Estate Tax Exemption Raised to $15 Million Under the Big Beautiful Tax Bill: What It Means for Your Estate Plan

By Michael Ruger, CFP®
Partner and Chief Investment Officer at Greenbush Financial Group

The newly enacted “Big Beautiful Tax Bill” includes a wide range of updates to the tax code, but one of the most impactful—and underreported—changes is the significant increase in the federal estate tax exemption. Under the new law, the federal estate tax exemption rises to $15 million per person, or $30 million for married couples with proper planning.

This change opens new estate planning opportunities for high-net-worth individuals and families—but it's not as simple as just celebrating the larger exemption. There are still important state-level considerations and planning decisions that need attention.

Let’s walk through what’s changed, what hasn’t, and what you should be doing now to stay ahead.

A Quick Recap: What Is the Estate Tax Exemption?

The estate tax exemption is the amount of an individual's estate that can be passed on to heirs free of federal estate tax. Any amount over the exemption is typically taxed at a flat 40% federal rate.

Before this bill, the federal exemption had been set to sunset at the end of 2025—reverting from its inflation-adjusted ~$13.6 million in 2024 down to about $6 million. But the Big Beautiful Tax Bill not only prevented that sunset, it increased the exemption even further to:

• $15 million per individual

• $30 million per married couple (with proper portability election)

These new levels apply beginning in 2026 and are indexed for inflation going forward.

State Estate Taxes Still Matter

While the federal estate tax exemption is now very generous, it’s critical to remember that many states impose their own estate or inheritance taxes, often with much lower exemption thresholds.

 Here are a few examples:

In states like Massachusetts and Oregon, even moderate estates can trigger a significant tax liability. Also, some states (like New York) have cliff provisions where exceeding the exemption by even a small amount can result in estate tax being applied to the entire estate—not just the portion over the threshold.

Bottom line: Even if you’re under the federal exemption, you may still face state-level estate taxes depending on where you live or own property.

What This Means for Your Estate Planning

The increase to a $15 million federal exemption doesn’t mean you should put your estate plan on the shelf. In fact, now may be the perfect time to refine and optimize your estate strategy.

Here’s what to consider:

1. Leverage Gifting Strategies While the Window Is Open

The $15 million exemption opens the door to making significant tax-free gifts. Techniques like spousal lifetime access trusts (SLATs), grantor retained annuity trusts (GRATs), and intentionally defective grantor trusts (IDGTs) may still be appropriate depending on your goals.

2. Don’t Overlook State-Level Planning

Work with your estate planning attorney to structure your estate to reduce or eliminate state estate tax exposure. This might include retitling assets, setting up trusts, or evaluating residency if you're near retirement.

3. Make Sure Your Documents Are Aligned

Many older estate plans were drafted with lower exemption amounts in mind. If your documents still refer to formulas like “credit shelter amount” or “maximum federal exemption,” you could unintentionally disinherit a spouse or fail to make full use of today’s exemption.

4. Portability Still Matters

Married couples should continue to file a federal estate tax return upon the death of the first spouse to elect portability and lock in both exemptions—especially now that we're talking about $30 million per couple.

The Takeaway

The Big Beautiful Tax Bill gives ultra-high-net-worth families a powerful estate tax planning opportunity. But for many, the state estate tax will continue to be a more pressing issue than the federal threshold.

Whether you’re just above the state threshold or pushing into eight-figure net worth territory, the key is proactive, coordinated planning. A well-structured estate plan not only protects wealth from unnecessary taxation but ensures that it’s distributed in alignment with your legacy goals.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What is the new federal estate tax exemption under the Big Beautiful Tax Bill?
Beginning in 2026, the federal estate tax exemption increases to $15 million per person and $30 million for married couples who elect portability. These amounts will be indexed annually for inflation.

When does the new exemption take effect?
The higher exemption takes effect on January 1, 2026. Until then, the 2024–2025 inflation-adjusted exemption (approximately $13.6 million per person) remains in place.

Wasn’t the federal exemption supposed to decrease in 2026?
Yes. Under prior law, the exemption was scheduled to “sunset” at the end of 2025, reverting to roughly $6 million per person. The Big Beautiful Tax Bill not only prevented that reduction but raised the exemption further to $15 million.

What is the current federal estate tax rate?
Amounts exceeding the exemption are subject to a flat 40% federal estate tax.

Does this change eliminate state-level estate taxes?
No. Many states still impose their own estate or inheritance taxes with much lower exemption limits—often between $1 million and $5 million. States such as Massachusetts, Oregon, and New York have their own rules that can create substantial tax exposure even if you’re below the federal threshold.

How does portability work for married couples?
Portability allows a surviving spouse to use any unused portion of their deceased spouse’s exemption. To take advantage, the estate of the first spouse must file a federal estate tax return (Form 706), even if no federal estate tax is due.

Can I make gifts using the higher exemption before 2026?
The $15 million exemption doesn’t apply until 2026, but you can continue to make gifts under the current (2024–2025) exemption without penalty. If you plan to make large gifts, consider doing so before the law changes to preserve flexibility and confirm how the IRS applies the new thresholds.

How can I reduce or avoid state estate taxes?
Strategies may include establishing or updating trusts, retitling assets, changing residency to a state without estate tax, or leveraging lifetime gifting to reduce your taxable estate. Work with an estate planning attorney familiar with your state’s laws.

Do I need to update my estate planning documents?
Possibly. Older wills and trusts often reference outdated exemption formulas or definitions. Review your plan to ensure it reflects current law and your intentions, especially if it uses terms like “credit shelter trust” or “maximum exemption amount.”

Why is estate planning still important even with a $15 million exemption?
Beyond taxes, estate planning governs how your wealth transfers, protects beneficiaries, and ensures your legacy goals are met. It also addresses incapacity, guardianship, and charitable intentions—issues unaffected by the exemption increase.

Trust Roles Easily Explained: Grantor, Trustee, and Beneficiary

When it comes to estate planning, trusts can be powerful tools—but they’re only as effective as the people involved. Whether you’re creating a trust or have been named in one, you need to understand three key roles: grantor, trustee, and beneficiary.

Here’s how each role works, how they relate to one another, and what to watch out for.

