Mary Beth Franklin - also known as the 'client whisperer' - on what your clients really want when they talk about retirement.
Dec 12, 2014, 2:55 PM EST
I've noticed an increased interest among financial advisers about Social Security rules that affect their public employee clients. It was a hot topic during my Dec. 9 webcast on Social Security claiming strategies.It is critical for financial advisers to know that clients who have worked for the city, state or federal government — or in some cases, public school systems — may be affected by rules that can reduce or eliminate their Social Security benefits. The Windfall Elimination Provision affects individuals who have worked in the private sector at least 10 years — long enough to qualify for Social Security benefits — and who also have worked in the public sector where FICA payroll taxes were not deducted from their earnings. To be subject to WEP rules, clients must have earned a pension from that public sector job. The WEP rules reduce monthly Social Security benefits by up to 50% of the amount of a public... Read full post
Dec 8, 2014, 6:43 AM EST
This the season of holiday parties and the dreaded social faux pas of double dipping your crudité in the ranch dressing. (You know, dip, bite, and dip again. Ew!)Let that be a reminder to you and your clients: no double dipping on Social Security claiming strategies either.I am always delighted to share the many rules and strategies of maximizing Social Security benefits with new readers and audiences. Inevitably, one of those novices will raise the very logical question of why married couples can't both file and suspend their benefits and then both file restricted claims so they can each collect spousal benefits while their own retirement benefits continue to grow up to age 70.It's a great idea, but the Social Security rules don't work that way. When it comes to collecting retirement benefits, each person is entitled to one Social Security election. (Survivor benefits are another story).You can claim reduced retirement benefits as... Read full post
Dec 5, 2014, 2:59 PM EST
Most consumers and financial advisers tend to think of Social Security benefits in terms of retirement income. But the program is a major provider of disability and survivor benefits, too. And not all of the beneficiaries are adults.In fact, about 4.4 million children receive roughly $2.5 billion each month because one or both of their parents are disabled, retired or deceased. When it comes to Social Security benefits for children, there are three important ages to remember: 16, 18 and 22.A child can receive Social Security benefits if he or she is the biological child, adopted child or dependent stepchild of a parent who is disabled or retired and entitled to Social Security benefits. Dependent children are also entitled to survivor benefits following the death of a parent who had worked long enough in a job where he or she paid Social Security taxes.When a parent collects disability or retirement benefits, the child is entitled to... Read full post
Dec 2, 2014, 5:54 PM EST
Sometimes real life provides the best case studies. Mary Lou Daly, a financial adviser in Charlotte, N.C., posed an interesting client scenario the other day.Her client, Jane, is 63 years old. Jane was married to Rob for more than 10 years. They are divorced, and Rob is still alive and older than 62. Following her divorce, Jane married David. They were married for five years when David died.Ms. Daly wondered if Jane would be entitled to all three types of Social Security benefits: survivor benefits based on her second husband's earning record, spousal benefits on her ex-husband's earnings record, and a retirement benefit based on her own earnings. And if she could collect all three types of benefits, what would be the optimum way to claim them?Normally, if you are eligible for both your own retirement benefit and a spousal benefit and you claim Social Security before your full retirement age, you are “deemed” to have filed... Read full post
Nov 26, 2014, 5:02 PM EST
Much of the financial planning community has embraced Social Security claiming strategies as an integral part of retirement income planning, but Social Security disability benefits remain a mystery to many.Based on the contents of my mailbag, it seems there is an increased appetite for information about Social Security disability benefits. Specifically, advisers want to know what happens when clients who are receiving Social Security disability benefits reach full retirement age.The short answer is disability benefits automatically convert to retirement benefits at age 66. The monthly amount remains the same.Heightened interest in this topic prompted Joe Elsasser, creator of the Social Security Timing software program that helps advisers identify optimal Social Security claiming strategies, to host a recent webcast that explored planning opportunities for disabled clients and their families.(More: The new and improved Social Security... Read full post
