Anyone Here Know About Disability?

[kpd905]

I am helping my parents plan for their retirement, with my dad working and my mom on disability (she has MS).  They are both 51.    I'd like to get my dad retired as soon as possible, because he works in a factory with horrible conditions.  He makes somewhere around $45-50k depending on overtime.

I am going to create SSA.gov accounts for both of them later today to figure out what their numbers look like.  My mom hasn't worked in about 10 years, and won't ever work again.

What I am wondering is:

Is there a point where my mom will have to switch from disability payments to normal social security retirement payments?

Can my dad get any benefit from the disability?  I saw that there is a spouse benefit: (http://www.ssa.gov/dibplan/dfamily2.htm) 
Basically, could he tap that before he taps his own social security?  So take that at 62, and take his at 65?

I will update later with actual numbers of their payouts.

Right now they have about $120k in traditional 401k/IRA accounts, and a paid for house worth maybe $110k.

[Bob W]

I work in the field of disabilities.   I can tell you from my experience that social security is a maze.  I would start with the SS office,  in person and make sure you have an appointment with someone with lots of experience. 

Then I would read lots of the SSA material available on line.   There are also many books on this subject.

It isn't an easy answer as each situation is unique.   

If you father is making that kind of money in a factory job, I wouldn't be in a hurry to displace him.  As long as he can work will help financially.

You should also know that there are various caregiver (family friend?) programs that sometimes will pay for a family member to take care of a loved one.  These may vary state to state.   

I wish there was one expert you could contact about this.   You might talk with a couple of Masters level social workers with several years of experience.   Good luck

[Cheddar Stacker]

Saw a nice PDF posted here yesterday with some facts about SSA. Might be worth a look. It was linked by beltim:
http://forum.mrmoneymustache.com/welcome-to-the-forum/risk-of-not-taking-ss-asap/msg350490/#msg350490

I thought of it because of your question about switching from disability to social security. I believe I read in the PDF yesterday that once you receive disability benefits you always receive them, you don't switch over to SS. I'm by no means an expert though, and I might be mistaken.

Good luck.

[giggles]

I also work in this field.

If your mom still qualifies for disability at her full retirement age, the benefit will be converted to retirement benefits automatically.  Payment amount will stay the same.

Your dad can't collected as only a spouse unless he waits until at least his full retirement age to file for any benefits.  Before full retirement age his only option is his own benefit, which will likely be high enough to preclude any future spouses benefits.  Post their numbers when you know them.

[kpd905]

I'll update with my dad's numbers tomorrow, SSA.gov locked me out from his account, I must have screwed up a security question.

For now, all I know is that my mom gets $1460 a month.

I'll report back in the morning.

[kpd905]

Alright, the numbers are in.

Estimated benefits for my dad: $1239/month at 62 or $1525 at 65
Mom: $1460/month right now

401k + IRA total current balance: $140,096
Currently contributing $6240 per year

I am going to have my dad stop contributing to the 401k and just max out an IRA because his 401k doesn't have matching, and has a 0.55% plan fee.  Unfortunate because his S&P 500 fund has a fee of 0.05 and his bond fund is only 0.01.

I am a little unsure of whether they'd be better off putting money into a traditional IRA or a Roth IRA right now.  My dad only made $41,000 last year, with my mom bringing in $17,520.  Normally I'd say Roth at that income, but at their age, should they just take the tax break now?

[giggles]

Yup, your dad could only collect on your mom past full retirement age, and he could get half her benefit amount while delaying his own.

[Cheddar Stacker]

I am going to have my dad stop contributing to the 401k and just max out an IRA because his 401k doesn't have matching, and has a 0.55% plan fee.  Unfortunate because his S&P 500 fund has a fee of 0.05 and his bond fund is only 0.01.

I am a little unsure of whether they'd be better off putting money into a traditional IRA or a Roth IRA right now.  My dad only made $41,000 last year, with my mom bringing in $17,520.  Normally I'd say Roth at that income, but at their age, should they just take the tax break now?

A few things:

1) I would continue with tax deferral while your father is working, so either 401k or Traditional IRA. Their income is low enough that you should be able to convert their T.IRA into a Roth IRA slowly without paying much tax at all.

2) Have you looked at the savers credit or the earned income credit. Run some numbers here: https://turbotax.intuit.com/tax-tools/calculators/taxcaster/ . I heard here yesterday somewhere that 401k contributions count towards the savers credit but Ira's don't. I didn't look into it at all and that seems incorrect, but if it's true you might consider 401k instead of Ira for that reason.

3) Can your father do an in-service withdrawal from the 401k and roll it into the IRA? If so it might be best to avoid that 0.55% plan fee.

[kpd905]

Alright, I'll keep it in traditional accounts.

IRAs do count toward the saver's credit.  I believe they may have just gotten it last year, so they would have gotten a $200 tax credit.  I'll have to figure out if they can reach the next level, which I think would get them a $400 tax credit.

I'm not sure about in-service withdrawals, I'll have to read through his paperwork.