The Three Key Roles in a Trust

1. Grantor (also called Settlor)

The grantor is the person who creates the trust and decides what goes into it and how it should be managed.

What the Grantor Does:

• Creates and funds the trust

• Sets the rules for how assets will be distributed

• Names the trustee and beneficiaries

• Can often serve as a trustee in a revocable trust

Example:
Sarah creates a revocable living trust and transfers her home and investment account into it. She sets terms for how her assets should pass to her children. Sarah is the grantor.

2. Trustee

The trustee is the person or institution responsible for managing the trust and following the rules set by the grantor.

Trustee Responsibilities:

• Manage and safeguard trust assets

• Follow the trust document’s instructions

• Distribute funds to beneficiaries

• Maintain records, file taxes, and act as a fiduciary

Example:
Sarah establishes an Irrevocable Trust and names her sister Emily as trustee. The trustee is awarded specific powers over the trust assets, such as establishing an investment account for the trust, selling real estate, making gifts to beneficiaries, hiring an accountant to prepare the tax return for the trust, and eventually distributing the assets accordingly. Emily is the trustee.

3. Beneficiary

The beneficiary is the person (or group) who receives the benefit of the trust, either now or in the future.

Beneficiaries Typically:

• Receive income or assets according to the trust terms

• Do not control how the trust is managed

Example:
Sarah’s children, Ava and Ben, are listed as beneficiaries. The trust states they’ll receive assets at age 30 but the trustee is allowed to distribute money from the trust to Ava and Ben to provide financial support for education, health, shelter, and living expenses. Ava and Ben are the beneficiaries.

Can One Person Fill Multiple Roles?

Yes. In many revocable trusts, the grantor can also be the trustee and beneficiary while alive. However, they must name a successor trustee to step in when needed.

In irrevocable trusts, the grantor typically gives up control and cannot serve as trustee or beneficiary.

For trusts that name someone beside the grantor as a trustee, it’s common that the trustee may also be a beneficiary of the trust. 

Example:
Sarah establishes an Irrevocable Trust and names her daughter, Ava, as Trustee. Ava is also a beneficiary of the trust with her brother Ben.

Why These Roles Matter

Choosing the wrong person or failing to clearly define roles can lead to:

• Disputes among family members

• Over-providing or under-providing powers to the trustee

• Mismanagement of assets

• Delays in distribution or tax problems

Planning Tips

• Review your trust documents and confirm who’s named in each role

• Confirm all of the powers you have provided to the trustee

• Name backup (successor) trustees in case your primary can’t serve

• Pick a trustee who is reliable, impartial, and financially competent

• Make sure your beneficiaries are clearly defined and up to date

Common Mistakes to Avoid

• Naming a trustee who lacks the time or skills to manage finances

• Forgetting to update your trust after a major life event (death, divorce, birth)

• Assuming your trustee can make decisions outside the written terms (they can't)

• Not reviewing your trust with your attorney after major tax law changes

Final Thought

Trusts only work when the right people are in the right roles—with a clear roadmap to follow. If you haven’t reviewed your trust recently, now is a great time.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What is a grantor in a trust?
The grantor (also called the settlor) is the person who creates and funds the trust. They decide what assets go into it, set the distribution rules, and name the trustee and beneficiaries. In many revocable trusts, the grantor may also serve as the trustee during their lifetime.

What does a trustee do?
The trustee manages the trust’s assets according to the grantor’s instructions. Responsibilities include safeguarding property, making distributions to beneficiaries, maintaining records, filing taxes, and acting in the best interests of the beneficiaries. The trustee must follow the trust document exactly as written.

Who are the beneficiaries of a trust?
Beneficiaries are the individuals or organizations who receive the benefits of the trust, either through income distributions, asset transfers, or both. They do not control how the trust is managed unless specifically granted that authority.

Can one person serve as grantor, trustee, and beneficiary?
Yes, in many revocable living trusts, one person can fill all three roles. However, for irrevocable trusts, the grantor typically gives up control and cannot act as trustee or beneficiary. In some cases, a trustee may also be a beneficiary if allowed by the trust terms.

What happens if the trustee is also a beneficiary?
It’s common for a trustee to also be a beneficiary, especially in family trusts. However, this arrangement can create conflicts of interest, so the trust should clearly define limits on the trustee’s powers to ensure fair treatment of all beneficiaries.

Why is choosing the right trustee important?
The trustee controls how and when trust assets are managed and distributed. Selecting someone unreliable or inexperienced can lead to mismanagement, family disputes, or tax problems. A trustee should be financially responsible, impartial, and able to follow complex legal instructions.

Can a trust have more than one trustee?
Yes. Co-trustees can share responsibilities, which can help balance workload and oversight. However, having multiple trustees can also slow decision-making, so coordination and clear communication are essential.

What is a successor trustee?
A successor trustee is a backup who steps in if the primary trustee is unable or unwilling to serve. Naming one (or more) successor trustees ensures that the trust continues to operate smoothly without court involvement.

What are common mistakes people make when setting up a trust?
Frequent mistakes include naming an unqualified trustee, failing to update the trust after major life changes, misunderstanding the trustee’s authority, and neglecting to review the trust after tax law updates.

Why is it important to review your trust regularly?
Laws, family circumstances, and financial situations change over time. Reviewing your trust every few years—or after major events like marriage, divorce, or the birth of a child—ensures that your intentions remain clear and your plan stays effective.

Should Your Investment Strategy Change when You Retire

Retirement marks a major shift in your financial life: you move from saving and accumulating wealth to spending it. But does that mean your investment strategy should change the moment you stop working?

The answer isn’t a simple yes or no—it depends on your goals, income needs, and risk tolerance. Let’s explore what changes may be necessary, what can stay the same, and how to align your investment approach with the realities of retirement.

1. Accumulation vs. Distribution: A New Financial Phase

During your working years, your investment strategy likely focused on growth—maximizing returns over the long term. For most, in retirement, the focus shifts to income and moderate growth. Your portfolio now needs to:

• Support monthly withdrawals

• Last for 20–30+ years

• Withstand market volatility without derailing your lifestyle

This shift doesn't mean abandoning growth altogether, but it does mean adjusting how you balance risk and reward.

