Thursday, January 5, 2023

Government Loans Against Social Security

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Often, disabled people experience lots of difficulties with working at companies, and in this case, they may get self-employed.

If you are one of those people, you can opt for a business loan.

In this case, you should apply with the Small Business Administration to ask for additional money.

They will go through your information and decide if your application should be approved.

Protected Social Security Benefits

Most creditors and debt collectors cannot seize your Social Security benefits, as long as you receive them via direct deposit to your bank account. If you receive your benefits on a prepaid card, these funds are generally safe as well. This protection applies even if a company sues you, you lose the case and a court enters a judgment against you.

The following benefits are protected from garnishment and bank levies thanks to federal law:

  • Social Security benefits
  • Supplemental Social Security Income
  • Veterans benefits
  • Civil Service Retirement System
  • Federal Railroad Retirement, Unemployment and Sickness Benefits

Third-party debt collectors cannot even threaten to take your Social Security benefits if they know the benefits are your only source of income. If a collection agency threatens to take your Social Security income, it may be guilty of violating the Fair Debt Collection Practices Act.

Personal Loans For Retired Seniors On Social Security

Retired seniors citizens cannot borrow money from their social security. Still, they can take advantage of the regular government-backed monthly checks to get a personal loan from a private lender.

Finding ways to reduce costs is always better than borrowing money during retirement at age 70, 85, or 90.

Fortunately, many benefit programs help retired seniors. The best financing alternative will always be having a third-party fund the expense.

Meanwhile, the worst-case scenario is having to repay a loan with interest charges and origination fees on a fixed income. You might fall behind and never catch up.

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Can You Afford To Take A Loan Against Social Security?

A $5,000 check that you dont have to pay back for years or decades? That would likely be too hard for many Americans to pass up during the best of times. Throw in the fact that tens of millions of Americans are unemployed at the moment, and millions more are underemployed or have seen their incomes drop, any seemingly free money would probably be too hard to pass up for many.

As a financial planner, I need to share a few thoughts about how bad that could be for your standard of living. The average Social Security check in just $1,503, per month, in 2020, with millions of retirees needing every single penny of benefits they can get. Additionally, more than 50% of American workers will likely need to retire earlier than expected for reasons beyond their direct control. Think about health issues, family issues, or an unexpected job loss. With a reported 50% or more of Americans having absolutely nothing saved for retirement, even without the coronavirus, there will be a wave of Americans falling into poverty as they age.

My biggest concern about this Trump proposal is that people will take this $5,000 loan and then be forced into retirement earlier than they expected. In that case, those individuals would not only end up with a smaller Social Security benefit , they would also likely have several months of not having any money coming in from Social Security as they paid back the loan.

Whats The Social Security Garnishment Limit

Loan Origination Illustrations, Royalty

With the Debt Collection Improvement Act of 1996, the government allowed for garnishment of Social Security benefits but set a limit on how much can be offset. Per the act, the government cant take any more than 15% of your Social Security payments, nor can it leave you with less than $750 in monthly benefits.

This limit doesnt give people enough protection, though. The last time the limit was adjusted was in 1998 the cost of living has increased since then, and the poverty line has gone up.

Today, the poverty threshold for a one-person household for someone aged 65 and older is an annual income of $12,261, or about $1,022 a month. However, the government can whittle your Social Security benefits down to $750 a month, which comes out to an annual income of just $9,000. With these reduced Social Security payments, older Americans with no other revenue streams have to subsist off an income thats well below the national poverty line.

Another piece of bad news: Most of the money carved from Social Security payments doesnt even pay down the loan principal. Of the $1.1 billion garnished from benefits as of 2016, more than 70% had gone to paying off fees and interest, rather than the borrowers actual debt.

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Make Sure They Are A Legit Lender

Many loans today originate online. While borrowers enjoy the convenience of getting a loan from their living room, its also easier for fake lenders to pose as legitimate operations. Watch out for scams that have poor or no reviews, require advance fees or operate shady websites.

You can get a cash advance from an app, but be sure you do it safely. Be especially cautious of lenders offering Social Security disability payday loans or payday loans for SSI recipients, as scammers tend to target older people.

Home And Housing Finance Information And Calculators

The Low-Income Home Energy Assistance Program may be able to help with:

  • Assistance in paying your heating or cooling bills
  • Emergency services in cases of the energy crisis, such as utility shutoffs
  • Low-cost home improvements, known as weatherization, and energy-related minor home repairs make your home more energy efficient and lower your utility bills.

NOTE: LIHEAP funds may not be used to pay water and sewer bills.

