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1 Page 1 of 5 21 West 38th St. - 14th Floor, New York, NY phone: (888) ext.1 Thursday, December 1, Social Security Disability Dear Savvy Social Security Advisor, More and more advisors are encountering clients who are either receiving, or asking about, Social Security disability benefits. This portion of the Social Security program is so big and so complex that there are law firms that specialize in helping clients navigate their way through it. Although it is beyond the purview of Savvy Social Security Planning, you should have a working knowledge of disability basics so you can answer questions and refer clients to the appropriate resources. There are two forms of disability benefits. One falls under the SSI (Supplemental Security Income) program, which is need-based for people with less than $2,000 in assets. The other is part of the regular Social Security program: anyone who has worked in a Social Security-covered job at least 10 years may become eligible for disability benefits if he finds himself unable to work because of an illness or condition that meets Social Security's definition of disability. We will refer to this as SSDI (Social Security Disability Insurance), but it is not to be confused with the disability portion of SSI. For those who qualify, SSDI may be a way to avoid taking a permanently reduced retirement benefit. Let's say you have a client who is 62, has a PIA of $2,200, and has stopped working because of some physical limitation. He may decide it's time to go ahead and apply for early retirement benefits. If he does this, he'll receive a monthly benefit of $1,650 (75% of $2,200). But if he can qualify for disability benefits, he'll receive a monthly benefit equal to his PIA, or $2,200. Then when he turns full retirement age, his disability benefit will convert to a retirement benefit in the same amount (plus COLAs). The biggest drawback is that it's a hassle. And the income doesn't start right away there's at least a five-month waiting period after the onset of the disability, during which time no benefits are paid. Most disability claims are denied at first, which is why lawyers have their work cut out for them helping clients appeal their disability rulings. But if your client is under full retirement age and has a legitimate disability claim, it may be worth it to file in order to avoid taking a permanently reduced retirement benefit. Keep in mind that SSDI is only for clients who are under full retirement age (after FRA they would receive their regular retirement benefit). And a client who takes advantage of SSDI while under FRA may be prohibited from pursuing certain spousal strategies after FRA. For example, he wouldn't be able to restrict his application to his spousal benefit under the claim-now-claim-more-later strategy because he would already have an active application for his retirement benefit due to the automatic conversion from disability at FRA. He could, however, suspend the benefit and earn delayed credits from age 66 to 70. Here are some commonly asked questions about SSDI: Who is eligible for SSDI? Your clients may be eligible to receive SSDI if they: Have worked in jobs covered by Social Security Have a medical condition that meets Social Security's definition of a disability To receive SSDI, your client's disability must be expected to last at least one year or result in death. Your client will not receive benefits for partial or for short-term disability (less than a year). For more information about work credits for disability benefits, see Work Credits Needed for Disability Benefits ( Why is there a five-month waiting period to receive SSDI benefits? The waiting period is long enough to permit most disabilities to be corrected or for your client to show signs of probable recovery within less than 12 months after the onset of disability. What does Social Security consider a disability?

2 Page 2 of 5 Disability under Social Security is based on a person's inability to work. Your client will be considered disabled if he/she cannot perform at the same working capacity as he/she did before, and Social Security decides that he/she cannot adjust to other work because of his/her medical condition(s). Your client's disability must also last or be expected to last for at least one year or to result in death. Where can I get a list of disabling impairments for Social Security Disability? You can get a copy of Disability Evaluation Under Social Security ("The Blue Book" 5/02; SSA Publication No ), which contains the medical criteria Social Security uses to determine disability. It is intended primarily for physicians and other health professionals. What information does my client need to provide in order to apply for SSDI benefits? Your client may need to provide the following information to apply for SSDI benefits: Social Security number Birth certificate or other proof of age Names, addresses, and phone numbers of doctors, hospitals, clinics, and institutions that treated the client, and the dates of treatment Names of all medications being taken How does my client apply for SSDI? Your clients can apply for disability benefits online at or by calling toll-free, Social Security representatives can make an appointment for your client's application to be taken over the telephone or at a local Social Security office. What is the typical time period to apply for SSDI? Social Security considers the application filing date to be the day your client makes an appointment to apply for SSDI. It generally takes approximately 90 days to process a claim for disability benefits. The time may be