Nov 20, 2014, 5:08 PM EST
I read an astounding statistic the other day: 40% of all newlyweds in 2013 were previously divorced or widowed. According to a recent report from Pew Research Center, 42 million Americans took their second (or third) trip down the aisle last year.I hope all those recycled brides and grooms know how Social Security rules treat their remarriage. But just in case they don't, I'll review it for their financial advisers.Let's begin with divorced spouses.As long as their marriage lasted at least 10 years, divorced spouses can collect Social Security benefits on their ex-spouse as if they were still married (assuming spousal benefits are larger than their own retirement benefits). Spousal benefits are worth up to 50% of the ex's full retirement age benefit if collected at full retirement age; less if collected earlier. If you start Social Security before full retirement age, you will receive your own benefits first, reduced for early claiming.... Read full post
Nov 18, 2014, 5:05 PM EST
Talk about a moving target! Since the U.S. Supreme Court struck down the Defense of Marriage Act in its Windsor v. United States decision on June 2013, there have been more than 50 judicial rulings at the federal, state and appellate court levels in favor of same-sex marriage. That has opened the door for legally married gay couples to apply for Social Security spousal and survivor benefits in 33 states and the District of Columbia — up from 19 states at the time the Supreme Court handed down its decision last year.(More: Drastic changes to tax and estate planning for same-sex couples)Last week, Nicholas Fish, a financial adviser with Fish and Associates in Voorhees, N.J., asked me about the availability of Social Security benefits for his clients, a same-sex couple legally married in Pennsylvania.“If John, who has the higher Social Security benefit, dies, will Bob, who is 70 and has a smaller benefit, be able to collect... Read full post
Nov 12, 2014, 2:30 PM EST
More than four in five women elect to take Social Security benefits before their full retirement age, locking in lower payments for the rest of their lives. And those lives could be longer than ever, according to recently updated mortality tables.Only 15% of women waited until their full retirement age, currently 66, to claim Social Security benefits, according to a recent online survey conducted for Nationwide Financial. And a mere 3% of women waited even longer to collect Social Security benefits, even though delaying benefits until age 70 can result in a 32% increase in monthly payments.“Some mistakenly believe taking benefits earlier will result in more money over the long run, while others may have been forced into retirement early and need the money,” said Shawn Britt, director of advance consulting for Nationwide. Eligible workers and their spouses can collect Social Security retirement benefits as early as age 62,... Read full post
Nov 4, 2014, 7:34 AM EST
About one-third of Social Security recipients — and probably the majority of financial advisers' clients — pay federal income taxes on a portion of their benefits. The taxes usually hit when the recipients have other substantial income such as wages, self-employment, interest, dividends and other taxable income that must be reported on their federal tax return in addition to their Social Security benefits.Social Security benefits are subject to federal income taxes, regardless of age, if income rises above certain thresholds known as “combined income,” which is the sum of adjusted gross income from Line 37 of the IRS 1040 form, plus non-taxable interest, plus one-half of Social Security benefits. As the income brackets have not changed since 1994, more and more retirees must pay this stealth tax as their income rises due to annual cost-of-living increases.Individuals with combined income between $25,000 and $34,... Read full post
Oct 27, 2014, 3:45 PM EST
The Social Security claiming strategy known as “file and suspend” always generates a lot of questions. One InvestmentNews reader wrote to me recently asking what would happen if a client who had filed and suspended his Social Security benefits at his full retirement age of 66 died before collecting his benefits.The client filed and suspended so he could trigger spousal benefits for his wife, while his own benefits accrued delayed retirement credits worth 8% per year for each year he postponed collecting them beyond his full retirement age up to age 70. Remember, you must be at least full retirement age to file and suspend. The client planned to collect his retirement benefits at age 70 when they would be worth 132% of his full retirement age benefit amount. Not only would that maximize the couple's retirement income, but it would also create the largest possible survivor benefit for the remaining spouse.But you know the old ... Read full post
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