60 Years Old - Forced to Stop Working - Need Investment Advice

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rocco56
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60 Years Old - Forced to Stop Working - Need Investment Advice

Post by rocco56 »

Hello All,

I am a 60 year old married man who has been forced to stop working due to a health issue. I am applying for Social Security Disability but I'm told that it may take a year or more to be approved for benefits ( Could be denied...God forbid). I would not stop working under any condition if I didn't absolutely have to but that is the position I find myself in.

My wife works and makes about $32,000 a year. My kids are grown and on their own. I own a home with no mortgage payment. We also have a couple loans totaling about $10,000. My cost of living is approx. $3000 a month. After benefits, business expenses, 401K and taxes my wife brings home approx. $1400 a month. We have spent most of our emergency fund and are left with just our Rollover and Roth IRA's. I can withdraw from my IRA's but my wife is still too young to tap into hers.

Right now everything is in Cash (Money Markets) as we try to figure out how to invest to generate income for retirement and a little growth to keep up with inflation. Under the best of circumstances we are very risk adverse and under our present situation the thought of losing money in a Bear market is especially frightening.

Our total IRA balances are 400K with $250K in my accounts and $150k in my spouses. I am not interested in Insurance Annuity products as I do not feel comfortable giving up control of our funds. I understand the argument for and against annuities but I am going to pass.

I would appreciate any and all thoughts on Asset Allocation for the $400K . I understand that Risk/Reward go hand in hand but protection of capital is my number one concern followed by Income. I also would appreciate ideas on either a lump sum investment into whatever you recommend or would you invest over a period of time.

Thank you in advance for your help.

Rocco
fnmix
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by fnmix »

Hello Rocco,

I just wanted to welcome you to the forum. I am sorry about your health issue and its sudden affect on your finances.

I don't quite have the experience to directly answer your question. I am sure others will chime in to help.

I do have a question for you though - are you able to elaborate a bit on your health condition and your previous job? I am wondering if it is possible for you to change jobs or make money some other way that does not adversely impact your health.

Once again, Welcome!
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Watty
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by Watty »

It would help to know what your normal Social Security retirment benefit will be for both you and your wife at your normal full retirment ages since that will likely be the key to your long term plans. You can get that on the Social Security web site. If you can also mention your wife's age that would be good too.
randomguy
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by randomguy »

What is your SS situation going to be like at 62 and when does your wife start collecting? With 3k in monthly expenses, I would guess that between the 2 of you that SS will cover most of it.

AA wise you can probably do almost anything if you and your wifes SS add up to like 2k/month. Something like 30/70 to 50/50 would be pretty darn reasonable. Since you might want to spend down quite a bit over the next couple of years while waiting for SS, going 30/70 (or just taking like 4 years out and sticking it in CDs) might make a lot of sense. As far as lump sum versus DCA, it sounds like you will be more comfortable with DCAing.

Things to think about
a) What is your health care plan? Any chance that will up the 3k by a bit?
b) Do you need to adjust your wife tax withholding to match your new status?
c) Given your likely tax rates going forward, it might be better for the wife to do a ROTH versus traditional.
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Peter Foley
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by Peter Foley »

Welcome to the forum. I too am sorry to hear about your health issues - they are putting you in a tight spot financially.

While you would give up some flexibility, it makes little sense to hold money in cash and receive very little in return while making regular payments on loans with higher interest rates. I would pay off the loans.

There is market risk and there is inflation risk. It is often advised never to have more than 75% in stocks nor less than 25%. Since you are risk adverse, I'd go with 25%. You do not have a lot of margin for error/market risk.

Are your accounts IRAs or 401ks? If they are IRAs I would go with a low cost Total Stock Market fund from Vanguard, Fidelity or Schwab. If they are 401ks, you have to consider expense ratios before choosing an investment vehicle. Total bond fund or an intermediate bond fund is usually recommended for bonds. You could also consider a CD ladder if you can get enough yield to cover inflation.
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sdsailing
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by sdsailing »

Can you work on aggressively reduceing your monthly expenses? That would go a long way and is at least as important as what you do with the investments.
krow36
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by krow36 »

Rocco56, welcome to the forum! I’m sorry about your health problem. It looks like you are short about 1600/mo, or about 20k/yr, at least until the disability SS kicks in. You don’t say how much your wife is contributing to her 401k, but if it is the max of 18k, you could discontinue contributions for the time being. That would almost cover your shortfall. You don’t really need the 401k’s deduction as you are in a low tax bracket. Even if she’s not contributing the max, you might consider it anyway. When the SS kicks in, she can contribute again.