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Is It Better To Act Sooner Rather Than Later

Not necessarily. Some people mistakenly suggest that Social Securitys shortfall gets larger the longer policymakers wait to address it, but thats only an artifact of the projections. The annual Social Security trustees report includes projections that span the next 75 years. Each years new report adds a year in which deficits are relatively large. This increases the estimated 75-year gap, even if the shortfall in each individual year of the projection remains the same.

That said, acting sooner to address the shortfall whether by increasing Social Securitys income, reducing its benefits, or some combination of the two would spread the burden over more generations of workers and beneficiaries and allow for smaller future adjustments. For example, if Social Security tax increases were phased in soon, current workers could contribute to restoring solvency. But if tax increases were delayed, they would fall entirely on younger workers, and the required increase would be larger. At the same time, however, future generations will be more prosperous and better able to afford adjustments. Policymakers will need to balance these competing concerns.

What Is The Trust Funds Financial Status

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If Social Securitys trust funds run out of Treasury bonds to cash in, benefits would not stop contrary to a common misunderstanding.

Social Security is adequately financed in the short term but faces a modest long-term financial shortfall amounting to 1.1 percent of gross domestic product over the next 75 years, the period that the programs actuaries use in evaluating Social Securitys long-term finances.

Following the bipartisan Social Security financing deal in 1983, Social Security ran a surplus every year until 2021. Starting in 2021, Social Securitys total cost exceeded its total income. However, the trust funds reserves supplement the programs income from payroll taxes, income taxes on benefits paid to higher-income beneficiaries, and interest earned on the trust funds bonds to enable Social Security to keep paying full benefits until 2035.

If Social Securitys trust funds run out of Treasury bonds to cash in, benefits would not stop contrary to a common misunderstanding. At that point, if nothing else is done, Social Security could still pay 80 percent of promised benefits using its annual tax income. Of course, paying less than full benefits is not an acceptable way to run this vital program, and Congress will need to act to strengthen its long-term finances.

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Can I Cash Out My Social Security Early

You can cash out Social Security from age 62 onward, but you will receive 25% to 30% less than your full Social Security benefit. You can access full Social Security benefits from age 70. You can access the U.S. government Social Security website to calculate your benefits and the impact of withdrawing Social Security early.

How Is Social Security Financed

In order to understand why Social Security is facing a long-term financing issue, it’s important to know how Social Security works. First off, Social Security is funded through payroll tax deductions. These payroll taxes are taken directly out of an employee’s paycheck and are paid by both employees and employers. In 2022, payroll taxes apply to up to $147,000 of an individual’s annual income.

The payroll tax rate for Social Security is 6.2%. This means that employees pay 6.2% and employers pay 6.2%. Self-employed people will pay the entire payroll tax rate of 12.4%.

When a worker pays their Social Security payroll tax, that money doesn’t go to a specific Social Security fund allocated just for them. Current workers are paying into a system that pays for the benefits of all current retirees.

In 2022, for every dollar you pay in Social Security payroll tax, 85 cents goes towards the Social Security trust fund that pays monthly benefits to current retirees and their families , according to the Social Security Administration. The other 15 cents goes to a trust fund that pays benefits to people with disabilities and their families

In recent years, there has been an excess of reserves in the Social Security Trust Fund: the amount of money that the Social Security administration collects through payroll taxes exceeds the amount of money the administration pays out in benefits.

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Are Cash Advance Loans Safe

Any loan with a high interest rate is unsafe, especially if you are a Social Security recipient living on a fixed income. Cash advance payday loans are the least-safe payday advance due to their 391% and higher APRs. The fees are so high that you may not be able to repay them, leading to further financial problems.

Personal loans are less expensive than payday loans, but they are not cheap if you have bad credit. However, you can repay personal loans over an extended period, resulting in affordable monthly installments that dont break your budget.

You can apply for a personal disability loan if you receive Social Security disability benefits. A disability loan relies on the benefits you receive for your disability.

, usually charging an APR of between 25% and 36% for subprime cardholders. You can repay the loan according to your schedule as long as you make the required minimum monthly payments on your credit card. The interest charges will mount up if you dont repay these advances quickly.

Delinquent Child Support And Spousal Support

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The Department of Treasury can also opt to withhold Social Security benefits in order to enforce an unmet legal obligation to pay child support, alimony or restitution. In such cases, the federal government may garnish your current and continuing monthly benefits.

If you owe child support, the government can take anywhere from 50% to 65% of your Social Security benefits, says Tayne.

