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Stephen L. Williams, CFP® CIMA®

Vice President,  Financial Planning Strategy

BMO Private Bank

Let’s look at some of the more common issues, concerns and life scenarios that could have a direct impact on an individual’s social security income. This is by no means an exhaustive list of relevant topics, but intended as a good starting point to formulating a social security game plan that makes sense for you.

Also, I think it’s worth taking a brief moment to understand social security in its historical context before trying to determine how it best fits into your life. Old Age, Survivors and Disability Insurance Program – OASDI – is the official name for Social Security in the United States. The OASDI is a comprehensive federal benefits program that provides benefits to retirees, disabled people and their survivors. This was and remains the OASDI mission.

1. Taking benefits early for disability

While it’s generally not advisable to elect to receive Social Security benefits early as it reduces the maximum monthly benefit over the course of a lifetime, disability is a different story. For those who are unable to work due to medical reasons, typically long-term disabilities, Social Security will pay disability benefits under a program that is separate from the core OASDI retirement benefits’ program.

To qualify for disability benefits, the disability has to be one that is medically considered to last longer than one year or that will likely result in death. Those who qualify can get up to 12 months of retroactive benefits, assuming they have not worked for at least 17 months due to the disability.  That is because of a five-month waiting period for disability claims.  Like retirement benefits, you can only receive disability benefits if you have paid into the Social Security system.  In other words, your monthly disability benefit is also based on your Social Security earnings record.

In addition, disability benefits, like retirement benefits, are subject to tax based on overall income:

Provisional income = AGI + ½ Social Security benefit + tax exempt interest

For married filing jointly, if that income is between $32,000 and $44,000 then up to 50% of the benefit is taxable. If the provisional income is more than $44,000 then up to 85% of the benefit is taxable.

When the worker reaches Full Retirement Age (FRA), which is age 66 for those retiring today, their disability benefits will automatically be converted to retirement benefits.

2. Benefits for children under age 18

Most people are aware that a surviving spouse gets a widow or survivor benefit of up to 100% of their deceased spouse’s remaining benefit due. However, less commonly known is the fact that unmarried children under the age of 18 are also eligible for survivor benefits. The child calculation, again subject to certain rules, is typically 75%.  Be aware that there is a maximum limit for each family that generally ranges from 150% to 180% of the basic benefit rate.

In addition, for those who had children later in life, once they are qualified for retirement benefits, any of their children who are unmarried and under age 18, can also receive retirement benefits. The benefit is up to 50% of the retirement benefit amount, and the same family maximum amount above applies.

3. Restrictions for public employees, teachers and government workers:

    Windfall Elimination Provision and Government Pension Offset

Social Security has built in certain benefit reductions for public sector employees based on their individual pension qualifications.

The Windfall Elimination Provision (WEP) was created for people who receive pensions from jobs in which they were not required to pay Social Security taxes — for instance, police officers, firefighters, teachers and state and local government workers whose employers were not part of the national Social Security system. If these public employees were also eligible for Social Security retirement or disability benefits based on other work they did over the course of their careers for which Social Security taxes were paid, this is when the WEP would kick in. For example, if someone worked under the Civil Service Retirement System (CSRS), and didn’t have social security taxes withheld, but earned Social Security benefits through a different job later on, then their benefit calculation would be based on a different formula which would reduce what they would have otherwise received. By how much? That depends on their work history. But one rule that generally applies is that the reduction in Social Security benefit cannot exceed 50% of their pension.

Similarly, the Government Pension Offset (GPO) reduces the Social Security survivor benefits by up to 2/3 of their public pension.  For example, a spouse who worked in a government role, qualifying for a pension, and whose husband had paid into Social Security his entire career, would have their spousal or widow benefit reduced by 2/3 of their pension.

4. Divorce

Often the greatest source of confusion as it relates to Social Security is the aftermath of divorce. In surveys we’ve run at BMO Private Bank, less than half of participants are aware of their rights as a divorced spouse. To put it simply, subject to three basic rules a divorced spouse is eligible for the same benefits as a current spouse. The rules are as follows: a) the marriage lasted for at least 10 years; b) you have not remarried; and c) you are age 62 or older.  Subject to these conditions a divorced spouse can earn up to 50% of their former spouse’s benefit.  If they have their own work record, they can also restrict their claim to just the divorced spouse benefit and accumulate delayed retirement benefits which they can switch to at a later date (not past age 70) to maximize their overall benefits.

