By Jennifer Waters
Minnesota is looking to become the next state to exempt Social
Security income from taxes, a move lawmakers hope will dissuade
retirees from fleeing.
Though some might argue that climate is the real culprit behind
Minnesota's exodus, the North Star state is among only 13 that slap
some kind of tax on Social Security income. Some of those states,
among them Connecticut and Montana, have separate calculations
and/or income limits to determine taxable Social Security benefits.
But Minnesota--like Nebraska, North Dakota, Rhode Island, Vermont
and West Virginia--tax Social Security income to the same extent
that the federal government does, or on as much as 85% of your
benefit.
But before you think about ditching a state because of Social
Security taxes, consider what other taxes you're subject to in the
new state, such as those on income or other retirement benefits,
not to mention state and local sales and property taxes.
Only seven states--Alaska, Florida, Nevada, South Dakota, Texas,
Washington and Wyoming--don't tax individual income of any kind,
according to the Wolters Kluwer CCH tax and accounting service.
Q: My wife is 13 years younger than I am. We both work but I
have higher earnings and a company-funded retirement. I thought I
read there's an option where I can claim her [Social Security]
benefit when I reach my full retirement age and then when she
retires she receives my benefit. Is that correct?
If I claim her retirement when I'm 66, does she get my full
benefit? As I will be 79 when she is 66, will she receive my age 70
benefit?
Ken B., San Diego
A: You're out of luck on receiving her benefit. There are
opportunities for spouses to collect on the other's benefits, but
your situation doesn't lend itself to them. You cannot collect on
her benefit until she applies for it. Considering the age
difference, you will be well into your own retirement by the time
she is first eligible to file, at age 62.
She, however, has options. At age 62, she can apply for spousal
benefits, which will be reduced because she will not be at her full
retirement age. If she does that, she must also file for her own
benefits then. If the benefit on your record is higher, she'll get
a combination of benefits that equals the greater amount.
If she waits until her FRA, she can file for spousal benefits on
your record that will be 50% of your full benefit, and wait until
she turns 70 to collect her own benefit. At that point, her
benefits will be larger with delayed retirement credits and may
exceed the benefit on your record.
You, too, can wait until you turn 70 to collect DRCs and a
bigger monthly check. The DRCs will not be computed into your
wife's spousal benefits. However, if you should die first, her
survivor's benefit will include them, or be equal to the benefit
you receive.
Q: I have power of attorney for an elderly woman with dementia
who lives in an assisted-living facility. I have met with the local
Social Security office with all supporting documentation to request
a change of address to receive the annual statement for income-tax
purposes.
SSA's response was "We do not recognize POA." They suggested I
bring her into the local office or call the 800 number. This
woman's condition has worsened to the point that neither option is
possible. Is there any other course of action that I could
take?
Brian S., Boca Raton, Fla.
A: Unfortunately, no. It's the Treasury Department that doesn't
recognize POA when negotiating federal payments--and that includes
Social Security. You must apply to, and be appointed by, SSA to
become a representative payee and obtain legal authority to
negotiate or manage her benefits. If she already has a
representative, that person can request the address change.
***
A word about SS numbers on Medicare cards: Thanks to readers who
called the National Committee to Preserve Social Security and
Medicare, the group's legislative arm has added the removal of SS
numbers from Medicare cards to its lobbying agenda for the 114th
Congress, and will issue a white paper on the matter soon.
"Both the Government Accountability Office and the Social
Security Administration Inspector General have made this
recommendation," according to a brief from the group. "It is a way
to combat fraud, thus protecting beneficiaries' identity and the
integrity of the Medicare program."