Similar to unpaid federal tax debts, individuals are not given the opportunity to appeal to Social Security for implementing garnishment orders. If you disagree with any garnishment action taken by the government, your best course of action is to contact an attorney.

Even under the exceptions above, SSI is off-limits for garnishment or a bank levy unless you were overpaid and the Social Security Administration is correcting an error.

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A Viable Solution Or Terrible Idea

Those in favor of letting workers access Social Security early say that it’s a good solution for those who need money but don’t have personal savings to tap , don’t own homes, and don’t have the credit scores needed to qualify for a personal loan. The problem, however, is that Social Security’s purpose is to serve as a means of poverty protection for seniors who no longer have a paycheck from work to collect. By accessing that money today, workers would risk falling on hard financial times during their later years, when they’re even more vulnerable.

Supposedly, the aforementioned proposal could be structured so as to not hurt Social Security financially, and that’s a good thing given that the program was already facing its share of fiscal woes before COVID-19 took hold. But given the dangers associated with letting workers take an advance on their Social Security income, this is one proposal that may be unlikely to get put into practice. A better solution to the current crisis may instead come in the form of a follow-up stimulus check something many lawmakers have been calling for since the first round of payments went out. So far, a second stimulus has not been approved, but if the COVID-19 crisis drags on for the remainder of the year and continues to batter the economy, something will need to be done to help Americans stay afloat.

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What To Do If You Are Dealing With Creditors

If youre in a situation where you have more financial commitments than you have money to pay them, it can be tempting to ignore the problem. After all, you cant afford the debt. Putting the issue out of mind may feel like a temporary solution.

But ignoring your debt is usually a mistake. Defaulted debts might snowball into a bigger issue, even if your Social Security benefits arent at risk. Instead of pretending that your debt problem doesnt exist, here are some better alternatives to consider.

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Final Thoughts On Getting A Cash Advance For Social Security Recipients

Cash advances can help you get by when you need them the most. The problem with traditional payday loans is the cycle of debt they often create. If you cant pay back the full loan, youll end up paying more in fees until the next payday. But that means even more debt a cycle that is difficult to break.

Retirees shouldnt have to choose between their financial future and current emergencies. Make sure to weigh the potential risks thoroughly and refrain from borrowing more than you can realistically pay back. Its also helpful to explore other ways to access extra cash. Consider asking friends, family, selling some items or even dipping into your savings.

Loans For People On Ssi With Bad Credit

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Online loans for people on Supplemental Security Income with bad credit require attention to detail. You could inadvertently jeopardize eligibility for these government benefits by violating several rules.

SSI addresses the needs of adults and children with limited earnings and resources who never paid FICA taxes. Therefore, the Social Security Administration requires conferees to follow specific rules.

  • Countable resources cannot exceed specific limits
  • $2,000 for an individual
  • $3,000 for a married couple
  • The funding is for food, clothing, and shelter only
  • You can own one automobile for transportation
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    Get Ssa Benefits While Living Abroad

    U.S. citizens can travel to or live in most, but not all, foreign countries and still receive their Social Security benefits. You can find out if you can receive benefits overseas by using the Social Security Administrations payment verification tool. Once you access the tool, pick the country you’re visiting or living in from the drop-down menu options.

    Can I Get An Advance On My Ssi Check

    For many retirees, security comes in the form of their monthly Social Security benefits. But if a medical emergency or sudden oil leak pops up, you cant always wait until your next check arrives. If you dont have other savings to cover an emergency, youll want to consider other sources of fast cash.

    Thats the moment to consider cash advances for social security recipients. Many lenders recognize SSI checks as an acceptable form of income to get a loan. However, many impose restrictions on your ability to borrow. Worse than that, some traditional cash-advance lenders engage in predatory practices that lead to high fees and interest charges on loans for SSI recipients.

    If youre searching for payday loans for SSI recipients, keep the following tips in mind:

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    Myth #: Undocumented Immigrants Drain Social Security

    The facts: Some have blamed problems with Social Security’s financial health on undocumented immigrants draining the system’s resources. It’s a popular complaint, but a false one. Noncitizens who live and work in the U.S. legally can qualify for Social Security under the same terms as native-born and naturalized Americans, but undocumented people are not allowed to claim benefits.

    There is evidence that undocumented workers actually improve Social Security’s bottom line. Some do obtain Social Security numbers under false pretenses, and payroll taxes are withheld from their wages even though they are not eligible to later collect benefits. A report by Social Security actuaries said that undocumented immigrants made a net contribution of around $12 billion to the program in 2010 and that their earnings would likely continue to benefit the financial status of Social Security.

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