5. Widow

Surviving spouse benefits depend on two things – when the deceased spouse originally claimed their benefit, and the age at which the widow claims their benefit. The easiest example is where they were both at Full Retirement Age (FRA) – today, 66. At this point, the surviving spouse is eligible to receive 100% of the deceased spouse’s retirement benefit, assuming that is higher than their own.  The more complex example is when both are taken early.  There is an automatic floor of the higher of the deceased spouse’s benefit or 82.5% of the PIA (Primary Insurance Amount – the full monthly Social Security retirement benefit to which you become entitled at FRA). This would get further reduced if the surviving spouse takes early benefit (as early as age 60).  For instance, Joe files early at age 62 and only receives 75% of his $2000 benefit or $1500. Julie is the surviving spouse and she would get the higher of $1500 or $1650 (82.5% of $2000), in this case $1650.   However, if she is younger and claims at age 60, she would only get 71.5% of $1650, or $1180. The survivor benefit could have been much higher if Joe had waited until at least FRA, and he could have even received delayed retirement credits of 8% per year by waiting past FRA up to age 70.  For divorced spouses, they can receive the same survivor benefits as a spouse, as long as the marriage lasted at least 10 years.

6. Taxation

While consulting with a tax advisor is paramount, one of the keys with taxation as it relates to Social Security is to be aware that the ranges are not indexed for inflation – and have stayed the same since the 1980s.  Know these ranges. A small amount of income in today’s standards means that up to 80% of Social Security is taxed at your rate, and may impact when or how much income you take from Roth IRAs and/or Traditional IRAs.  For single filers, annual provisional income (defined above) between $25,000 and $34,000 means that up to 50% of Social Security is subject to tax, and over $34,000 in provisional income means that up to 85% is subject to tax at your tax rate.

These Social Security-related topics are merely a starting point to a more concerted retirement planning self-examination with your financial adviser.  Take the time to fully understand your needs and objectives so that Social Security can play a positive role in your financial future.

BMO Private Bank is a brand name used in the United States by BMO Harris Bank N.A. Member FDIC. Not all products and services are available in every state and/or location.

The information and opinions expressed herein are obtained from sources believed to be reliable and up-to-date, however their accuracy and completeness cannot be guaranteed.  Opinions expressed reflect judgment current as of the date of this publication and are subject to change.


Not company earnings, not data but vaccines now steering investor sentiment



Not company earnings, not data but vaccines now steering investor sentiment 1

By Marc Jones and Dhara Ranasinghe

LONDON (Reuters) – Forget economic data releases and corporate trading statements — vaccine rollout progress is what fund managers and analysts are watching to gauge which markets may recover quickest from the COVID-19 devastation and to guide their investment decisions.

Consensus is for world economic growth to rebound this year above 5%, while Refinitiv I/B/E/S forecasts that 2021 earnings will expand 38% and 21% in Europe and the United States respectively.

Yet those projections and investment themes hinge almost entirely on how quickly inoculation campaigns progress; new COVID-19 strains and fresh lockdown extensions make official data releases and company profit-loss statements hopelessly out of date for anyone who uses them to guide investment decisions.

“The vaccine race remains the major wild card here. It will shape the outlook and perceptions of global growth leadership in 2021,” said Mark McCormick, head of currency strategy at TD Securities.

“While vaccines could reinforce a more synchronized recovery in the second half (2021), the early numbers reinforce the shifting fundamental between the United States, euro zone and others.”

The question is which country will be first to vaccinate 60%-70% of its population — the threshold generally seen as conferring herd immunity, where factories, bars and hotels can safely reopen. Delays could necessitate more stimulus from governments and central banks.

Patchy vaccine progress has forced some to push back initial estimates of when herd immunity could be reached. Deutsche Bank says late autumn is now more realistic than summer, though it expects the northern hemisphere spring to be a turning point, with 20%-25% of people vaccinated and restrictions slowly being lifted.

But race winners are already becoming evident, above all Israel, where a speedy immunisation campaign has brought a torrent of investment into its markets and pushed the shekel to quarter-century highs.

(Graphic: Vaccinations per 100 people by country,


Others such as South Africa and Brazil, slower to get off the ground, have been punished by markets.

Britain’s pound meanwhile is at eight-month highs versus the euro which analysts attribute partly to better vaccination prospects; about 5 million people have had their first shot with numbers doubling in the past week.

Shamik Dhar, chief economist at BNY Mellon Investment Management expects double-digit GDP bouncebacks in Britain and the United States but noted sluggish euro zone progress.

