Life Insurance Settlements provide cash for seniors. -
Andrew Myrick, son of La Crosses first white settler, lived only a year, two months and 17 days, according to his marble gravestone in Oak Grove Cemetery. Life Insurance Settlement
Sunday, March 16, 2008
Thursday, March 13, 2008
The aging of America raises many questions about what's in store for future and current retirees and whether society can sustain current systems that support the retired population. Who will prosper? Who won't? Many good things are happening too, like longer life and better health. Although much of the baby boom generation will be better off than those retiring today, many face uncertain prospects. Especially vulnerable are divorced women, single mothers, never-married men, high school dropouts, and Hispanics. Even Social Security—which tends to equalize the distribution of retirement income by paying low-income people more than they put in and wealthier contributors less—may not make them financially secure.
Uncertainty about whether workers today are saving enough for retirement further complicates the outlook. New trends in employment, employer-sponsored pensions, and health insurance influence retirement decisions and financial security at older ages. And, the sheer number of reform proposals, such as personal retirement accounts to augment traditional Social Security or changes in the Medicare eligibility age, makes solid analyses imperative.
Urban Institute researchers assess how current retirement policies, demographic trends, and private sector practices influence older Americans' security and decision-making. Numerous studies and reports provide objective, nonpartisan guidance for policymakers.
Uncertainty about whether workers today are saving enough for retirement further complicates the outlook. New trends in employment, employer-sponsored pensions, and health insurance influence retirement decisions and financial security at older ages. And, the sheer number of reform proposals, such as personal retirement accounts to augment traditional Social Security or changes in the Medicare eligibility age, makes solid analyses imperative.
Urban Institute researchers assess how current retirement policies, demographic trends, and private sector practices influence older Americans' security and decision-making. Numerous studies and reports provide objective, nonpartisan guidance for policymakers.
Retirement Income Government Sources
What are "special payments?" After you retire, you may receive payments for work you did before you started getting Social Security benefits. Usually, those payments will not affect your Social Security benefit if they are for work done before you retired. This fact sheet describes some of the more common types of special payments, helps you to decide if you received any and tells you what steps to take if you did.
[Back to top] What qualifies as a special payment? If you worked for wages, income received after retirement counts as a special payment if the last thing you did to earn the payment was completed before you stopped working. Some special payments to employees include bonuses, accumulated vacation or sick pay, severance pay, back pay, standby pay, sales commissions and retirement payments or deferred compensation reported on a W-2 form for one year, but earned in a previous year. These amounts may be shown on your W-2 in the box labeled “Nonqualified Plan.”
If you were self-employed, any net income you receive after the first year you retire counts as a special payment if you performed the services to earn the payment before you were entitled to receive Social Security benefits. “Services” are any regular work or other significant activity you do for your business.
Some special payments to self-employed people include farm agricultural program payments, income from carryover crops or income derived by an owner of a business who does not perform significant services in that business.
[Back to top] How do earnings limits affect payments? Generally, there are limits to how much a Social Security beneficiary can earn while still working and younger than the full retirement age. Full retirement age was 65 for many years. However, beginning with people born in 1938 or later, that age gradually increases until it reaches 67 for people born in 1960 or later. For example, the full retirement age for people born in 1943 through 1954 is 66. Benefits are reduced if earnings exceed certain limits.
If you are younger than your fullretirement age, $1 in benefits will be deducted for each $2 you earn above the earnings limit. In 2008, the limit is $13,560. In the year you reach your full retirement age, your benefits will be reduced $1 for every $3 you earn above the earnings limit. In 2008, the limit is $36,120. Starting with the month that you reach full retirement age, you can get your full benefits no matter how much you earn. [Back to top] If you think you received a special payment If you get Social Security and your total yearly earnings exceed the limit and these earnings include a special payment, you should contact Social Security. Tell us you think you received a special payment. If we agree, we will not count the amount of the special payment as part of your total earnings for the year.
[Back to top] Example of a special paymentThis example shows how a special payment is treated under Social Security rules.
Mr. DeSilva retired at age 62 in November 2007 and began to receive Social Security benefits. In January 2008, Mr. DeSilva receives a check from his employer for $17,000 for his leftover vacation time. Because this is for vacation pay he accumulated before he retired, Social Security will consider it a special payment and will not count it toward the earnings limit for 2008.
[Back to top] Insurance salespeople and farmers Two specific occupational groups that commonly receive earnings which qualify as special payments are insurance salespeople who receive renewal or repeat commissions and farmers who receive income from carryover crops.
Insurance salespeopleMany insurance salespeople continue to receive commissions after the year they retire for policies they sold prior to retirement. This income will not affect their Social Security benefits, as long as the income was the result of work done before they retired.
FarmersMany farmers harvest and store crops in one year to be sold in another year. If a crop is fully harvested and stored before or in the month a farmer is entitled to Social Security benefits and then is carried over and sold in the next year, this income will not affect benefits for the year the income is received.