2. Reassess Your Asset Allocation

One of the first things to review in retirement is your asset allocation—how your investments are divided among stocks, bonds, and cash.

A typical pre-retirement portfolio may be 70–100% in equities. But in retirement, many advisors recommend dialing that back to reduce risk.

Example:
If you have a $1 million portfolio:

• A 60/40 allocation would mean $600,000 in diversified stock funds and $400,000 in bonds or other fixed-income assets.

• A 40/60 allocation might suit someone who is more risk-averse or heavily reliant on portfolio withdrawals.

Mistake Alert:
Some retirees swing too far into conservative territory. While that may feel safe, inflation can quietly erode your purchasing power—especially over a 25- to 30-year retirement.

3. Add an Income Strategy

Now that you’re drawing from your investments, it’s essential to have a plan for generating reliable income and decreasing the level of volatility with your portfolio. This may include:

• Dividend-paying stocks or ETFs

• Bond holdings or short-term fixed income

The goal is to create stable cash flow while giving your growth assets time to recover from market dips.

4. Be Strategic With Withdrawals

Your withdrawal strategy has a major impact on taxes and portfolio longevity. The order you pull from different account types matters.

Example:
Let’s say you need $80,000/year from your portfolio. You might:

• Take $40,000 from a taxable account (capital gains taxed at lower rates)

• Pull $20,000 from a Traditional IRA (fully taxable as income)

• Social Security $20,000 (up to 85% taxable)

This balanced approach spreads the tax burden, avoids pushing you into a higher bracket, and gives your Roth assets (if you have them) more time to grow.

Common Misstep:
Many retirees default to depleting all of their after-tax assets first, but by not taking withdrawals from their tax-deferred accounts, like Traditional IRAs and 401(k) accounts, they potentially miss out on realizing those taxable distributions at very low tax rates. Having a withdrawal plan that coordinates your social security, Medicare premiums, after-tax accounts, pre-tax accounts, and Roth accounts is key.

5. Stay Diversified—Reduce Volatility In Portfolio

Diversification and reducing volatility are key considerations when entering retirement years. When you take withdrawals from your retirement accounts, the investment returns can vary significantly from those of the accumulation years.  Why is that?

When you were working and contributing to your retirement accounts, and the economy hit a recession, since you were not withdrawing any money from your accounts when the market rebounded, you likely regained those losses fairly quickly.   But in retirement, when you are taking distributions from the account as the market is moving lower, there is less money in the account when the market begins to rally.  As such, your rate of return is more significantly impacted by market volatility when you enter distribution mode.

To reduce volatility in your portfolio, you may need to:

• Increase your level of diversification across various asset classes

• Keep a large cash reserve on hand to avoid selling stocks in a downturn

• Be more proactive about adjusting your investment allocation in response to changing market conditions

6. Don’t Forget About Growth

Retirement could last 30 years or more. That means your portfolio needs to outpace inflation, especially with rising healthcare and long-term care costs.

Even if you’re taking distributions, keeping 30–60% in equities may help ensure your money grows enough to support you in later decades.

Final Thoughts: Don’t “Set It and Forget It”

Your investment strategy should evolve with you. Retirement isn’t a one-time financial event—it’s a new chapter that requires ongoing planning and regular reviews.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

Should your investment strategy change when you retire?
While the focus shifts from accumulation to income and preservation, your investment approach should evolve based on your goals, risk tolerance, and income needs. Many retirees move toward a more balanced portfolio that supports sustainable withdrawals while still allowing for growth.

What’s the difference between the accumulation and distribution phases?
During the accumulation phase (your working years), the goal is to grow wealth through regular contributions and long-term compounding. In the distribution phase (retirement), you rely on your savings for income, so the emphasis shifts to generating steady cash flow and managing risk.

How should retirees adjust their asset allocation?
Many retirees move from aggressive stock-heavy portfolios to more balanced allocations—like 60/40 (stocks/bonds) or 40/60—depending on their comfort with risk. However, being too conservative can expose you to inflation risk, which can erode purchasing power over time.

How can you generate income from your investments in retirement?
Common income strategies include using dividend-paying stocks, bonds, or fixed-income funds to provide a steady cash flow. A well-structured income plan helps cover expenses while allowing growth-oriented investments to recover from market downturns.

What’s the best order to withdraw funds from retirement accounts?
Strategic withdrawals can help minimize taxes and extend portfolio longevity. The right order depends on your income, Social Security, and Medicare situation.

Why is diversification so important in retirement?
Diversification can reduce portfolio volatility—critical during retirement, when you’re withdrawing funds. Selling assets during a market downturn can permanently harm portfolio growth. Diversifying across asset classes and maintaining a cash buffer may help reduce the impact of market volatility.

Should retirees still invest in stocks?
In most cases, yes. Even in retirement, equities are important for long-term growth and inflation protection. With retirees living longer, it’s not uncommon for retirees to maintain investment accounts for 15+ years into retirement.

How often should retirees review their investment strategy?
At least once a year—or after major life or market changes. Retirement isn’t static, and your investment strategy should adjust to reflect evolving income needs, health costs, tax law updates, and market conditions.

What’s the most common mistake retirees make?
Becoming too conservative too soon. Avoiding market exposure entirely can limit growth and increase the risk of outliving your savings. A balanced approach that manages volatility while maintaining some growth potential is ideal in most situations.

The HSA 6-Month Rule: What Happens When You Enroll in Medicare at Age 65

Many people know that Health Savings Accounts (HSAs) offer triple tax benefits: tax-deductible contributions, tax-deferred growth, and tax-free withdrawals for qualified medical expenses. But what’s less commonly understood is the 6-month rule tied to Medicare Part A enrollment—and how it can affect your HSA eligibility.

If you’re turning 65 and planning to sign up for Medicare, this rule could impact when you must stop HSA contributions and potentially trigger a tax penalty if not handled properly.

Let’s walk through what the 6-month rule is, when it applies, and how to avoid costly mistakes.

What Is the HSA 6-Month Rule?

The 6-month rule refers to a Medicare regulation stating that when you apply for Medicare Part A after age 65, your coverage may retroactively begin up to six months prior to your application date—but no earlier than your 65th birthday.

Why does this matter for HSAs?