shorter or longer depending on the amount of information required to make a decision on your client's claim. Once my client is eligible for SSDI, how long will he/she be enrolled? Your client will continue to receive SSDI benefits as long as he/she continues to be disabled and meets other eligibility requirements. However, Social Security will periodically review your client's case to see whether he/she is still disabled. The frequency of the reviews depends on the expectation of recovery. If medical improvement is "expected," your client's case will be reviewed within six to 18 months. If medical improvement is "possible," your client's case will be reviewed in three years. If medical improvement is "not expected," your client's case will be reviewed in seven years. What about Medicare? If your client qualifies for Medicare through disability, Social Security will automatically sign him up for Parts A and B and mail his Medicare card shortly before benefits become effective. He can decline Part B if he wants for example, if he is covered by employer-sponsored health insurance. For more information please see Chapter 9 of the Financial Advisor's Guide to Savvy Social Security Planning, as well as the following resources: Social Security Disability ( Social Security Disability Help ( Disabling Conditions ( Social Security Disability Tips ( Mistakes in Forbes, Investment News articles

3 Page 3 of 5 Savvy advisors are catching errors in media stories which are attempting to clarify Social Security nuances but are doing more to confuse or even misinform. Norman N. noticed errors in "The Social Security Spousal Benefit" ( and Doug V. alerted us to errors in "Like Comedy, Secret to Social Security is Timing" ( AID=/ /REG/ ) The Forbes article was written by Jim Blankenship, a respected financial planner who seems to be very knowledgeable about Social Security. But it mentions that "Dick" who is 66, has a PIA of $2,600. This is too high, even for a hypothetical case. A maximum earner born in 1945 would have a PIA of about $2,366. It might be OK to round up to $2,400, but $2,600 could set up unrealistic expectations. The article says that if Jane, who is 62 and has a PIA of $1,000, files for her benefit today, it will be reduced by 30%. This is wrong. Since she was born between 1943 and 1954, it would be reduced by 25%, giving her a benefit of $750, not $700. This causes some of the other calculations to be incorrect as well. The bullet points under the conclusion are all correct, but some of the examples are confusing and inaccurate. The Investment News article got completely mixed up trying to explain file-and-suspend (which they call claim-andsuspend, which is OK) and claim-now-claim-more-later. It says that under claim-and-suspend, both spouses must be over full retirement age. This is incorrect. Only the spouse who is filing and suspending must be over FRA. The other spouse can be under FRA and receive the spousal benefit as long as it is higher than her own benefit. I think the author tried to explain this by saying that a spouse under FRA is "required to take his or her payments," but it wasn't at all clear which spouse it was talking about and only added to the confusion. Another bothersome piece of advice in connection with the earnings test was, "don't earn a lot of money if you're going to file early, because they're going to reduce your benefit." This is old-style thinking. A better piece of advice is, "if you're going to earn a lot of money, don't file for Social Security before full retirement age." Thanks to all our eagle-eye advisors for bringing these to our attention. Question of the week Q: Here's a really interesting/unique one for you. We have a client [male] who was married for over 20 years to a woman 8 years his senior. He has very little earnings history, whereas the ex-wife has a reasonable amount of SS earnings history. Soon after his divorce, roughly years ago, he visited Jamaica (he was there for a few weeks) and remarried someone while there a spur of the moment decision, apparently. This marriage quickly unraveled, but technically the marriage wasn't terminated for roughly 2 years. The Jamaican wife was never a citizen nor a resident of the US, nor has she set foot in the US since prior to meeting our client. The question is: Since the client was remarried for 2 years, has he disqualified himself from receiving benefits based on his former wife's SS history? Ron M. A: That is interesting. But not to worry. As long as he and the Jamaican woman were properly divorced, he can receive divorced-spouse benefits based on his first wife's earnings history. The key is that he must be currently unmarried. Although we often say that remarriage makes a person ineligible for divorced-spouse benefits, that's only if the remarriage lasts. If the remarriage ends and the person becomes single once again, he can claim divorcedspouse benefits just as if the remarriage had never taken place. By the way, we heard from one advisor who was interested in knowing what her own divorced-spouse benefit would be. She simply visited her local SSA office with a record of the marriage date, the divorce date, and her ex-husband's Social Security number from an old joint tax return. The SSA worker looked it up and printed it out. "Worked just fine. No estimating!" she said. New and notable 90+ in the United States: ( Key findings: The 90+ population will continue to grow both in size and proportion of the older population. Social Security represents almost half of total personal income for the 90+. Women aged 90+ outnumber 90+ men nearly 3 to 1. Over 80 percent of the 90+ women are widowed, while more than 40 percent of the 90+ men are married. Difficulty doing errands alone and mobility-related limitations are the two most common types of disability for the 90+. "The Financial Recovery for Retirees Continues"

