Here is a simple social security question.

I have a friend who is 60 years old, his wife is 57.

They earned about 90k together (including an inheritance) in 2004.
They are self employed and can divide their income in any way they
like between them on their tax return(s).

He would like to know what is the wisest way to collect points with
the social secutity administration for both him and his wife.

Would it be wiser to file all of the income as his own, until he
retires... then file it as his wife's? Would it be wiser to file all
of the income between them evenly until he retires so the both get
points?

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Request for Question Clarification by czh-ga on 17 Jan 2005 17:50 PST

Hello favored-ga,

It is impossible to answer your question without knowing the couple's
work history. Has he been working steadily all his life without
substantial breaks? What has been his income level through the years?
Has she been employed or self-employed through the years or has she
been out of the labor force? We need enough information to be able to
estimate how much each of them will get in retirement income based on
their own earnings records before we can make an attempt to answer
your question. Thanks.

~ czh ~

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Clarification of Question by favored-ga on 18 Jan 2005 05:16 PST

Thank you for the clarification request. I will do my best to answer
your questions.

They are originally from another country. My understanding is that
they became citizens in the late 90's and started paying taxes and
social security here around that time. So their earnings records with
the SSA only goes back about 6-7 years. Until then they were paying
taxes and social welfare to a European country that will also be
paying them some retirement as a result.

They are both self-employed together and have been steadily
self-employed for a long time. They have earned $40k-$60k/yr in the
last 7 years.


I hope this answered your questions -- if not please ask me to clarify
again. I'll tip well for any trouble.

Thank you!

Hello again favored-ga,

Your clarification helped a lot. The best place to get good
information to guide your friends in their financial planning for
retirement is the website of the Social Security Administration. They
will be able to use the many online tools to check their current
status and to make the appropriate projections for the future. I?ve
collected the most relevant starting points to help answer the
specific questions you raised.

Best wishes to you and your friends.

~ czh ~

http://www.ssa.gov
Social Security Administration

***** Start here to get all your questions answered.

-------------------------------------------------


http://www.ssa.gov/mystatement/
Your Social Security Statement

***** Your friends can go to the online Benefits Planners from this
page and calculate their own future benefit estimates based on various
scenarios for projected future earnings. Since your friends only
started earning Social Security credits in the mid-nineties they will
have to keep working until they have earned a minimum of 40 social
security credits to be eligible for any retirement payments.

How many credits do I need to receive benefits?
Everyone born in 1929 or later needs 40 social security credits to be
eligible for retirement benefits. You can earn up to four credits per
year, so you will need to work in at least 10 years to become eligible
for retirement benefits. During your working years, earnings covered
by social security are posted to your Social Security record, and you
earn credits based on those earnings. Each year the amount of earnings
needed for a credit rises as average earnings levels rise. In 2005,
you receive one credit for each $920 of earnings, up to the maximum of
four credits per year. For 2004, you receive one credit for each $900
of earnings. If you become disabled or die before age 62, the number
of credits needed depends on your age at the time you die or become
disabled. A minimum of 6 is required regardless of your age.

-------------------------------------------------


http://ssa-custhelp.ssa.gov/cgi-bin/ssa.cfg/php/enduser/std_alp.php?p_cat_lvl1=12&p_cat_lvl2=78
Family Benefits

***** The question of whether it would be more advantageous to report
income for both husband and wife or only for the husband will partly
depend on that they?ve reported in past years. This section of the SSA
site explains what benefits a wife might be eligible for and gives you
methods for comparing these to any benefits she might collect on her
own earnings record.

-------------------------------------------------


http://www.ssa.gov/r&m1.htm
Plan Your Retirement

***** This page provides lots of information to help your friends plan
for their retirement.





SEARCH STRATEGY

Social Security Adminsitration

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Request for Answer Clarification by favored-ga on 18 Jan 2005 20:45 PST

I'm still kind of left in a daze of SSA confusion. Is there really no
other way to make more sense of it?

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Clarification of Answer by czh-ga on 18 Jan 2005 22:19 PST

Hello again favored-ga,

I?m sorry you?re feeling confused. The SSA website is very
comprehensive and it can look intimidating. However, the issues
involving your friends are fairly simple.

You say that they?ve been in this country since the mid-90s and ?their
earnings records with the SSA only goes back about 6-7 years.? Your
question seems to say that they have been self-employed for these
years. If they continue working they should be able to earn the
minimum of 40 social security credits to qualify for retirement
benefits.

There are two possibilities for their reported self-employment
earnings. If the husband has been reporting all of the earnings under
his own record, he will qualify for retirement benefits on his own
record and should keep reporting all of their business income to his
own record. His wife will qualify for wife?s benefits. Wife?s benefits
are half the wage earner?s and may be reduced for starting them before
reaching full retirement age.

If they have been reporting the self-employment income as shared, then
each will have benefits on their own earnings record as long as they
have the minimum number of social security credits. It depends on how
they reported the earnings as to how much the benefit will be on an
individual basis or as wage earner and wife. It?s impossible to
determine what?s the best course of action for the current year
without knowing how they have been reporting their joint
self-employment earnings for past years.

The SSA website is quite easy to follow if you have the information
about the individual?s earnings. I suggest that you meet with your
friends and work through the site together. I?m sure that with their
earnings history in hand you will be able to figure out what is the
most advantageous action to take.

Wishing great financial success for you and your friends.

~ czh ~