Because you cannot contribute to an HSA once you are enrolled in any part of Medicare. If your Medicare Part A enrollment is retroactive, and you weren’t aware, you could accidentally contribute to your HSA while you were technically ineligible—and face a tax penalty.

When Does the 6-Month Rule Apply?

This rule only comes into play if:

• You are 65 or older, and

• You delay enrolling in Medicare Part A, and

• You later apply for Medicare Part A (for example, when retiring at 67 or 68)

At that point, the Social Security Administration may retroactively activate your Part A coverage up to 6 months prior to your application date.

Important: If you enroll in Medicare at age 65 or earlier, this rule does not apply. Your Part A coverage starts based on your enrollment date.

Timeline Example

• Turns 65: July 2023

• Continues working and delays Medicare

• Applies for Medicare: October 2025 (at age 67)

• Medicare Part A effective date: April 1, 2025

• Last eligible month to contribute to an HSA: March 2025

Why You Must Stop HSA Contributions Before Medicare Coverage Starts

HSA rules state that:

• You must stop making contributions to your HSA the month before your Medicare coverage begins.

• Medicare coverage always begins on the first day of the month—so plan your final HSA contribution accordingly.

• If you accidentally contribute while enrolled in Medicare—even retroactively—you may owe a 6% excise tax on those excess contributions.

How to Plan Around the 6-Month Rule

To avoid penalties and protect your tax savings:

1. Stop HSA Contributions at Least 6 Months Before Applying for Medicare

If you plan to delay Medicare past age 65, stop HSA contributions at least 6 months before you submit your Medicare application. This helps avoid retroactive coverage overlapping with HSA eligibility.

2. Calculate and Remove Excess Contributions Promptly

If you do contribute after your Medicare Part A effective date, you must remove the excess to avoid penalties.

• How to calculate excess: Total the amount contributed after your Medicare coverage began. This includes both your own and any employer contributions during that ineligible period.

• Penalty timeline: You must remove the excess contributions (plus any earnings) by your tax filing deadline—typically April 15 of the following year—to avoid the 6% excise tax.

• If you miss that deadline, the 6% penalty applies for each year the excess amount remains in the account.

3. Use a Mid-Year Retirement Strategy

If retiring mid-year, prorate your annual HSA contribution based on the number of months you were eligible. Contributions made after Medicare enrollment—even by your employer—count toward your annual limit and must be removed if you were ineligible.

Final Thought:

The HSA 6-month rule is easy to overlook—but understanding how it works can help you avoid costly mistakes as you transition to Medicare. Whether you’re retiring soon or planning ahead, coordinating your HSA contributions with Medicare enrollment is an essential part of a tax-efficient retirement strategy.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What is the HSA 6-month rule?
The HSA 6-month rule refers to a Medicare regulation stating that when you apply for Medicare Part A after age 65, your coverage can be retroactive for up to six months—but no earlier than your 65th birthday. Since you cannot contribute to a Health Savings Account (HSA) while enrolled in any part of Medicare, this retroactive coverage can make you ineligible to contribute for that six-month period.

Why does the 6-month rule matter for HSA contributions?
Because Medicare Part A coverage may be applied retroactively, you could unknowingly contribute to your HSA during months when you were technically covered by Medicare. Those contributions would be considered “excess contributions” and subject to a 6% excise tax if not corrected.

When does the 6-month rule apply?
The rule applies only if you delay enrolling in Medicare Part A beyond age 65 and later apply. At that point, the Social Security Administration may backdate your Medicare Part A coverage up to six months. If you enroll at or before age 65, the rule does not apply.

How does retroactive Medicare coverage affect my HSA?
Once your Medicare Part A coverage begins—whether retroactively or not—you lose HSA eligibility from that start date. You must stop making contributions the month before your Medicare coverage begins to avoid excess contributions.

Can you give an example of the 6-month rule?
Yes. Suppose you turn 65 in July 2023 and continue working with an HSA-eligible plan. You apply for Medicare in October 2025 (at age 67). Your Medicare Part A effective date will be April 1, 2025—six months retroactive. Therefore, your last eligible HSA contribution month is March 2025.

When should I stop contributing to my HSA?
You should stop contributing at least six months before applying for Medicare Part A to ensure your contributions don’t overlap with retroactive coverage. This applies to both your own and any employer contributions.

What happens if I accidentally contribute while covered by Medicare?
Any contributions made after your Medicare Part A effective date are considered excess. You must withdraw those excess contributions (plus earnings) by your tax filing deadline—typically April 15 of the following year—to avoid a 6% penalty.

How do I calculate my excess contributions?
Add up all contributions (including employer contributions) made after your Medicare Part A effective date. That total must be withdrawn from your HSA. If not removed by your tax deadline, a 6% penalty applies each year the excess remains.

How should I handle HSA contributions if I retire mid-year?
If you retire partway through the year, prorate your HSA contribution limit based on the number of months you were eligible before Medicare enrollment. Contributions made after that date—even by your employer—count toward your annual limit and may need to be withdrawn.

What’s the best way to avoid penalties from the 6-month rule?
Plan ahead. Stop HSA contributions at least six months before applying for Medicare, coordinate with your HR or benefits department, and track contributions closely to prevent ineligible deposits.

How Do Executive Non-Qualified Deferred Compensation Plans Work?

For highly compensated employees, saving for retirement isn’t always as simple as maxing out a 401(k). When income exceeds traditional plan limits, non-qualified deferred compensation (NQDC) plans—often offered to executives—can provide a powerful way to defer taxes and accumulate wealth beyond standard retirement vehicles.

But how do these plans actually work? And what should executives know before deferring compensation?

Let’s break it down.

What Is a Non-Qualified Deferred Compensation Plan?

An NQDC plan is an employer-sponsored agreement that allows certain employees—typically executives or other key personnel—to defer a portion of their income to a future date, such as retirement or separation from service.

Unlike qualified plans (such as a 401(k)), these plans do not fall under ERISA coverage and do not have contribution limits set by the IRS. This makes them attractive for those whose income exceeds the maximum deferral limits in traditional plans.

Key Features

How Deferrals Work

An executive elects—in advance of the year earned—to defer a portion of salary, bonus, or other compensation. This election is typically irrevocable for that year and must comply with IRC Section 409A.

