Mary Beth Franklin

Retirement 2.0blog

Mary Beth Franklin - also known as the 'client whisperer' - on what your clients really want when they talk about retirement.

Nov 26, 2014, 1:34 PM EST

Being a traffic cop at the intersection of disability and Social Security benefits

By Mary Beth Franklin

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

Deconstructing Social Security rules for remarriage

By Mary Beth Franklin

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

A crash course on Social Security benefits for gay couples

By Mary Beth Franklin

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

Majority of women claim Social Security early

By Mary Beth Franklin

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

Get out your calculators: Social Security tax rules are a mind-bender

By Mary Beth Franklin

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

Lump sum Social Security payments only for the living

By Mary Beth Franklin

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

Oct 22, 2014, 5:20 PM EST

Early filers cannot choose their Social Security benefits

By Mary Beth Franklin

There must be something in the air. I have received a slew of questions from financial advisers lately asking if a client who files for Social Security benefits before full retirement age can collect only spousal benefits while allowing their own benefit to grow to the maximum amount up to 70.The short answer is no.If you prefer the official answer from the Social Security Handbook, here it is: “If you are eligible for both reduced retirement insurance benefits and reduced spouse's insurance benefits beginning with the same month, you cannot restrict an application to just one of these types of benefits. By filing for either benefit, you are deemed by law to have filed for both types of benefits.”That's why the strategy of filing a restricted claim for spousal benefits is so powerful. If you wait until your full retirement age to claim benefits, you can request that you receive spousal benefits only while your own... Read full post

Oct 15, 2014, 3:38 PM EST

The new and improved Social Security statements

By Mary Beth Franklin

Surprise, I got mail! I'm not sure why, but I received a Social Security estimated benefit statement in the mail this week. Although I will reach a milestone birthday of 60 later this year, I didn't expect to receive a paper statement because I have already set up an online account.Whatever the reason, I'm glad I received a paper statement to compare it to previous ones in my retirement file.Bowing to public and congressional pressure, the Social Security Administration announced last month that it would resume periodic mailings of estimated benefit statements to workers who reach ages 25, 30, 35, 40, 45, 50, 55 and 60, are not receiving Social Security benefits and have not registered for an online account. Designated workers will receive a statement in the mail about three months before their birthday. After age 60, people will receive a statement every year. The agency expects to send nearly 48 million statements each year.At the... Read full post

Oct 8, 2014, 3:08 PM EST

How public employees can get around Social Security restrictions

By Mary Beth Franklin

In a recent column, I wrote about rules that can reduce or eliminate Social Security benefits for public sector employees.I explained that there are two sets of rules. The first, the Windfall Elimination Provision, applies to some federal, state and local workers — including some public school teachers — who earned a pension from work in which they did not pay FICA taxes and also worked in the private sector long enough to be eligible for Social Security benefits. Generally, one must work and pay FICA payroll taxes for at least 10 years to accumulate the 40 quarters needed to be eligible for Social Security benefits.The WEP rules reduce their monthly Social Security benefits by up to 50% of the amount of their public pension — but not more than $408 per month — as of 2014. A second rule, the Government Pension Offset provision, reduces Social Security benefits paid to a spouse or survivor when the spouse or... Read full post

Oct 6, 2014, 5:16 PM EST

Some earnings don't reduce Social Security benefits

By Mary Beth Franklin

Most advisers know that if their clients continue to work while collecting Social Security benefits before full retirement age, their benefits may be reduced if their earnings exceed an annual limit.In 2014, retirees who are younger than full retirement age (66 for anyone born from 1943 through 1954) lose $1 in benefits for every $2 they earn over $15,480. The earnings test is more lenient in the months leading up to a retiree's 66th birthday and completely disappears once the person reaches full retirement age. Those turning 66 this year will lose $1 in benefits for every $3 earned above $41,400 until their birthday.But what happens if your client retires and subsequently receives payments from a former employer in the form of severance pay, unused vacation days, accumulated sick leave or commissions? In most cases, such payments are considered “special payments” and will not affect Social Security benefits.(See also: For... Read full post

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