I understand your reluctance to invest in the stock and bond market. However having everything in MM isn’t a very good plan as you know. You don’t tell us what the choices are in her 401k, or where your rollover IRA and Roth IRAs are located. Are there low cost index funds available?

In you situation, I think I might make an AA for the next year or so until the SS comes in, and revise after that. How about leaving 50% in MM, 30% in a short-term bond index fund, and 20% in a total stock market index fund? With an AA similar like that, you would hardly notice our recent ~10% stock market decline, and even a 50% stock market decline would only give you maybe a 10% portfolio drop. Anyway, I hope I’ve given you a few ideas to think about. Hopefully others will add their thoughts. (I see they have while I've been writing.)
Leeraar
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by Leeraar »

Rocco,

It seems to me you are on the cusp of not having saved enough to comfortably retire. I would not exclude immediate annuities. They may be your best bet.

Good luck.

L.
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IPer
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by IPer »

Hi Rocco,

Welcome to the forum. Sorry to hear of your situation, hope you can make the best of it.
I know I have gone from spending $12K/mo to $8K/mo then to $3K/mo and then finally to
around $800/mo but I am not sure I would recommend it to anyone else, though there are
many that would (a google search will find many)!

That being said if I were in your shoes I would do whatever I could to bring cash outlays to
$1200-1400/mo, invest the cash conservatively (another poster mentioned 30/70 to 50/50
and I agree) and draw as little as possible until your benefits kick in. It might even be worth
it to allocate the cash you will need for the next 2 years and keep it more liquid so as to give
a bit more peace of mind and reduce stress at a time when I am almost certain you are having
it due to not being able to work. It is one thing to not want to have to work. It is another thing
to not be able to work.
Read the Wiki Wiki !
johnz1001
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by johnz1001 »

You're in a tight spot with your health and no job, and I hope it works out. You do have some resources though to manage things in a manner that decreases what you have to worry about. Here's what I would do:

1) You need to cover the $3000 a month in living expenses not met by your wife's pay (1400). That's $1600. You don't say how much you anticipate to receive from disability or your social security down the road. But let's say for the year you have to cover the $19,200 shortfall.

I would take the shortfall from the IRA for the year. You need it. It doesn't matter from a tax perspective whether you draw it out and pay the tax or your wife stops making her contribution. She'd pay the tax on what she no longer contributes and you'll pay the tax on what you withdraw. But you need that $19200 (after tax).

2) Once you receive disability and eventually social security, you have to look at how much you're short, if any, year in and year out. If it's 5 grand, 10 grand or whatever it is, you are going to have to cover it. Now this could change once both you and your wife receive social security and together you can cover the 3 grand.

3) Let's say that you can cover the 3 grand within one or two years, then I would put the balance of my remaining portfolio in whatever risk tolerance you find yourself most comfortable. I would go 40/60 or 50/50, but that's me. You may want to go to the Vanguard site and find your level of risk tolerance and follow their recommendations for what funds are suitable for you. The LifeStrategy funds are great for whatever risk tolerance you and your wife have.

4) If there is an amount that won't be covered after you calculate the disability/social security benefits and your wife's pay for a number of years, I would make sure that I could cover that amount with short term CDs, high interest savings accounts, short term bond funds for the duration of time I could not cover my monthly costs.

I hope this is clear. I'm saying what I would do. Others can point any flaws in my thinking or reconstruction of your situation. I hope things work out in the best way...
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AtlasShrugged?
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by AtlasShrugged? »

rocco56....Sorry to hear about your health issue(s). I have a couple of thoughts for you.

1) I would not count on SSDI, as less than 40% of claims are ultimately improved. Also, it would help the forum a lot in giving you advice if you knew what that monthly benefit actually was. You can find that number of your annual SSA statement (page 2). If you monhly benefit is high enough, it may become somewhat moot as you would have enough to live on until retirement age.

2) I would immediately set aside enough cash for two years of expenses in a CD ladder - assuming no SSDI. Doing the math, it appears that you need [1,600 * 24 = $38,400] set aside.

3) You stated that you have approximately 250K in 401K accounts. If you take out ~40K for two years of expenses, the question becomes how to invest ~210K of the remaining 401K monies. What I would tell you is to have an overall allocation of 40/60 or 30/70 (equity/bond) in a three fund portfolio. For the equity side of the portfolio, I would have a mix of 75% US equity and 25% international. Also, given your health, there is a real possibility that your wife may have to manage finances and a three fund portfolio is pretty simple.

4) Not sure if you can, but I would consider simply paying off the loans. You need to aggressively cut out expenses wherever possible.

