Retirement 2.0
May 22, 2013, 4:35 PM EST
Mary Beth Franklin: With Social Security, no double dipping allowed
I often receive questions from financial advisers who are anxious to maximize their clients—on in some cases, their-own—retirement income through smart Social Security claiming decisions. Unfortunately, the strategies that some of them propose are based more on wishful thinking than fact.A common suggestion is for both spouses to file and suspend, triggering benefits for the other spouse while both defer their own retirement benefits until they are worth the maximum amount at age 70.Sorry. That doesn't work. One spouse can file and suspend to trigger benefits for the other spouse, assuming they are both at least 62 years. But if both of them file and suspend their benefits—which isn't allowed—it would amount to both spouses suspending their benefits, so neither could collect anything.Another common error is to recommend that both spouses restrict their claim to spousal benefits only. Again, that's not an option. ... Read full post
May 20, 2013, 2:37 PM EST
Mary Beth Franklin: Undone by the do-over strategy
One of the biggest challenges of figuring out when to claim Social Security benefits is determining which strategy would maximize benefits for a client. The second challenge is to keep up with any rule changes that could undo the initial decision.In the past few weeks, I have heard from two readers who claimed reduced Social Security benefits early because they needed the money at the time. They both planned to repay those benefits later and restart them at a higher amount based on their age at the time. The only problem is they missed the memo that repayment options had changed.Until December 2010, it was possible for an individual to collect reduced Social Security benefits as early as age 62 and at any point up to age 70, to withdraw their application for benefits, repay any benefits they had received, and restart their benefits at a higher rate.Although repayments often exceeded $100,000, it was significantly cheaper than buying an ... Read full post
May 13, 2013, 10:45 AM EST
Retirement Income Summit 2013 Mary Beth Franklin: Home schooling long-term care
Dr. Carolyn McClanahan, both a medical doctor and CFP, admits she is a minimalist when it comes to seeking medical care. And when it comes to long-term care, she has a unique vision of how and where she would like to receive assistance as she ages.Rather than an expensive nursing home or assisted living facility, Dr. McClanahan and her husband, along with some of their close friends, are hatching plans to build a compound with a central courtyard and common living space surrounded by individual apartments, including one for a live-in nurse or health aide.“We plan to pool our money and share our cost of care, living the way we want without having to abide by the rules of an assisted living facility,” she told attendees at the Seventh Annual InvestmentNews Retirement Income Summit in Chicago on Monday.“It sounds like the Golden Girls reality show,” her fellow presenter, Paul Fronstin, Director of Health Research... Read full post
May 7, 2013, 10:57 AM EST
Match Social Security strategies to clients' needs
I received a really interesting question from an adviser in Minnesota recently who was looking for advice on Social Security claiming strategies for a recently widowed client.The adviser suggested that in order to maximize her Social Security benefits, his 59-year-old client should wait until age 66 to collect survivor benefits and then switch to her own retirement benefits when she turned 70.The client said thanks, but no thanks.The client, Nancy, decided to take survivor benefits as early as possible at age 60, even though they will be reduced, and to switch to her own retirement benefit at 70. Her retirement benefit would increase by 8% per year between her normal retirement age of 66 and age 70.“I know I will receive less of Steve's benefits by starting at age 60, but I do not care,” Nancy, a retired teacher, wrote in an e-mail to her adviser. Nancy also knows that if she collects Social Security benefits before her... Read full post
May 2, 2013, 11:54 AM EST
Social Security rules for divorced spouses
I received a question from an adviser in California today that broke my heart. Donna wanted to know if her client might be entitled to Social Security survivor benefits based on her ex-husband's earnings record.The hitch: the client's marriage had lasted nine years and three months.Unfortunately, no. For an ex-spouse to be entitled to retirement benefits or survivor benefits, the marriage must have lasted at least 10 years. Donna's client missed the mark by nine months.A spokesperson from the Social Security Administration confirmed my suspicions. The no-benefits decree reminded me of the Soup Nazi on Seinfeld: No soup for you!Remember, as long as a marriage lasted at least 10 years and a divorced spouse is currently unmarried, he or she may be able to claim Social Security retirement benefits on the ex-spouse's earnings record. In a special rule that applies only to divorced spouses, you can claim benefits on your ex even if he or she ... Read full post
Apr 29, 2013, 1:51 PM EST
Leading Social Security software seller comes down on price
Increasingly, financial advisers are interested in incorporating Social Security claiming strategies into their clients' retirement income plans. But as most of you know from reading my InvestmentNews columns, Social Security rules can be downright confounding.To get an accurate estimate of your clients' potential retirement benefits, forecast their lifetime income and figure out the most advantageous claiming strategies, you need good Social Security claiming software. One of the best programs, in my opinion, is Social Security Analyzer (SSanalyzer.com). But up until now, only the most dedicated retirement income specialists have been willing to fork over $1,200 per year for the robust SSanalyzer program that covers all types of households from singles and married couples to divorced spouses and widows and allows side-by-side comparisons of various claiming strategies. It can factor in the impact of the earnings test restrictions on... Read full post
Apr 25, 2013, 4:07 PM EST
Mary Beth FrankIin: I finished my CFP program!
