Mary Beth Franklin

Retirement 2.0blog

Mary Beth Franklin on what your clients really want when they talk about retirement.

Feb 8, 2016, 2:48 PM EST

Social Security Administration releases details of rule on new spousal benefits claiming strategy

By Mary Beth Franklin

The Social Security Administration issued an emergency message late Friday to its field offices explaining how to implement changes that will ban future retirees from claiming only spousal benefits at full retirement age.The changes are the result of the Bipartisan Budget Act of 2015 that President Barack Obama signed into law Nov. 2. The ability to file a restricted claim for spousal benefits will disappear for anyone born on or after Jan. 2, 1954. No surprise there. But financial advisers and their clients are still waiting for the other shoe to drop. The agency has not yet issued any guidance on another key rule change that will prohibit future retirees from filing for their retirement benefits at full retirement age and then immediately suspending them in order to trigger spousal or dependent benefits for an eligible family member. Under existing file-and-suspend rules, the worker's own retirement benefits continue to grow by 8%... Read full post

Feb 3, 2016, 4:13 PM EST

Adjusting Social Security claiming strategies for new rules

By Mary Beth Franklin

Ever since Congress voted to eliminate some key Social Security claiming strategies last fall, financial advisers have been writing to me with questions about how to adapt their clients' retirement plans. Here are a few scenarios that should be familiar to advisers. I hope the answers can help you guide your clients' decisions.Lee Revolinski, an adviser and partner at the Summit Planning Group in Green Bay, Wis., asked what his clients, a married couple, should do now.The wife claimed Social Security benefits on her own earnings record in September 2014 when she was 63. Her husband turns 66 in September 2017 and had planned to file and suspend his benefits. At that point, his wife would step up to a larger spousal benefit amount and he would delay claiming his maximum retirement benefits until he turned 70 in June 2021.“Can this still work under the current law?” Mr. Revolinski asked. “If not, what is their best... Read full post

Feb 1, 2016, 12:48 PM EST

Retirement income hit with highest effective tax rates

By Mary Beth Franklin

Here's a shocking statement: Some Social Security recipients are subject to the highest marginal income tax rates in the country — topping 55% in some cases — depending on their other sources of retirement income in a given year. What's even more shocking? It's true.Most advisers think of income taxes in terms of the federal tax brackets: 10%, 15%, 25%, 28%, 33%, 35% and 39.6%.But in the retirement space, taxes are different, particularly once clients turn 70˝ and must start taking annual required distributions from their retirement accounts. Their effective marginal tax rate — the rate at which one additional dollar of income will be taxed when added to existing income — can be higher than the highest tax bracket. Consider this example supplied by Social Security Timing, a software program for financial advisers to help their clients maximize their Social Security benefits: A married couple who is subject to... Read full post

Jan 27, 2016, 5:42 PM EST

Are your clients using the wrong account to save for retirement?

By Mary Beth Franklin

Traditional wisdom suggests that clients should always stash enough money in a 401(k) to capture an employer matching contribution year as the first step toward achieving a secure retirement.But a provocative article in the Journal of Financial Planning by Greg Geisler, associate professor of accounting at the University of Missouri-St. Louis, challenges that assumption.Mr. Geisler suggests that in many cases, the tax savings on an employee's contribution to a health savings account could trump the wealth-building potential of a similar contribution to a 401(k) — even one that includes an employer's matching contribution.The reason: HSAs offer a triple tax break. Contributions are made with pre-tax dollars; assets grow tax-free; and distributions are tax-free if used for qualified medical expenses. In comparison, traditional retirement accounts are tax-deductible up front but taxable upon distribution. And contributions to Roth... Read full post

Jan 20, 2016, 11:22 AM EST

Test your knowledge about upcoming Social Security changes

By Mary Beth Franklin

There's about 1.5 million baby boomers who need to decide, before April 30, 2016, whether to file and suspend their Social Security benefits. Your clients may be among them.Due to the recent passage of the Bipartisan Budget Bill of 2015, there have been sweeping changes to Social Security legislation and claiming strategies. “These dramatic changes may result in thousands of dollars of lost retirement income for your older clients," warns the Financial Experts Network, a free online educational resource for consumers and financial advisers on topics such as Social Security, Medicare, reverse mortgages and college planning.Financial Experts Network founder Tom Dickson shared the results of a new Social Security quiz posted on his company's homepage and invited InvestmentNews readers to take a shot at it. Warning: Based on the results of the first 358 people who took the 10-question quiz, the average score was just 6.6. Only 12% of ... Read full post

