Mary Beth Franklin

Retirement 2.0blog

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

Jul 26, 2016, 3:11 PM EST

Solving the mystery of unexpectedly reduced Social Security benefits

By Mary Beth Franklin

Who doesn't like a good mystery while lounging by the pool or on the beach on a hot summer day? While I can't compete with James Patterson's or Sandra Brown's pulp fiction page turners, I was able to help one financial adviser get to the bottom of a nagging question about why her client's Social Security benefit was so much smaller than expected.Sharon Egan, a financial adviser with North Star Investment Management Corp. in Chicago, contacted me recently about one of her clients who had decided to delay claiming his Social Security benefits until age 70 when they would be worth the maximum amount. For every year he postponed collecting benefits beyond his full retirement age of 66, he earned an extra 8% per year in delayed retirement credits up until age 70. As a result, he increased his monthly benefits by 32%.Holding out for the maximum retirement benefit also means that any future cost-of-living adjustments would be worth more... Read full post

Jul 20, 2016, 2:44 PM EST

Social Security reform awaits next president

By Mary Beth Franklin

All is quiet in Washington this week as Republicans descend on Cleveland for their national convention and Democrats prepare to invade Philadelphia next week to anoint their presumptive nominee. The lull gave me time to review the numerous Social Security reform bills that have been introduced during the 114th Congress. None of the bills have advanced beyond the committee stage over the past two years.But depending on the outcome of the November election, some of the measures could serve as inspiration for the next president if he or she decides to tackle Social Security reform. In general, Democrats oppose benefit cuts and Republicans object to tax hikes, but both sides are going to have to compromise to find a workable solution before it is too late. The most recent Social Security and Medicare trustees report issued in June reiterated earlier forecasts that the program's trust fund reserves would run dry in 2034 unless Congress... Read full post

Jul 12, 2016, 6:08 PM EST

Market volatility raises the bar for retirement income savers

By Mary Beth Franklin

In the wake of the United Kingdom's decision to exit the European Union, global market volatility has not only sent investment portfolios on a roller coaster ride, it has also raised the prospective cost of income for near-retirees.Pre-retirees now need nearly 10% more in retirement savings than before the Brexit vote in order to generate the same level of income, according to BlackRock, a provider of investment and advisory services for institutional and retail clients.Since the historic vote on June 23, BlackRock's CoRI Retirement Indexes have spiked nearly 10%. The indexes help investors estimate how much annual retirement income their current savings will generate for life starting at age 65. When interest rates fall, the cost of buying an immediate annuity to generate future income rises.A 55-year-old would need $17.64 saved today to generate each dollar of annual retirement income starting at age 65, according to the CoRI tool.... Read full post

Jul 6, 2016, 2:50 PM EST

How to correct Social Security earnings records

By Mary Beth Franklin

What's the most important reason to review your Social Security statement? Most people would say that it is to get an estimate of their future retirement, disability and survivor benefits.Although those estimated benefits are critical elements needed create a retirement income plan, the most crucial reason to review your Social Security statement at least once a year is to verify your earnings.The amount of the Social Security benefits you or your family can receive depends on the amount of earnings shown on your record. Benefits are based on your top 35 years of indexed earnings. If you have fewer than 35 years of earnings, Social Security still divides by 35 to estimate your annual earnings. Consequently, several years of zero earnings will result in lower benefits. During a recent presentation on Social Security claiming strategies, I was astounded when two different participants told me that they had discovered several years of... Read full post

Jul 5, 2016, 5:10 PM EST

Social Security out of step with many modern families

By Mary Beth Franklin

For more than 80 years, Social Security has provided seniors with freedom from poverty after a lifetime of work — an important accomplishment to celebrate as America marks its 240th birthday this week. But much has changed since the Social Security program was created in the 1930s, when the standard family consisted of a married couple where the husband was the breadwinner and the wife was a homemaker. Since then, the family unit has changed dramatically. The rise in the employment of married women has diminished the importance of spousal and survivor benefits, according to a new report from the Center for Retirement Research at Boston College. That has led to a significant decline in family benefits as a source of retirement income, Steven Sass, a researcher at the Center for Retirement Research, wrote in his brief “How Work and Marriage Trends Affect Social Security's Family Benefits.”Social Security spousal and... Read full post