For example:

Jane, a CFO earning $600,000, defers $100,000 of her 2025 compensation into her company’s NQDC plan. She’ll pay no income tax on that $100,000 in 2025—it'll be taxed when she receives the funds in retirement or at a future distribution date.

Distribution Options

The executive can usually choose from a menu of payout options, such as:

• Lump sum at retirement

• Installments over 5–10 years

• Specific distribution events (e.g., separation from service, death, disability)

Important: Once the distribution schedule is set, changing it often requires a five-year delay and must follow 409A regulations to avoid penalties.

Tax Considerations

• Deferred income is not taxed until it’s actually received.

• Funds may grow tax-deferred in an investment vehicle selected by the participant or the employer.

• Unlike a 401(k), contributions are not protected from creditors—they remain employer assets until distributed.

• Distributions are taxed as ordinary income, not capital gains.

What Are the Risks?

NQDC plans can be valuable, but they come with risks not present in qualified plans:

• Employer Solvency: Since funds remain part of the employer’s general assets, they could be lost in bankruptcy.

• Limited Access: You cannot take early withdrawals without triggering taxes and penalties under 409A.

• Inflexibility: Election and distribution decisions are difficult to change once made.

• Unfunded plan:  NQDC plans are not required to be “funded” by the employer like a 401(k) plan so it may just be a future promise of the employer to pay those amounts out to the employee when the benefit vests.  This adds additional risk for the executive.

When Does an NQDC Plan Make Sense?

An NQDC plan can be a smart tool for:

• High W2 earners who max out traditional retirement plans and want to save more

• Executives with predictable income and long-term tenure at the company

• Those expecting to be in a lower tax bracket in retirement

• Executives who are employed by a financially strong company

However, it may not be suitable for someone with:

• Uncertainty around staying with the employer long-term

• Concerns about the company’s financial health

• A need for liquidity or access to funds before retirement

Final Thought

Non-qualified deferred compensation plans can be a powerful tax deferral and wealth-building tool for high-income executives, but they require careful planning. Because these plans carry unique risks and limited flexibility, it’s important to review your full financial picture, long-term goals, and employer stability before making a deferral election.

If you're considering participating in your company’s NQDC plan, talk to a financial planner who understands executive compensation and tax strategy. The right guidance can help you avoid missteps and make the most of what these plans have to offer.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What is a Non-Qualified Deferred Compensation (NQDC) plan?
A Non-Qualified Deferred Compensation (NQDC) plan is an employer-sponsored arrangement that allows select employees—typically executives or highly compensated individuals—to defer a portion of their income to a future date, such as retirement or separation from service. These plans are not subject to the same IRS limits as 401(k)s, allowing for greater savings potential.

How does an NQDC plan work?
Participants elect in advance to defer a portion of their salary, bonuses, or other compensation before it is earned. The deferred income grows tax-deferred until distributed, usually at retirement or another specified event. Because the funds technically remain part of the employer’s assets, they are not taxed until paid out to the employee.

When do I have to make my deferral election?
Under IRS Section 409A, deferral elections must be made before the start of the year in which the income is earned. These elections are generally irrevocable for that year and must follow strict timing and compliance rules to avoid penalties.

How are NQDC distributions paid?
Participants usually choose a distribution schedule when enrolling in the plan. Common options include a lump sum at retirement or installment payments over 5–10 years. Once the schedule is selected, it’s difficult to change without a five-year delay and compliance with Section 409A regulations.

How is deferred compensation taxed?
Deferred income and its growth are not taxed until distributed. When payouts occur, the amounts are taxed as ordinary income—not capital gains. However, if the plan violates 409A rules, deferred amounts could become immediately taxable with additional penalties.

Are NQDC plans protected from creditors?
No. Unlike 401(k)s, NQDC plan assets remain part of the employer’s general assets until distributed. This means that if the company faces bankruptcy or insolvency, participants may lose their deferred compensation.

What are the main risks of participating in an NQDC plan?
The key risks include employer insolvency, lack of liquidity, and limited flexibility. Because plans are often unfunded and cannot be accessed early without tax penalties, participants rely on their employer’s financial strength and long-term stability.

Who should consider using an NQDC plan?
These plans are best suited for high earners who have already maxed out qualified retirement plans, expect to stay with their employer long-term, and anticipate being in a lower tax bracket in retirement. They may also be attractive for executives at financially stable companies.

Who might want to avoid an NQDC plan?
NQDC plans may not be appropriate for individuals who expect to leave their employer soon, need short-term access to funds, or are concerned about the company’s financial health. Those uncertain about their future tax situation should also evaluate carefully before deferring large amounts.

What’s the difference between an NQDC plan and a 401(k)?
A 401(k) is a qualified, ERISA-protected plan with contribution limits and creditor protection. An NQDC plan is non-qualified, has no IRS contribution limits, offers greater flexibility in savings amounts, but lacks creditor protection and carries employer solvency risk.

Can I change my payout schedule after enrolling?
Generally no—changes to distribution timing or method require at least a five-year deferral from the original payout date and must follow strict Section 409A rules to avoid penalties.

Should I consult a financial planner before enrolling in an NQDC plan?
Yes. Because NQDC plans involve complex tax, investment, and timing decisions, working with a financial planner or tax advisor experienced in executive compensation can help you optimize your deferral strategy and manage potential risks.

Do You Pay More or Less Taxes When You Get Married?

Marriage brings about numerous life changes—some personal, some financial. One common question couples ask is whether tying the knot means paying more in taxes. The answer? It depends.

Let’s walk through the key considerations that determine whether you face a marriage bonus or a marriage penalty, how upcoming tax law changes could impact your filing status, and what smart tax planning looks like for married couples.

1. Marriage Bonus vs. Marriage Penalty

The IRS offers special tax brackets and deductions for married couples filing jointly—but whether this works in your favor depends on your income levels.

Marriage Bonus
Occurs when one spouse earns significantly more than the other (or one spouse doesn’t earn at all). Filing jointly often results in a lower combined tax bill compared to filing separately.

Marriage Penalty
Occurs when both spouses earn similar, high incomes. Their combined income may push them into a higher tax bracket faster than if they filed as two single individuals.

