose to receive monthly payments or a lump-sum payment. The exact amount of your pension depends on factors that include your age, salary, and the length of time you worked for the issuing employer.

You should research the details of your pension. You should always ask whether you can draw from it for emergency purposes and whether it automatically goes to your survivors in the event of your death.




Annuities are contracts with insurance companies. The contract is purchased for an amount of money, which is paid out in either one lump-sum or periodic payments.

The insurer can invest your money in mutual funds, stocks, or bonds. When you retire or sooner, depending on the terms of your contract, you can start to receive regular payments from your annuity.

Annuities are insured investments. If you select a highly rated company, you’re relatively safe, but the fees can cut into your returns. Be sure to consult a financial advisor to learn about the benefits and especially the risks of annuities before signing any contract.


IRA Survivor Benefits


If your spouse leaves you with a Roth or traditional IRA, you can transfer the account into your name and withdraw when you want, or until you turn 70½. If you have an employer-sponsored plan such as a 401(k), 401(b) or 457, you can roll a traditional IRA into that. Inherited Roth IRAs can be transferred to a spouse’s own Roth account. Alternatively, you can take the required non-spouse beneficiary mandatory distributions.


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