Nicholas Scheibner is quoted on this topic in two separate articles in NJMoneyHelp.com by Karin Price Mueller, originally published on June 1, 2020 and July 6, 2020.
A 90-second read by Nicholas Scheibner, CFP®:
Can you borrow from your Social Security? *
- The short answer is No, you cannot “borrow” from your Social Security. Through the years, there have been talks about allowing the option for loans from Social Security. However, the system was never designed to allow such a thing.
- Social Security was established in 1935, by Franklin Delano Roosevelt. The system was designed to economically protect United States workers in old-age, and make provisions for the blind, dependent and disabled children. The original retirement age of 65 was chosen as the most reasonable and manageable age to maintain the program without too much payroll taxation. The ability to tax payroll was done through the Federal Insurance Contributions Act, or “FICA” which you see on your paycheck. The original benefit for Social Security was “Retirement Benefits.” Social Security has since added benefits such as survivor, disability, and spousal benefits.
- In order to qualify for your own retirement benefits, you need 40 credits. You receive 1 credit each time you earn more than the required income for that year. In 2020, you receive one credit for each $1,410 of earnings, up to the maximum of four credits per year. This is typically described as 10 years of work, (4 quarters of 10 years = 40 credits). However, you can earn all 4 credits in a single month during the year.
- The credit system only determines if you qualify for benefits. It does not determine what your benefit will be. If you do qualify for benefits, Social Security will calculate an average of your monthly wages for your highest 35 years of work. If you work more than 35 years, this means higher income years can replace lower income years and increase your average.
- You can begin taking your own retirement benefits as early as age 62. However, you will see a 30% reduction in your Full Retirement Age (FRA) benefit. Also, if you are working, you will be subject to Social Security’s working income limits.
Can I get my spouses’ Social Security when they pass away? Even from my ex-spouse?
- As a married couple, when looking at Social Security, what may be helpful is to think of three buckets: Your spousal benefits, your own retirement benefits, and your survivor benefits. In the eyes of Social Security, these are all different benefits.
- For people who are divorced, Social Security allows you to claim spousal benefits on the ex-spouse’s earnings record as-long-as the marriage lasted for at least 10 years. This will last even if the ex-spouse remarries. However, if you remarry, spousal benefits will be assessed on the current spouse’s earnings record.
- Regarding survivor benefits, as Social Security states, if you remarry after you reach age 60 (age 50, if disabled), your remarriage will not affect your eligibility for benefits.
- For more information on survivor benefits, visit the Social Security website at: https://www.ssa.gov/planners/survivors/ifyou.html
- This working paper from Social Security talks about the potential effect that Social Security has on couples who may want to remarry, but have not, due to Social Security benefits. https://www.ssa.gov/policy/docs/workingpapers/wp89.html
If you have any further questions, please reach out to your Baron Team.
Disclosure: This is a general communication being provided for informational purposes only. Past performance is no guarantee of future results. Every investment strategy has the potential for profit or loss. This material is not intended to be relied upon as a forecast, research, tax or investment advice. Please consult your tax planning professional for personal tax advice.