The Marriage Bonus and Penalty Have Been Diminished

Since the passing of the Tax Cuts and Jobs Act in 2017, the gap between the married penalty and the marriage bonus has greatly decreased.  Said another way, in many cases, when comparing the federal income tax paid by two single filers to what they would pay if they got married and started filing as married filing jointly, the amounts are now fairly similar.

Example:

• Couple A: Two people earning $50,000 each, no dependents in 2025

• As single filers, they would each pay $4,016 in Federal income tax, resulting in a total of $8,032 between the two of them.

• If they were married filing jointly, earning a combined $100,000, their federal tax liability would be $8,032, which is the same exact amount.

• Couple B: One person earning $200,000 and the second person earning $50,000

• As single filers, they would pay $37,538 and $4,016 in federal income tax, respectively, for a total of  $41,554 in taxes paid.

• If they were married filing jointly, earning a combined $250,000, their federal tax liability would be $39,076, putting them in the “married bonus” category because they paid $2,478 less as joint filers.

2. 2025/2026 Tax Law Changes

The Tax Cuts and Jobs Act (TCJA) of 2017 temporarily expanded the marriage bonus by adjusting tax brackets so that married filing jointly brackets were nearly double those for single filers. But that could change.

What’s happening in 2026?
Unless Congress acts, the TCJA provisions will sunset at the end of 2025. This means:

• Tax brackets may revert to pre-2018 levels

• The standard deduction will shrink

• The marriage penalty may reappear or worsen for dual earners

A tax bill is moving through Congress to extend or modify these provisions, but the tax bill has yet to pass Congress and reach its final form.

3. Impacts on Other Financial Areas

Marriage affects more than just your tax bracket. Here are other areas where your combined income can matter:

• IRAs & Roth IRAs:
  Couples with high combined income may be phased out of Roth IRA eligibility or be ineligible for deductible Traditional IRA contributions.

• Child Tax Credit & Earned Income Tax Credit (EITC):
  Phaseouts are based on combined income, which can reduce or eliminate your eligibility even if you previously qualified.

• Student Loan Repayment:
  Income-driven repayment (IDR) plans like REPAYE or SAVE base your payments on combined household income, increasing monthly obligations after marriage.

4. Filing Separately — When Does It Make Sense?

Most married couples file jointly, but there are a few niche cases where filing separately may be beneficial:

• One spouse has high medical expenses relative to their income

• You’re repaying student loans on an income-driven plan that uses individual income

• For a married couple with children, if there is a big deviation in income between the two spouses, the lower-income-earning spouse may qualify for more child-related tax credits and deductions. 

• One spouse has significant tax liabilities or legal concerns and you want to limit shared responsibility

However, filing separately often disqualifies you from certain credits and deductions, so it’s important to weigh the trade-offs.

5. Tax Planning Tips for Married Couples

• Timing Matters:
  If you marry on December 31, you’re considered married for the whole tax year. That means your filing status changes for that year, no matter the wedding date.

• Update Your Withholding:
  Adjust your W-4 to avoid under- or over-withholding. The IRS has a helpful Tax Withholding Estimator to guide you.

• Run a Mock Return:
  Use tax software or consult a planner to compare filing jointly vs. separately before submitting your return.

Final Thoughts

Marriage doesn’t automatically mean you’ll pay more in taxes—but it does change the equation. For some, marriage brings a welcome tax break. For others, particularly high earners, it may result in higher taxes and lost deductions.

Strategic tax planning—especially in light of the pending changes to the tax laws—can help minimize surprises and maximize your benefits as a married couple.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

Does getting married mean you’ll pay more in taxes?
Not always—it depends on your income levels and how they combine. If one spouse earns significantly more than the other, you may receive a marriage bonus. If both spouses earn similar, high incomes, you may face a marriage penalty because your combined income could push you into a higher tax bracket.

What is the difference between a marriage bonus and a marriage penalty?
A marriage bonus occurs when filing jointly reduces your combined tax liability compared to filing separately as single taxpayers. A penalty occurs when your combined income causes you to pay more tax as a couple than you would have individually.

Did the 2017 Tax Cuts and Jobs Act (TCJA) change the marriage penalty?
Yes. The TCJA largely reduced or eliminated the marriage penalty by aligning joint filer tax brackets to be nearly double those for single filers. However, these provisions are temporary and are set to expire at the end of 2025 unless Congress renews them.

Can marriage affect IRA and Roth IRA contributions?
Yes. Married couples’ combined income is used to determine eligibility for Roth IRA contributions and deductible Traditional IRA contributions. High-income couples may phase out of eligibility due to their joint modified adjusted gross income (MAGI).

How does marriage impact the Child Tax Credit or Earned Income Tax Credit (EITC)?
Both credits are subject to income phaseouts based on combined household income. After marriage, your eligibility could decrease or disappear even if you qualified for these credits individually before.

Will marriage change my student loan repayment plan?
Yes, potentially. Income-driven repayment (IDR) plans such as SAVE or REPAYE often use combined household income to calculate monthly payments, which can increase the payment amount after marriage.

When does it make sense for married couples to file separately?
Filing separately may help when one spouse has high medical expenses relative to income, is repaying student loans under an income-driven plan, or has significant tax liabilities or legal issues. However, filing separately often disqualifies you from valuable deductions and credits, so it’s usually best to compare both scenarios first.

Does timing matter if you get married late in the year?
Yes. The IRS considers you married for the entire year if you are married on December 31. That means your filing status changes for that tax year, even if you married on the last day of December.

What should newly married couples do to adjust their taxes?
Update your W-4 form to reflect your new filing status and income levels, review your estimated tax payments, and consider running a mock return to compare joint versus separate filing options. This helps avoid over- or under-withholding and surprises at tax time.

What’s the best way to minimize taxes as a married couple?
Strategic planning is key. Maximize tax-advantaged savings (like 401(k)s or HSAs), manage income timing, and coordinate deductions. A tax professional can help you determine whether to file jointly or separately and how to prepare for upcoming tax law changes in 2026.

Exceptions to the 10% Early Withdrawal Penalty for IRA Distributions

When distributions are processed from an IRA account prior to age 59½, the IRS generally assesses a 10% early withdrawal penalty in addition to the ordinary income taxes owed on the amount of the distribution. 