Jan 19, 2016, 2:55 PM EST

Social Security claiming questions persist

By Mary Beth Franklin

Questions keep pouring in from InvestmentNews readers regarding how individual clients will be affected by the new Social Security rules that eliminate creative claiming strategies for future retirees.I'm doing my best to answer their questions based on existing Social Security rules and interpreting the Bipartisan Budget Act of 2015 that established new ones. But frankly, I am frustrated. Every week I ask the Social Security Administration when they will issue official guidance, and every week I get the same response: “Our legislative and policy staffs are diligently working with Congress to analyze the intent of the legislation and update our instructions.”The SSA's Office of Legislation and Congressional Affairs issued a two-page summary of the legislation in December, explaining why Congress closed the Social Security “loopholes.” But the document did not contain any effective dates other than to say the law ... Read full post

Jan 12, 2016, 2:48 PM EST

Gray divorce boosts poverty level for women

By Mary Beth Franklin

Divorce among spouses age 50 and older is increasingly common and has negative implications for baby boomers' retirement security, according to new research from the National Center for Family & Marriage Research at Bowling Green State University. “Individuals who go through gray divorce are considerably economically disadvantaged and they are a growing demographic group,” wrote I-Fen Lin, Susan Brown and Anna Hammersmith, co-authors of the study Marital Biography, Social Security and Poverty.Even though the overall U.S. divorce rate has remained stable since 1990, gray divorce has doubled during that period. The researchers estimated that nearly 650,000 people over 50 divorced in 2010 alone.While older adults enjoy the lowest overall levels of poverty, largely due to Social Security, poverty levels vary by marital status. “The share of baby boomers living in poverty is nearly five times higher among unmarried (19%)... Read full post

Jan 5, 2016, 6:10 PM EST

New resolution: Create and review your Social Security statement online

By Mary Beth Franklin

Whether you love — or loathe — making New Year's resolutions, here's one you can check off your to-do list in a matter of minutes: Create an online Social Security account. It's a perfect start for a financial review for yourself and your clients.If you've already done so, congratulations! But you're not off the hook yet. Log on to your account and review your earnings history for accuracy. Your future benefits are based on your lifetime earnings. If your earnings information is wrong, you may not receive all the benefits to which you are entitled.Ordinarily, you cannot correct your earnings after three years, three months and 15 days from the end of the taxable year in which your wages were paid, according to the Social Security Administration. But in some cases you can correct your record after that length of time if you can match it up with previously filed tax returns or can otherwise document your earnings. Contact SSA ... Read full post

Dec 30, 2015, 1:08 PM EST

Aging boomers are ready for financial advice

By Mary Beth Franklin

Don't let the title scare you. “What Your Financial Advisor Isn't Telling You” may be the best tool you can recommend to your current and potential clients in the New Year. As Sy Syms, the pioneering retailer of discount designer suits, intoned in his radio and television ads for decades: “An educated consumer is our best customer.” What worked for a haberdashery empire that was born in the shadow of Wall Street holds some powerful lessons for financial advisers.“What Your Financial Advisor Isn't Telling You” (Houghton Mifflin Harcourt, 2016) is not an expose of the financial services industry. Instead, it aims to empower individuals with the information they need to know before selecting a financial professional.The book is authored by Liz Davidson, founder and chief executive of Financial Finesse Inc., a company that provides financial education programs for employees. A one-time hedge fund CEO, Ms.... Read full post

Dec 22, 2015, 5:57 PM EST

Loss of file-and-suspend strategy may be overblown

By Mary Beth Franklin

The financial impact of eliminating the file and suspend Social Security claiming strategy slated to take effect this spring may might not be as severe as originally feared, according to one software company executive.For married couples, the ability to coordinate their Social Security claiming strategies can boost their combined lifetime income by $100,000 or more, according to some estimates. But the stand-alone file-and-suspend strategy that allows one spouse who is at least 66 years old to file for Social Security and immediately suspend benefits in order to boost future retirement income is not the most valuable part of the claiming strategy equation.Jeff Miller, co-founder of Social Security Choices, a software company that helps individuals and financial advisers calculate optimum Social Security claiming strategies, recently analyzed nearly 1,300 cases of couples who used his software. “Assuming normal life expectancy,... Read full post

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