5) What are your health insurance options? This is something to think long and hard about. Ditto for life insurance (are you insured?).

You have a little bit of time to sort through your options. I did not infer from your post that there was desperation. What I took away is that you are now at the point where you need to make some decisions. I think coming to this forum was a good step. Best of luck to you (and your wife).
“If you don't know, the thing to do is not to get scared, but to learn.”
UncleBen
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by UncleBen »

Worse case scenario: you don't get SSDI and you cannot tolerate any risk at all in your portfolio.

1. You need $36k - wife's take home of $16-$17k = $20k per year. So leave $40k in the money markets to get you to 62 when you can take early SS.
2. Invest the remaining $360k in CD's (e.g. NASAFCU 49 month 2.3%).
3. This gets you to 62 with at least $377k in your 401ks. You still need $36k. Wife's income is $17k and CD's throw off $8k. So your shortage is $11k. I'm guessing SS will cover all or most of this.
tampaite
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by tampaite »

Deleting my messages on this forum
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mouses
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by mouses »

OP, I'm sorry about your health issue.

I have heard that Social Security disability is often denied, and then granted on appeal. So I would keep after them.

See if you qualify for unemployment payments.

I would also see if you can reduce your expenses.

What is your health insurance situation? I am guessing you would qualify for a subsidy with Obamacare, which might substantially reduce your cost.

I am very financially conservative, and I would never invest in the stock market in your situation. Instead, I would concentrate on the reduction of expenses and any extra paid work you and your wife might find.
livesoft
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by livesoft »

I think many people in your situation would be looking into a Single Premium Immediate Annuity.
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Rupert
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by Rupert »

Word to the wise on SSDI: Unless you have one of a rather short list of ailments that warrant almost automatic payment, claims are usually denied initially, and you have to appeal. In case you haven't seen it, this is a useful link to Social Security's list of impairments that may warrant SSDI payments: https://www.ssa.gov/disability/professi ... stings.htm. If you have to appeal, you're realistically looking at 2+ years before you receive any sort of payment. Also, SSDI payments are sometimes suspended after being granted, and you are forced to prove, again, that you are disabled. It's one of the fraud detection/prevention techniques that Social Security employs. Truly disabled people continue to seek and receive medical treatment for their disorders after disability payments begin. Fraudsters tend to stop seeing doctors and are thus unable to re-prove that they are disabled. There are so many fraudsters out there that, unfortunately, the entire SSDI system is designed to ferret them out. That often leaves genuinely disabled people in the lurch.
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Peter Foley
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by Peter Foley »

mouses wrote:
See if you qualify for unemployment payments
Good suggestion. I used to work for the Unemployment Insurance Program. While there are some differences from state to state, one of the basics is that if you are unemployed through no fault of your own you must be able, available and actively seeking work. Perhaps you can't do your current job, but could do something else. A thought.
jasonwc
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by jasonwc »

I'm somewhat confused by your wife's net income figure. If she grosses $32k annually ($2666/mo), it's not clear why her net is only $1,400 unless she is making significant 401k contributions. It's also possible she increased withholding due to your income in the past. If you are filing MFJ and you expect to have no earnings in 2016, your combined federal tax rate should be very low. I would minimize her withholding (if applicable) and reduce/eliminate her 401k contributions so as to meet your monthly expenses.
jasonwc
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by jasonwc »

Peter Foley wrote:mouses wrote:
See if you qualify for unemployment payments
Good suggestion. I used to work for the Unemployment Insurance Program. While there are some differences from state to state, one of the basics is that if you are unemployed through no fault of your own you must be able, available and actively seeking work. Perhaps you can't do your current job, but could do something else. A thought.
I would be very wary of doing this. Applying for unemployment requires you to certify that you are able and willing to work. When you apply for disability, you are certifying that you believe you are permanently unable to perform your past relevant work or ANY SUBSTANTIAL GAINFUL ACTIVITY THAT EXISTS IN THE NATIONAL ECONOMY (20 CFR 404.1505; see also 404.1572 for definition of Substantial Gainful Activity). Filing for both is contradictory, and may undermine the disability claim, since the credibility of a claimant's subjective allegations is often a factor (e.g. mental or back impairment claims).

See https://www.socialsecurity.gov/OP_Home/ ... 4-1505.htm
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snarlyjack
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by snarlyjack »

Portfolio wise.

My parents are in a similar situation...

If you look at the Total Bond Market portfolio (VBTLX).
The total bond market portfolio has 7860 bonds and is
currently paying 2.32%. That pay's out monthly, It's a pretty good fund.