However, as with most aspects of the tax code, there are exceptions.

Whether you’re facing a financial emergency or considering strategic planning options, it’s essential to understand the legitimate circumstances under which the IRS waives the early withdrawal penalty. In this article, we’ll walk through the most common exceptions to the 10% penalty and provide some guidance on how to navigate them.

The Basics: Tax vs. Penalty

First, a quick clarification:

When you take a distribution from a traditional IRA, you generally owe ordinary income tax on the amount withdrawn. That’s true whether you’re 40 or 70. The 10% early withdrawal penalty is in addition to that tax and is designed to discourage people from prematurely accessing their retirement funds.

However, the IRS carves out several exceptions for situations it deems reasonable or necessary. These exceptions waive the penalty, not the income tax (unless otherwise noted).

Key Exceptions to the 10% Early Withdrawal Penalty

Here are the most common exceptions that apply to IRA distributions:

1. First-Time Home Purchase

One of the more well-known exceptions to the 10% early withdrawal penalty is for a first-time home purchase. The IRS allows you to take up to $10,000 from your traditional IRA—penalty-free—to put toward buying, building, or rebuilding your first home. If you’re married, both spouses can each take $10,000 from their respective IRAs for a combined total of $20,000.

Now, the term “first-time homebuyer” is a bit misleading. You don’t have to be a literal first-time buyer—you just have to not have owned a primary residence in the last two years. That opens the door for people re-entering the housing market after renting, relocating, or going through a divorce.

2. Qualified Higher Education Expenses

Tuition, fees, books, supplies, and required equipment for you, your spouse, children, or grandchildren all qualify. Room and board also qualify if the student is enrolled at least half-time.

Planning tip: If you're considering this, remember that using retirement funds for education can impact long-term growth. Exhaust other education savings options first.

3. Disability

If you become totally and permanently disabled, you can take distributions at any age without penalty. The burden of proof here is high—the IRS requires documentation from a physician.

4. Substantially Equal Periodic Payments (SEPP)

This is a strategy where you take consistent withdrawals based on your life expectancy. You must commit to this withdrawal strategy for at least 5 years or until you reach age 59½, whichever is longer.

Strategy note: SEPPs can be complex and restrictive. It’s a tool best used under close guidance from a financial advisor or CPA.

5. Unreimbursed Medical Expenses

If you have unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI), you can withdraw IRA funds penalty-free to cover that portion.

6. Health Insurance Premiums While Unemployed

If you’ve lost your job and received unemployment compensation for at least 12 consecutive weeks, you can use IRA funds to pay for health insurance premiums for yourself, your spouse, and dependents without triggering the penalty.

7. Death

If the IRA owner dies, the beneficiaries can take distributions from the inherited IRA without facing the 10% penalty, regardless of their age.

8. IRS Levy

If the IRS issues a levy directly on your IRA, you won’t face the penalty. Voluntary payments to the IRS, however, don’t qualify.

9. Qualified Birth or Adoption

You can withdraw up to $5,000 per child within one year of the birth or adoption without penalty. This is a relatively new provision under the SECURE Act and gives new parents a bit more flexibility.

Important Caveats

• Roth IRAs have their own set of rules. Since contributions to a Roth are made with after-tax dollars, you can withdraw your contributions (not earnings) at any time, for any reason, without tax or penalty.

• These 10% early withdrawal exceptions apply to IRAs, not necessarily to 401(k)s, which have a slightly different set of rules (though some overlap).

Final Thoughts

While these exceptions can be life-savers in times of need, early IRA withdrawals should still be a last resort for most people. The long-term cost in lost compounding and retirement security can be substantial.

That said, life doesn’t always go according to plan. Knowing your options—and using them strategically—can help you make informed, tax-efficient decisions when circumstances require flexibility.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What is the 10% early withdrawal penalty on IRA distributions?
If you withdraw money from a traditional IRA before age 59½, the IRS typically charges a 10% penalty in addition to ordinary income taxes owed on the amount withdrawn.

Are there exceptions to the 10% penalty?
Yes. The IRS waives the early withdrawal penalty for specific circumstances such as:

• First-time home purchase (up to $10,000)

• Qualified higher education expenses

• Total and permanent disability

• Unreimbursed medical expenses exceeding 7.5% of AGI

• Health insurance premiums while unemployed

Can I use IRA funds for a first-time home purchase without penalty?
Yes. You can withdraw up to $10,000 ($20,000 for couples) penalty-free to buy, build, or rebuild a first home. You qualify as a “first-time buyer” if you haven’t owned a primary residence in the past two years.

Are college costs or medical expenses penalty-free?
Yes. You can withdraw IRA funds penalty-free for qualified education costs for yourself, your spouse, children, or grandchildren. You can also avoid the penalty if you use funds to pay unreimbursed medical bills that exceed 7.5% of your AGI.

Do these exceptions eliminate income taxes too?
No. The 10% penalty may be waived, but standard income tax on traditional IRA withdrawals still applies unless it’s a Roth IRA contribution being withdrawn.

Social Security: A Complete Guide to Benefits

While most Americans understand Social Security as a monthly retirement benefit, the system is far more expansive than that. It provides a foundation of income not only for retirees, but also for spouses, surviving family members, and even minor children.

For many, Social Security is one of the largest sources of guaranteed income in retirement. Yet, without a clear understanding of how the program works, individuals often leave money on the table or make filing decisions that reduce lifetime benefits. In this guide, we’ll walk through the primary types of Social Security benefits available and the planning opportunities they create for you and your family.

Retirement Benefits

Retirement benefits are the most common form of Social Security income and are based on your earnings record over your working years. You must earn 40 quarters of work credit (typically 10 years of work) to qualify.

Filing Age Matters

You can begin collecting benefits as early as age 62, but doing so permanently reduces your monthly benefit. On the other hand, delaying benefits past your Full Retirement Age (FRA) can increase your monthly payment by as much as 8% per year until age 70.

For example, if your Full Retirement Age is 67 and your monthly benefit at that age is $2,000, delaying until age 70 would increase your benefit to approximately $2,480 per month for life.

