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Social Security

www.ssa.gov

www.socialsecurity.gov

Quiz

1.  If you are an average wage earner, how much of your pre-retirement earnings will Social Security replace?

A  For the average wage earner, Social Security replaces about 40 percent of pre-retirement earnings.

2.  How many years of earnings will your basic Social Security retirement benefit be based on?

The amount of your retirement benefit is based on your age at retirement and on your earnings averaged over most of your working lifetime.

3.  If you don't reitre at your full retirement age, will your eventual benefit be higher because you continued to work?

Your benefit will increase in two ways.  First, each additional year you work adds another year of earnings to your Social Security records, and higher lifetime earnings may result in higher benefits when you retire.  Secondly, your benefit increases by a certain percentage when you delay retirement.  For example, if you were born in 1936, your benefit increases 6 percent each year you delay retirement, up to age 70.

4.  Is there a maximum Social Security retirement benefit amount?

The maximum Social Security benefit in January 2006 for a working retiring at full retirement age is $2,053.

5.  Once your retire, do you have to pay federal income taxes on Social Security benefit? 

Social Security benefits are considered taxable income for beneficiaries are considered taxable income for beneficiaries whose countable income exceeds certain limits.  (Countable income includes adjusted gross income, tax-exempt interest income and part of Social Security benefits.)

The amount of Social Security benefits subject to federal income tax is:  Up to 50 percent, for individual tax filers with incomes from $25,000 through $34,000 and joint filers with incomes of $32,000 through $44,000; and, Up to 85 percent, for individual tax filers whose incomes exceed $34,000 and joint tax filers whose incomes exceed $44,000. 

Georgiann Drake, Social Security Administration Public Affairs Specialist

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"The Mistake of Titling Your Assets Jointly "

Is your checking or savings account titled jointly with one of your children? Many of you have added your son or daughter's name as joint account holders so that your child may pay your bills or to avoid probate. However, what you may not realize is that your child, as a joint account holder, may withdraw 100% of the money in the account, without your consent. Further, upon your death, the money on deposit in those accounts will automatically, by operation of law, go to that child. Your child has no legal obligation to share that money with your other children. Consequently, you unintentionally disinherit your other children.

Consider this. Your son, Paul, is the joint account holder on your bank accounts that are valued at $100,000. The bank accounts are your only assets. You execute a Last Will & Testament and devise your estate to your three children, equally. Upon your death, the bank accounts, worth $100,000 will go to Paul because he is the co-owner of the accounts. Nothing will pass according to your Last Will & Testament because all your assets were titled jointly with Paul. The result - your other two children receive nothing. You have unintentionally disinherited your other two children.

To avoid these problems, consider executing a Durable Power of Attorney. A Durable Power of Attorney will allow another individual to act on your behalf when you are unable to act for yourself and incapacitated. Most attorneys can draft and explain the power of attorney documents to you.

If you are concerned with avoiding probate, consider naming your children as payable-on-death beneficiaries on your accounts rather than titling your accounts jointly. Next time you are at your bank, simply ask the representative for the appropriate paper work to designate a beneficiary on your account. Most bank customer service representatives will be more than happy to assist you with this. ...

What is the Indiana Inheritance Tax?


If you die in Indiana, your loved ones will have to pay inheritance tax on the assets that you leave them. Unfortunately, Indiana is one of the few states that have an inheritance or death tax. All property that is transferred as a result of your death is subject to the inheritance tax ? with two exceptions. Real property that is not located in this state and life insurance proceeds that are payable to a beneficiary other than your estate are not subject to the inheritance tax.

The tax rate and the exemption amount depend on the relationship between you and the person to whom you leave your assets. There is no tax on the assets that you leave to your spouse. Your spouse receives a one hundred percent (100%) exemption. A Class A transferee is an individual who is your lineal ancestor, lineal descendant, stepchild or lineal descendent of a stepchild. The first one hundred thousand dollars ($100,000) of assets transferred to an individual who is a Class A transferee is exempt ? meaning it is not taxed. The amount over one hundred thousand dollars ($100,000) is taxed at a rate starting at one percent (1%) and the tax rate goes gradually up to ten percent (10%).

A Class B transferee is an individual who is your brother, sister, descendant of a brother or sister, spouse, widow or widower of one of your children. The first five hundred dollars ($500) of assets transferred to a Class B transferee are exempt. The amount over five hundred dollars ($500) is taxed at a rate of seven percent (7%) and the tax rate goes gradually up to twelve percent (12%).

A Class C transferee is any other individual. This transferee is an individual that is not related to you by blood. The first one hundred dollars ($100) of assets transferred to a Class C transferee are exempt. The amount over one hundred dollars ($100) is taxed at a rate of ten percent (10%) and the tax rate goes up to twenty percent (20%).

The personal representative of your estate is required to file the inheritance tax return with the local probate court within nine (9) months after the date of death. The inheritance tax is due within twelve (12) months of death. However, if the inheritance tax is paid within nine (9) months, the person making the payment is entitled to a five percent (5%) reduction in the inheritance tax due. If the inheritance tax is not paid within twelve (12) months of death, interest will accrue at a rate of ten percent (10%) per year from the date of death until the payment is made. "


Beckman, Kelly & Smith - Alissa Kohlhoff

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