$400,000 x 2.32% = 9280. yearly.
$9280. ./. 12 = 773.00 per month.

You should check out the Total Bond Fund (VBTLX)...
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rocco56
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by rocco56 »

Thank you everyone for your help and suggestions.

To answer some of your questions:

My SS at age 62 would be approx. $1400 a month.
My wife would receive approx. $800 per month at age 62 ( She is 56 presently)

We are saving 15% of her pay in her work 401K. Not sure if we can continue this but I always felt that it is very discouraging to work and not save.

We have health insurance via her work.
joebh
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by joebh »

rocco56 wrote:Thank you everyone for your help and suggestions.

To answer some of your questions:

My SS at age 62 would be approx. $1400 a month.
My wife would receive approx. $800 per month at age 62 ( She is 56 presently)

We are saving 15% of her pay in her work 401K. Not sure if we can continue this but I always felt that it is very discouraging to work and not save.

We have health insurance via her work.
It's a rough situation. Clearly, your wife needs to continue working as long as she can.
Depending on how your SSDI claim turns out, you may need to continue drawing $1600/month from your savings for a while, so you have to be fairly conservative with the investments until then.
After that (or once you reach 62 and choose to draw SS), you can afford to take a higher level of risk, although still need to be conservative.
evilityb
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by evilityb »

Can you tell us more about your assets?

You mentioned that you have a total of $400k in Roth IRAs; about $250k in yours and $150k in your wife's. You also mentioned that your wife is contributing aggressively to her 401(k).

Please tell us the following:

- How much does your wife have in her 401(k)? Is this Roth or Traditional?
- Do you have any money in a 401(k)? If so, is it Roth or Traditional?
- How much do you have left in your emergency fund?
- How much is your house worth?
- Do you have any additional assets, aside from the aforementioned?
- Would you be able to reduce your expenses any?
- Would you grown kids be able to help you out to smooth over the shortfall?
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Bob B
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by Bob B »

Speaking from experience, winning SSDI is easier the older you are. At 62, I was approved in 3 months with MS based on my initial application (no appeal necessary.). My best advice is to not go it alone. Find a nearby SSDI lawyer who can review your application before submitting it and who will represent and guide you through the appeal process, if necessary. They are only allowed to collect a fee from back benefits. Your initial application is very important and must be honest and worded correctly (this is where the lawyer will help.) You also need a supportive doctor. His or her part of the application is critical. My neurologist was superb.
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SeeMoe
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by SeeMoe »

Bob B wrote:Speaking from experience, winning SSDI is easier the older you are. At 62, I was approved in 3 months with MS based on my initial application (no appeal necessary.). My best advice is to not go it alone. Find a nearby SSDI lawyer who can review your application before submitting it and who will represent and guide you through the appeal process, if necessary. They are only allowed to collect a fee from back benefits. Your initial application is very important and must be honest and worded correctly (this is where the lawyer will help.) You also need a supportive doctor. His or her part of the application is critical. My neurologist was superb.
Careful there ! SSDI, SSI lawyers will take a chunk of that award out of you for the life of the claim,.. So wait until a decision comes down regards your claim before doing the preceding. Or consult with an upfront fee only lawyer maybe. Consider paying off the loans and cut spending by 20%-30% if possible .
SeeMoe.. :shock:
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}
jasonwc
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by jasonwc »

SeeMoe wrote:
Bob B wrote:Speaking from experience, winning SSDI is easier the older you are. At 62, I was approved in 3 months with MS based on my initial application (no appeal necessary.). My best advice is to not go it alone. Find a nearby SSDI lawyer who can review your application before submitting it and who will represent and guide you through the appeal process, if necessary. They are only allowed to collect a fee from back benefits. Your initial application is very important and must be honest and worded correctly (this is where the lawyer will help.) You also need a supportive doctor. His or her part of the application is critical. My neurologist was superb.
Careful there ! SSDI, SSI lawyers will take a chunk of that award out of you for the life of the claim,.. So wait until a decision comes down regards your claim before doing the preceding. Or consult with an upfront fee only lawyer maybe. Consider paying off the loans and cut spending by 20%-30% if possible .
SeeMoe.. :shock:
This is not accurate. Representative compensation is limited by the Social Security Administration to the lesser of 25% of back benefits or $6,000 + reasonable fees actually sustained (copying, mailing costs etc). There are no "recurring" costs, and the compensation is based solely on back benefits. See https://www.ssa.gov/representation/docu ... %20pdf.pdf
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by SeeMoe »