Planning Strategy:

If you have other sources of income, delaying Social Security can be a powerful way to hedge against longevity risk. Higher lifetime benefits can also increase survivor benefits for a spouse, which is especially important if one spouse is expected to live significantly longer than the other.

Spousal Benefits

Spousal benefits allow a lower-earning spouse (or a non-working spouse) to claim up to 50% of their spouse’s full retirement benefit.

Eligibility Criteria:

• Must be at least 62 years old

• The higher-earning spouse must have filed for their own benefit

• Marriage must have lasted at least 1 year (or 10 years if divorced)

For example, if your spouse's full benefit is $2,000 per month, you could receive $1,000 per month as a spousal benefit—even if you never worked.

Planning Tip:

If your own benefit is less than half of your spouse’s, spousal benefits can provide a significant boost to household income. However, if you claim before your FRA, your spousal benefit will also be reduced.

Survivor Benefits

When a worker passes away, their spouse and dependent children may be eligible for survivor benefits based on the deceased’s earnings record. These benefits can be a critical form of income replacement.

Who Can Claim:

• A surviving spouse as early as age 60 (or 50 if disabled)

• Surviving divorced spouses (if the marriage lasted 10+ years)

• Minor children under age 18 (or 19 if still in high school)

• Disabled adult children whose disability began before age 22

Survivor benefits can be up to 100% of the deceased worker’s benefit amount. However, claiming early will reduce the amount received.

Strategy Example:

A widow claiming survivor benefits at age 60 may receive 71.5% of the deceased spouse’s benefit, while waiting until her FRA allows her to claim the full 100%.

If the surviving spouse is also eligible for their own retirement benefit, they can switch between benefits to maximize lifetime payouts. For example, they might take survivor benefits early and delay their own retirement benefit until age 70 to receive delayed credits.

Benefits for Minor Children

Children of retired, disabled, or deceased workers may also qualify for Social Security benefits.

Eligibility:

• Must be under age 18 (or 19 if still in high school)

• Must be unmarried

• Or, must have a disability that began before age 22

Each eligible child may receive up to 50% of the parent’s benefit (or 75% if the parent is deceased), subject to a family maximum of 150% to 180% of the worker’s benefit amount.

Planning Opportunity:

Parents nearing retirement who still have minor children can increase household income by claiming their own benefit and triggering minor benefits for their children. In some cases, this can result in tens of thousands of dollars in additional family income.

Disability Benefits (SSDI)

Social Security Disability Insurance (SSDI) is available to workers who have a qualifying disability and a sufficient work history.

Key Points:

• The disability must be expected to last at least 12 months or result in death

• The number of required work credits depends on your age at the time of disability

• Benefits are based on your average lifetime earnings, similar to retirement benefits

SSDI also includes dependent benefits for minor children and spouses in certain cases, making it another critical piece of the Social Security safety net.

Taxation of Benefits

Many people are surprised to learn that Social Security benefits can be taxable at the federal level, depending on your income. The social security provisional income formula determines what portion of your social security benefits will be taxed at the federal level which ranges from 0% to 85%.

Provisional Income Calculation:

The provisional income formula is as follows:

Provisional income = AGI + tax-exempt interest + 50% of Social Security benefits

If your provisional income exceeds the IRS thresholds below, up to 85% of your Social Security benefits may be subject to federal income tax:

• Single filers: Benefits become taxable if income > $25,000

• Married filing jointly: Threshold starts at $32,000

Planning Tip:

Roth IRA distributions and qualified withdrawals from a Health Savings Account (HSA) do not count toward provisional income, making them useful tools in managing your tax liability in retirement.

Earnings Limits Before FRA

If you claim benefits before Full Retirement Age and continue working, your benefits may be temporarily reduced.

2025 Earnings Limit:

• $23,400/year before FRA

• $1 for every $2 earned above this limit is withheld

• In the year you reach FRA, a higher threshold applies

• No limit applies after reaching FRA

The good news: Any withheld benefits are recalculated into your future payments once you reach FRA, so the money is not lost—it’s just delayed.

Final Thoughts

Social Security is more than just a retirement benefit—it’s an income safety net for families, widows, children, and disabled workers. Understanding how and when to claim each type of benefit can create significant long-term financial value.

Whether you are approaching retirement or already receiving benefits, strategic planning around Social Security can impact your taxes, cash flow, and even legacy planning for future generations.

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Frequently Asked Questions (FAQs):

What are the main types of Social Security benefits available?
Social Security provides several types of benefits, including retirement, spousal, survivor, disability (SSDI), and benefits for minor children. Each type is based on specific eligibility criteria tied to a worker’s earnings record and family situation.

How does the age at which I claim Social Security affect my benefit amount?
Claiming benefits before your Full Retirement Age (FRA) reduces your monthly payments permanently, while delaying benefits past FRA can increase them by up to 8% per year until age 70. The best claiming age depends on factors like life expectancy, income needs, and spousal considerations.

Can a spouse who never worked receive Social Security benefits?
Yes, a non-working or lower-earning spouse can receive up to 50% of their spouse’s full retirement benefit as a spousal benefit. To qualify, the higher-earning spouse must have filed for benefits, and the marriage must meet the required duration rules.

What are survivor benefits and who can claim them?
Survivor benefits provide income to the spouse, children, or other dependents of a deceased worker. A surviving spouse can claim benefits as early as age 60, while dependent children and certain disabled adults may also qualify based on the worker’s earnings record.

Are Social Security benefits taxable?
Depending on your income, up to 85% of your Social Security benefits may be subject to federal income tax. The taxable portion is determined using your “provisional income,” which includes your adjusted gross income, tax-exempt interest, and half of your Social Security benefits.

How does working before Full Retirement Age affect my benefits?
If you claim benefits before FRA and continue to work, part of your payments may be temporarily withheld if your earnings exceed annual limits. Once you reach FRA, the withheld amounts are recalculated into future payments, effectively restoring the value over time.

Can children receive Social Security benefits based on a parent’s record?
Yes, children of retired, disabled, or deceased workers may qualify for benefits if they are under 18 (or 19 if still in high school) or became disabled before age 22. These payments can provide up to 50–75% of the parent’s benefit amount, subject to family maximum limits.