“It is harder in the euro zone, the outlook is a bit more cloudy there as it looks like it will take longer to get herd immunity (due to slower vaccine programmes),” he added.

The euro bloc currently lags the likes of Britain and Israel in terms of per capita coverage, leading Germany to extend a hard lockdown until Feb. 14, while France and Netherlands are moving to impose night-time curfews.

Jack Allen-Reynolds, senior European economist at Capital Economics, said the slow vaccine progress and lockdowns had led him to revise down his euro zone 2021 GDP forecasts by a whole percentage point to 4%.

“We assume GDP gets back to pre-pandemic levels around 2022…the general story is that we think the euro zone will recover more slowly than US and UK.”

The United States, which started vaccinating its population last month, is also ahead of most other major economies with its vaccination rollout running at a rate of about 5 per 100.

Deutsche said at current rates 70 million Americans would have been immunised around April, the threshold for protecting the most vulnerable.

Some such as Eric Baurmeister, head of emerging markets fixed income at Morgan Stanley Investment Management, highlight risks to the vaccine trade, noting that markets appear to have more or less priced normality being restored, leaving room for disappointment.

Broadly though the view is that eventually consumers will channel pent-up savings into travel, shopping and entertainment, against a backdrop of abundant stimulus. In the meantime, investors are just trying to capture market moves when lockdowns are eased, said Hans Peterson global head of asset allocation at SEB Investment Management.

“All (market) moves depend now on the lower pace of infections,” Peterson said. “If that reverts, we have to go back to investing in the FAANGS (U.S. tech stocks) for good or for bad.”

(GRAPHIC: Renewed surge in COVID-19 across Europe –

(Reporting by Dhara Ranasinghe and Marc Jones; Additional reporting by Karin Strohecker; Writing by Sujata Rao; Editing by Hugh Lawson)

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BlackRock to add bitcoin as eligible investment to two funds



BlackRock to add bitcoin as eligible investment to two funds 2

By David Randall

(Reuters) – BlackRock Inc, the world’s largest asset manager, is adding bitcoin futures as an eligible investment to two funds, a company filing showed.

The company said it could use bitcoin derivatives for its funds BlackRock Strategic Income Opportunities and BlackRock Global Allocation Fund Inc.

The funds will invest only in cash-settled bitcoin futures traded on commodity exchanges registered with the Commodity Futures Trading Commission, the company said in a filing to the Securities and Exchange Commission on Wednesday.

A BlackRock representative declined to comment beyond the filings when contacted by Reuters.

Earlier this month, Bitcoin, the world’s most popular cryptocurrency, hit a record high of $40,000, rallying more than 900% from a low in March and having only just breached $20,000 in mid-December.

Bitcoin tumbled 10.6% in midday U.S. trading Thursday.

Other U.S.-based asset managers will likely follow BlackRock’s lead and add exposure to bitcoin in some form to their go-anywhere or macro strategies as the cryptocurrency market becomes more liquid and developed, said Todd Rosenbluth, director of mutual fund research at CFRA.

“It’s easy to see how strong the performance has been of late and look at a historical asset allocation strategy that would have included a slice of crypto and how returns would have been enhanced as a result,” he said. “Large institutional investors are going to be able to tap into the futures market in a way that a retail investor could not do.”

There is currently no U.S.-based exchange-traded fund that owns bitcoin, limiting the ability of most fund managers to own the cryptocurrency in their portfolios.

BlackRock Chief Executive Officer Larry Fink had said at the Council of Foreign Relations in December that bitcoin is seeing giant moves every day and could possibly evolve into a global market. (

(Reporting by David Randall; Additional reporting by Radhika Anilkumar and Bhargav Acharya in Bengaluru; Editing by Arun Koyyur and Lisa Shumaker)

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Bitcoin slumps 10% as pullback from record continues



Bitcoin slumps 10% as pullback from record continues 3

LONDON (Reuters) – Bitcoin slumped 10% on Thursday to a 10-day low of $31,977 as the world’s most popular cryptocurrency continued to retreat from the $42,000 record high hit on Jan. 8.

The pullback came amid growing concerns that bitcoin is one of a number of financial bubbles threatening the overall stability of global markets.

Fears that U.S. President Joe Biden’s administration could attempt to regulate cryptocurrencies have also weighed, traders said.

(Reporting by Julien Ponthus; editing by Tom Wilson)

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