jasonwc wrote:
SeeMoe wrote:
Bob B wrote:Speaking from experience, winning SSDI is easier the older you are. At 62, I was approved in 3 months with MS based on my initial application (no appeal necessary.). My best advice is to not go it alone. Find a nearby SSDI lawyer who can review your application before submitting it and who will represent and guide you through the appeal process, if necessary. They are only allowed to collect a fee from back benefits. Your initial application is very important and must be honest and worded correctly (this is where the lawyer will help.) You also need a supportive doctor. His or her part of the application is critical. My neurologist was superb.
Careful there ! SSDI, SSI lawyers will take a chunk of that award out of you for the life of the claim,.. So wait until a decision comes down regards your claim before doing the preceding. Or consult with an upfront fee only lawyer maybe. Consider paying off the loans and cut spending by 20%-30% if possible .
SeeMoe.. :shock:
This is not accurate. Representative compensation is limited by the Social Security Administration to the lesser of 25% of back benefits or $6,000 + reasonable fees actually sustained (copying, mailing costs etc). There are no "recurring" costs, and the compensation is based solely on back benefits. See https://www.ssa.gov/representation/docu ... %20pdf.pdf
Huh. My in-law was wrong then. She was unsuccessful applying for SSDI (bad back) for 15 years until she finally hired an SSDI/SSI specific case lawyer who won her case within a year from then. She says he(lawyer) will receive a cut of the award for the life of the claim, just like SWIF attorneys receive, which is about 20%.(?)
SeeMoe.. :?:
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}
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Bob B
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by Bob B »

SeeMoe wrote: Careful there ! SSDI, SSI lawyers will take a chunk of that award out of you for the life of the claim,.. So wait until a decision comes down regards your claim before doing the preceding. Or consult with an upfront fee only lawyer maybe. Consider paying off the loans and cut spending by 20%-30% if possible .
SeeMoe.. :shock:
This is not true. The Social Security Administration limits attorney fees on SSDI representation. $6,000 is the MAXIMUM fee anyone will have to pay an attorney in a SSDI case. There is never a fee if benefits are not awarded. There are never on-going fees. My attorney charged me ZERO dollars because I won my benefit on the initial application even though he spent some time reviewing my documents and met with me once face-to-face for an hour.

I stand by my advice that it is important to have an experienced SSDI attorney review your application, Function Report and Work History Report prior to submittal to the SSA. There is never a fee to do that. One mistake on any of these documents and you will be thrown into the appeal process.
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Bob B
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by Bob B »

SeeMoe wrote: Huh. My in-law was wrong then. She was unsuccessful applying for SSDI (bad back) for 15 years until she finally hired an SSDI/SSI specific case lawyer who won her case within a year from then. She says he(lawyer) will receive a cut of the award for the life of the claim, just like SWIF attorneys receive, which is about 20%.(?)
SeeMoe.. :?:
I think there must be a misunderstanding here. See the previous posts for how it works. If this is a straight SSDI case, and If what you say is true, your in-law needs to report this to the SSA or at least have a chat with the attorney first to see why he is taking a cut for the life of the claim. The law is very specific. Good luck.
Regards, | Bob | Wiki
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SeeMoe
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by SeeMoe »

Bob B wrote:
SeeMoe wrote: Huh. My in-law was wrong then. She was unsuccessful applying for SSDI (bad back) for 15 years until she finally hired an SSDI/SSI specific case lawyer who won her case within a year from then. She says he(lawyer) will receive a cut of the award for the life of the claim, just like SWIF attorneys receive, which is about 20%.(?)
SeeMoe.. :?:
I think there must be a misunderstanding here. See the previous posts for how it works. If this is a straight SSDI case, and If what you say is true, your in-law needs to report this to the SSA or at least have a chat with the attorney first to see why he is taking a cut for the life of the claim. The law is very specific. Good luck.
Thank you for the SS information , Bob. As I recall the person in question was confused about the SSDI award and attorney fees. Do know that after 15 years of do it yourself appeals with input from friends for " free" , she hired a lawyer and finally won her SSDI case. She went "from 100% of nothing to 100%, or so, of something!"
SeeMoe.. :dollar
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}
2retire
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Re: 60 Years Old - Forced to Stop Working - Need Investment Advice

Post by 2retire »

I didn't read all of the responses too carefully, but I wanted to point out that what your SS benefit would be at age 62 makes no difference if you go on SSDI.

Once you start receiving SSDI, your past SS history doesn't matter. You will continue to receive the SDDI payment until your full retirement date, on that date, the value you are receiving from SSDI becomes your official SS payment value.
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