Call me a glutton for punishment. I wasn't satisfied with just writing about financial planners. I wanted to become one.In my 30-plus years as a financial journalist, I have always enjoyed digging into whitepapers and crunching numbers from income tax tables to give my readers a better idea of how a new law or proposal might affect their pocketbook or portfolio.I became fascinated with retirement income planning more than a decade ago when I was writer and editor at Kiplinger's Personal Finance magazine and received countless questions from readers asking how they should convert their lifetime of savings into sustainable streams of income. So I researched the 4% withdrawal rule, dissected the buckets of money strategy, and learned the value of pairing fixed expenses with guaranteed sources of income such as Social Security benefits, pensions or annuities. In the process, I became a first-class Social Security claiming strategy nerd.I... Read full post
Apr 22, 2013, 1:52 PM EST
Social Security rules define when a spouse is a spouse
I received an interesting question from a reader last week. She asked what are the Social Security claiming rules for a married couple that has been legally separated for years, but is not divorced?In this case, both spouses are older than the normal retirement age of 66, but the husband—the larger earner—has not yet claimed Social Security benefits. The wife does not have sufficient lifetime earnings to qualify for retirement benefits on her own work record.The question is does the wife have to wait for her estranged husband to claim benefits before she can collect spousal benefits? It turns out that the Social Security Administration has a black-and-white definition of marriage. Either you're married or you're not. The rules make no specific provisions for the gray no-man's (or woman's) land of legal separation.“If your reader is legally married to the worker even though they are estranged, she is his spouse,” ... Read full post
Apr 17, 2013, 6:18 PM EST
Mary Beth Franklin: Social Security Disability muddles claiming picture
A financial adviser in Minneapolis received a panicked call from one of his clients recently asking what would happen to her disability benefits once she reached full retirement age. She had heard that Social Security disability benefits end at full retirement age.That's true, but it's not as scary as it sounds. Disability benefits end at full retirement age, currently age 66, but are automatically converted to retirement benefits. The monthly benefits continue in the same amount.The conversation prompted another question. The adviser wondered if the client, who he called Mary, could stop the automatic conversion from disability to retirement benefits so she engage in some creative Social Security claiming strategies.Mary's disability benefit, which she had been collecting for several years due to a medical condition that rendered her unable to work, is $1,800. Her husband's retirement benefit at full retirement age would be $2,200.... Read full post
Apr 15, 2013, 1:02 PM EST
Taxes, anniversaries and alligator hunters
To many Americans, April 15 is a hated day that marks the deadline for filing their federal income taxes, and for some sad souls, the final day to pay their outstanding tax bill before the late-penalty clock starts ticking. Me, I usually celebrate with champagne.Don't get me wrong. I don't love filing my tax return, but I do love my husband and April 15 is also our wedding anniversary. This year is our 35th.That brings me to the story of the alligator hunter.I have always been frugal and love a good bargain, which is why Mike and I got married on April 15. Not only is it impossible to forget the date thanks to the tax-day notoriety, but it was also the beginning of the low-cost shoulder season in Aruba where we spent our honeymoon. Perfect weather and post high-season prices. What's not to love?When I asked Mike what he'd like as an anniversary gift this year, he suggested a new alligator wallet. If you've ever bought one, you know... Read full post
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