4 Page 4 of 5 ( The 2011 study finds that retirees: Feel more financially secure than in 2009, but not quite as secure as in Are more confident than in 2009 when it comes to having saved enough for retirement, but are less confident than they were before the financial crisis in Have not changed their risk tolerance level since 2009 when they were more conservative than in Have overall less household debt than in 2008 and Continue to control spending at a proportion more similar to that seen in 2009 than in Are just as likely to have financial advisors as in "80 Is The New 65 For Many Middle Class Americans When It Comes To Retirement" ( Excerpt:: Three fourths (76%) of the 1,500 middle class Americans surveyed say it is more important to have a specific amount saved before retirement, regardless of age, while only 20% say it is more important to retire at a specific age, regardless of savings. The survey also found: A quarter (25%) of middle class Americans say they will "need to work until at least age 80" to live comfortably in retirement Three-fourths (74%) of middle class Americans expect to work in their retirement years, including 39% of all respondents who will need to work to make ends meet or maintain their lifestyles, while 35% say they will work because they want to, rather than out of financial need. Among middle class Americans age 40 to 59, 54% say they will "need to work," compared to 34% of those age 25 to 39. Accordingly, only 25% of those between the ages of 40 and 59 say they will work in retirement because they "want to," versus 45% of Americans between the ages of 25 and 39. Of the Americans who will work in retirement, 47% say they will do "similar work" to their pre-retired years, while 42% say they will work in a position that requires "less responsibility." Retirement Income Study by Charles Schwab ( Excerpt: Pre-retirees aged who are 5 years or less from retirement are generally feeling optimistic about how prepared they are for retirement. But, that definition of retirement is evolving with almost half (48%) saying that retirement means working part-time or that there is no such thing as retirement. "Who is retirement ready? Depends on how you look at data" ( Excerpt: "Studies which indicate that only half of Americans are prepared for retirement tend to use the standard income replacement ratio concept used by the financial industry and some government/academic economists," Mr. Utkus said. "The more positive studies generally use a less restrictive benchmark." The NBER study, authored by the two RAND researchers, observes that among older households today, spending in retirement gradually declines with age. For the next generation of retirees, the study defines adequate preparation as being able to match that gradually declining consumption level of current retirees. When it incorporates these observations into its modeling, it comes to the overall conclusion that 71% of households have the assets to finance their retirement standard of living. In the news "Life After Age 90" ( Excerpt: Over the past eight decades, older women have added almost seven years to their life expectancy, or a 54 percent extension, compared with 5.3 years for men, a 45 percent extension. Among the age 90-and-older population, there are just 35 men for every 100 women. After age 95, there is approximately one man for every four women. "Goodbye, Golden Years" ( It's counterintuitive, but the forever work life of older Americans may turn out to be a good thing for young workers. The "lump of labor fallacy" envisions an economic order in which there is a fixed amount of work to be done. But we can make more or less, buy more or less, and most important, we can create new lines of enterprise. Over time, growth and innovation can create plentiful new work opportunities. If the economy needed only a lump of labor, the spectacular expansion of America's female work force would have led to vast male unemployment. But it didn't. In fact, the number of working women rose by 87 percent in the 25 years between 1975 and 2000, during which time total male employment also increased, by 41 percent.

5 Page 5 of 5 Opinion "Why Raising the Retirement Age Won't Shrink the Deficit" ( Washington deficit cutters often attempt to justify a higher Social Security retirement age by pointing toward rising longevity and the need to work longer. There are several problems with that argument. First, most of the longevity gains are going to affluent Americans with access to better health care and diets, and occupations that are less demanding physically. What's more, only about one-fifth of Social Security's long-range imbalance is due to rising longevity; more than half is due to weak wage growth and rising income inequality, which reduce the payroll tax receipts that fund the program. "Gingrich's Social Security Plan: Privatize Gains, Socialize Losses" ( In short, you can't have it both ways: you cannot allow individuals to take on more risk while retaining the absolute safety net of Social Security. If Gingrich believes that privatization is the way to go, his plan needs to force individual workers rather than taxpayers as a whole to bear the risk of poor investment returns. As always, post your questions to or write to me at socialsecurity@horsesmouth.com. Elaine Floyd, CFP Director, Retirement and Life Planning Horsesmouth, LLC 2011 Horsesmouth, LLC. All rights reserved.