Jun 29, 2016, 2:38 PM EST

Social Security benefits for noncitizens

By Mary Beth Franklin

Britain's recent decision to exit the European Union has dominated world headlines and underscored the interconnectedness of our global economy. For many financial advisers, headlines about immigration and international employment issues strike close to home following an uptick in the number of foreign-born clients. That has raised questions about whether those clients can collect the Social Security benefits they earned by working here or marrying a U.S. worker, particularly if they decide to retire to their home country or elsewhere abroad.As with so many aspects of Social Security rules, the answer is complicated. It depends on the worker's immigration status, years of residency in the U.S., country of origin and whether that nation has a bilateral agreement with the U.S. Advisers may want to download a copy of “Your Payments While You are Outside the United States” for a complete list of countries and circumstances that ... Read full post

Jun 20, 2016, 3:21 PM EST

Baby boomers reach required minimum distribution milestone for retirement accounts

By Mary Beth Franklin

The first of wave of baby boomers will hit an important milestone beginning July 1. Those earliest boomers born at the start of 1946 will turn 70Ĺ in mid-summer, and will be followed at the rate of 10,000 people per day for the next 18 years.Uncle Sam will have his hand out — not to applaud the generation's half-birthday but to collect income taxes from their retirement account distributions that have finally come due. It seems like a good time to review some basic distribution rules for IRAs, 401(k)s and other types of retirement savings plans.SPECIAL FIRST YEAR RULEClients who were born between January 1 and June 30, 1946 — who turn 70Ĺ this year — can choose to take their first required minimum distribution from their traditional IRAs (including SEPs and SIMPLE IRAs) by Dec. 31, 2016, or delay until April 1, 2017. But if they decide to take advantage of the April 1 deadline that is available only for first-year... Read full post

Jun 16, 2016, 4:11 PM EST

Most recent retirees do not regret claiming Social Security early

By Mary Beth Franklin

A majority of recent retirees (69%) would not change the age they started to collect Social Security, according a new survey of Americans age 50 or older released by the Nationwide Retirement Institute on Thursday.The survey found nearly a quarter of recent retirees (23%) regret claiming their Social Security benefits before full retirement age, while 2% said they would draw their benefits earlier and 6% said they were not sure.Of the respondents who said they would not change when they began claiming benefits, 39% said they were reacting to events beyond their control such as poor health or job loss, according to the third annual online survey of more than 900 Americans in or nearing retirement.The survey revealed that one of the biggest shocks to current retirees is the cost of health care. One in four respondents said health care expenses keep them from enjoying the retirement lifestyle they had expected. Separately, a study... Read full post

Jun 6, 2016, 5:30 PM EST

Social Security cost-of-living adjustment unlikely for 2017

By Mary Beth Franklin

If inflation continues at its current low pace, 2017 may turn out to be another year when Social Security recipients will not receive an automatic increase in their monthly retirement and disability benefits. If that happens, it would mark the second year in a row — and the fourth time since 2010 — that there will be no cost-of-living adjustment (COLA) in Social Security benefits.The Social Security Act provides for an automatic increase in benefits if there is an increase in inflation as measured by the Consumer Price Index for Urban Wage Earners (CPI-W). The COLA for 2017 — if any — would be based on the increase in the third-quarter average CPI-W for 2016 over the third quarter of 2014, the last year in which a COLA became effective.Although inflation could pick up between now and the end of September that marks the end of the third quarter, the latest CPI-W is 0.3% lower than the average CPI-W for the base... Read full post

Jun 1, 2016, 2:30 PM EST

Longevity may alter financial planning

By Mary Beth Franklin

Longevity is a hot topic among financial services firms. Based on the fact that people are living about 30 years longer on average than they did a century ago, several major companies have teamed up with leading research institutions to figure out what these added years may mean for financial planning.A few months ago, I reported on the latest installment of a multi-year study by Bank of America Merrill Lynch and Age Wave on the impact of longer lives on various aspects of retirement living including health, home, family, giving, leisure, work and finances. In my article, “Longevity can be an asset in retirement,” I discussed how an increased pool of retirees could be a boon for charities and nonprofit organizations in the future if older Americans continue to donate their time and money to their favorite causes at their current rate. Although Americans age 65 represent just 31% of today's population, they account for 42%... Read full post

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