[Back to top] What qualifies as a special payment? If you worked for wages, income received after retirement counts as a special payment if the last thing you did to earn the payment was completed before you stopped working. Some special payments to employees include bonuses, accumulated vacation or sick pay, severance pay, back pay, standby pay, sales commissions and retirement payments or deferred compensation reported on a W-2 form for one year, but earned in a previous year. These amounts may be shown on your W-2 in the box labeled “Nonqualified Plan.”
If you were self-employed, any net income you receive after the first year you retire counts as a special payment if you performed the services to earn the payment before you were entitled to receive Social Security benefits. “Services” are any regular work or other significant activity you do for your business.
Some special payments to self-employed people include farm agricultural program payments, income from carryover crops or income derived by an owner of a business who does not perform significant services in that business.
[Back to top] How do earnings limits affect payments? Generally, there are limits to how much a Social Security beneficiary can earn while still working and younger than the full retirement age. Full retirement age was 65 for many years. However, beginning with people born in 1938 or later, that age gradually increases until it reaches 67 for people born in 1960 or later. For example, the full retirement age for people born in 1943 through 1954 is 66. Benefits are reduced if earnings exceed certain limits.
If you are younger than your fullretirement age, $1 in benefits will be deducted for each $2 you earn above the earnings limit. In 2008, the limit is $13,560. In the year you reach your full retirement age, your benefits will be reduced $1 for every $3 you earn above the earnings limit. In 2008, the limit is $36,120. Starting with the month that you reach full retirement age, you can get your full benefits no matter how much you earn. [Back to top] If you think you received a special payment If you get Social Security and your total yearly earnings exceed the limit and these earnings include a special payment, you should contact Social Security. Tell us you think you received a special payment. If we agree, we will not count the amount of the special payment as part of your total earnings for the year.
[Back to top] Example of a special paymentThis example shows how a special payment is treated under Social Security rules.
Mr. DeSilva retired at age 62 in November 2007 and began to receive Social Security benefits. In January 2008, Mr. DeSilva receives a check from his employer for $17,000 for his leftover vacation time. Because this is for vacation pay he accumulated before he retired, Social Security will consider it a special payment and will not count it toward the earnings limit for 2008.
[Back to top] Insurance salespeople and farmers Two specific occupational groups that commonly receive earnings which qualify as special payments are insurance salespeople who receive renewal or repeat commissions and farmers who receive income from carryover crops.
Insurance salespeopleMany insurance salespeople continue to receive commissions after the year they retire for policies they sold prior to retirement. This income will not affect their Social Security benefits, as long as the income was the result of work done before they retired.
FarmersMany farmers harvest and store crops in one year to be sold in another year. If a crop is fully harvested and stored before or in the month a farmer is entitled to Social Security benefits and then is carried over and sold in the next year, this income will not affect benefits for the year the income is received.
Thalia Santiago, 86, was approached by investors who offered her $400,000 cash, in exchange for ownership of a new life insurance policy on her life, that offered a death benefit of $2,000,000 upon her death. The beneficiaries would not be Selma's family, but whoever the new owner of the policy would designate. And to sweeten the pot, the investors would make all the premium payments. Thalia's son, a retired tax attorney, gave it a green light. Thalia's position was not one of desperation but it gave her pleasure to be able to bestow money upon her grandchildren while she is still alive. Other scenarios for life settlement candidates might be those living out retirement years on a fixed income, and finding it difficult to manage all of their expenses. As a result, these seniors are forced to make difficult decisions about things they need or want, but can no longer afford. Keep the life insurance policy settlement , or let it lapse? If they don't own their own home then a reverse mortgage-a lifesaver in the right circumstances for cash-strapped seniors-is out of the question. Enter the Life Settlement transaction, a possible solution for some, providing some very important criteria is met. But what is a life settlement?Here's how it works: You sell your life insurance policy that is no longer needed, wanted, or affordable to an investor or company. The investor or company agrees to continue paying the life insurance premiums.The investor or company collects the death benefit upon your death. You receive a cash settlement amount which is more than the cash "surrender value" of your policy.The settlement amount is determined by a number of factors, including the original amount of life insurance, your life expectancy, and the cost of the premiums, to name a few.
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All in an effort to save money. In recent years, it seems like more and more companies are interested in money for their stockholders than those that serve them. Retirement plans are being closed out or converted over to 401k"s where they may or may not match funds going in. Social security is on the rocks as well. By 2050, Senior Citizens in America will double. The bottom line is don't count on anyone to take care of you. You have to lookout for yourself because nobody else will.
I have now been retired for four years. I quickly learned what a fixed income is. Lucky for me however, I have paid into a pretty good retirement plan for the past 33 years. I even paid in extra at two key times to help strengthen my financial future. Many individuals don't have that luxury.
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