 Investment
shouldn't limit Social Security
|
 Dear
Dr. Don,
I am a young widow who received a small life insurance amount. I
am considering purchasing a rental property, for a family member
to live in, as a long-term investment. Are there any implications
as far as my future and the widow benefits I receive from Social
Security to take care of my three children?
-- Tammy Twixt
 Dear
Tammy,
The survivors benefits you receive as a young
widow are based on the age of your husband's children, not your income level.
Here's what the Social Security electronic
publication on the topic has to say about survivors benefits:
Social
Security survivors benefits can be paid to:
- A widow or widower full benefits at full retirement
age, or reduced benefits as early as age 60. A disabled widow
or widower may receive benefits as early as age 50.
- A widow or widower at any age if he or she takes care of the
deceased's child under age 16 or disabled, who receives Social
Security benefits.
- Unmarried children under 18, or
up to age 19 if they are attending elementary or secondary school full time. A
child can receive benefits at any age if he or she was disabled before age 22
and remains disabled. Under certain circumstances, benefits can also be paid to
stepchildren, grandchildren or adopted children.
- Dependent parents at
62 or older.
What if I work?
- If you work while getting Social Security survivors benefits
and are younger than full retirement age, your benefits may
be reduced if your earnings exceed certain limits. (The full
retirement age was 65 for people born before 1938 but will gradually
increase to 67 for people born in 1960 or later.) To find out
what the earnings limits are this year and how earnings above
those limits reduce your Social Security benefits, contact us
to request the publication, "How
Work Affects your Benefits" (Publication No. 05-10069).
- There is no earnings limit after you reach full retirement
age.
- Also, your earnings will reduce only your benefits, not the
benefits of other family members.
What income counts ... and when do we count it?
- If you work for someone
else, only your wages count toward Social Security's earnings limits. If you are
self-employed, we count only your net earnings from self-employment. We do not
count income such as other government benefits, investment earnings, interest,
pensions, annuities and capital gains.
- If you work for wages,
income counts when it is earned, not when it is paid. If you have income that
you earned in one year, but the payment was made in the following year, it should
not be counted as earnings for the year you receive it. Some examples are accumulated
sick or vacation pay and bonuses.
- If you are self-employed,
income counts when you receive it -- not when you earn it -- unless it is paid
in a year after you become entitled to Social Security and earned before you became
entitled.
Buying an investment property and receiving
rental income from that property shouldn't influence the level of survivors benefits
you receive from Social Security as a widow.
Note: Thanks, and a tip of the hat to James Ivers
III, professor of taxation at The American College, for his help
in understanding the issues surrounding Tammy's question.
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