Mary Beth Franklin

Retirement 2.0blog

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

Sep 21, 2017, 2:07 PM EST

Demand for Social Security advice growing


By Mary Beth Franklin

Less than 20% of older Americans work with a financial adviser who provides guidance on when to claim Social Security benefits. Despite the low incidence of this type of holistic financial advice, it marks an improvement from recent years, according to a new survey of Americans age 50 or older by the Nationwide Retirement Institute.Among future retirees who are currently working with an adviser, 58% said their adviser provided guidance on Social Security benefits compared to 38% of recent retirees and about a third of clients who had been retired 10 years or more. But in about half of the cases, it was the client—not the adviser—who initiated the discussion about how and when to claim Social Security benefits.Despite the apparent reluctance among some financial advisers to offer Social Security guidance, it seems to be an increasing priority for clients. Nearly 80% of future retirees who work with a financial adviser said ... Read full post

Sep 15, 2017, 6:01 PM EST

Social Security COLA could get wiped out by Medicare costs


By Mary Beth Franklin

Consider this perverse scenario. Next year, typical retirees could see their expected Social Security cost-of-living adjustment for 2018 virtually wiped out by a big jump in Medicare premiums, but premiums for many higher-income clients could remain the same as 2017.Blame this potentially bizarre situation on the "hold harmless" provision that is designed to protect most retirees from a net decline in Social Security benefits from one year to the next. Although it is still more than a month away from the official 2018 COLA announcement, the latest Consumer Price Index (CPI) for August suggests that Social Security benefits could increase by about 1.8% next year, according to Mary Johnson, senior policy analyst at The Senior Citizens League, an advocacy group for older Americans. COLAs are based on increases in the CPI-W, which measures price inflation for urban workers, from the third quarter of the prior year to the corresponding... Read full post

Sep 12, 2017, 1:37 PM EST

Retirement-income theories confront reality

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By Mary Beth Franklin

I spent part of my post-Labor Day week at the beach catching up on my professional reading. I knocked off eight issues of the Journal of Financial Planning and scored eight hours of continuing education credits by taking the online quizzes available for each issue.There is something very satisfying about being able to devote long stretches of time to reviewing the latest research, analysis and opinions — particularly when accompanied by a cool beverage on a hot day. Bonus points for the sound of breaking waves in the background. What struck me the most is how financial planning continues to be more art than science, particularly when it comes to retirement-income distributions.More than two decades ago, William Bengen developed the 4% rule, which evolved into the holy grail of safe initial withdrawal rates for retirees — until persistent low interest rates called even that conservative rule of thumb into question. Mr.... Read full post

Sep 6, 2017, 1:01 PM EST

How to appeal higher Medicare premiums


By Mary Beth Franklin

It's time to prepare higher-income clients for a nasty surprise that awaits some of them this fall. Notices of monthly surcharges involving both Medicare Part B and Part D premiums in 2018 will be sent to affected Medicare enrollees in October. But sometimes those surcharges can be reversed.If clients' income exceeds certain levels—$85,000 for singles or $170,000 for married couples—they may have to pay an income-related monthly adjustment amount, known as IRMAA. The Social Security Administration uses 2016 tax returns to determine Medicare premium adjustments for 2018. IRMAA letters will be sent to Medicare enrollees next month.The Medicare Rights Center is offering a free downloadable guide for financial advisers to help their clients appeal Medicare premium surcharges. The Medicare Rights Center also offers two continuing education programs to instruct advisers about Medicare rules, costs and enrollment deadlines. Both ... Read full post

Sep 6, 2017, 4:48 PM EST

Reverse mortgages under fire again ​

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By Mary Beth Franklin

The Consumer Financial Protection Bureau (CFPB) issued a new report warning seniors against using a reverse mortgage as an income bridge to delay collecting Social Security benefits. While the report rightly points outs the potential risks of reverse mortgages, it demonstrates little understanding of the nuances of Social Security claiming strategies and overstates the typical cost of a reverse mortgage in today's marketplace.But new rules issued by this Department of Housing and Urban Development this week will increase the costs of reverse mortgages in the future and reduce the amount of equity seniors can borrow through the government-backed Home Equity Conversion Mortgage (HECM) program. The new rules take effect Oct. 2, 2017, but will not alter the terms of existing reverse mortgages. A reverse mortgage allows homeowners age 62 or older to tap some of the equity in their home through a lump sum, a line of credit, or regular... Read full post

Aug 16, 2017, 4:50 PM EST

Surprising Social Security rules on divorce

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By Mary Beth Franklin

Anyone who has read my columns about Social Security rules over the past several years undoubtedly knows that a couple must be married at least 10 years before divorcing to claim benefits on an ex-spouse's earnings record.Ho hum.But one astute financial adviser had an unusual question about whether the 10 years of marriage had to be consecutive. The scenario he outlined is a clear case of he loves me, he loves me not—times two!"I have a client who is divorced for more than two years and was married to the same person twice," wrote Mike Bruggemann of INPAC Wealth Solutions in Honolulu. "Each time was less than 10 years, but total length of the two marriages was more than 10 years," Mr. Bruggemann explained in an email. "Does that entitle her to claim on her divorced spouse's record?"Believe it or not, this situation is common enough that the Social Security Administration addresses the issue in its official program manual. Two... Read full post

Aug 2, 2017, 5:29 PM EST

A refresher course on Social Security claiming rules


By Mary Beth Franklin

By now, most financial advisers should be generally familiar with the changes to Social Security claiming rules that took effect last year. But it is the nuances of the new rules that can thwart a carefully crafted retirement income plan. Based on the numerous emails I have received from advisers, it seems a refresher course is in order. Here is a summary of the claiming rules authorized by the Bipartisan Budget Act of 2015.The claiming strategy known as "file and suspend" is no longer available, but those clients who took advantage of this strategy before the April 29, 2016, deadline are grandfathered under the old rules, as are their spouses and dependents.The file-and-suspend strategy could trigger benefits for spouses and/or minor dependent children or permanently disabled adult children while the worker's own benefit would continue to accrue delayed retirement credits worth 8% per year up to age 70. At that point, the worker could ... Read full post

Jul 27, 2017, 2:35 PM EST

Most women flunk retirement income literacy quiz

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By Mary Beth Franklin

It is unfortunate that the people who are likely to live the longest understand the least about how to make their money last a lifetime. Only 18% of retirement age women can pass a basic quiz about how to make a nest egg last in retirement, according to findings from The American College of Financial Services' 2017 RICP Retirement Income Literacy Gender Differences Report. That's about half the rate of men of the same age. RICP stands for Retirement Income Certified Professional, a designation offered through The American College.Even though more than 80% of women failed the quiz, the majority—55%—are still extremely confident that they and their spouses would have enough money to retire comfortably. Call it the Scarlett O'Hara syndrome. Apparently, many women simply plan to think about it tomorrow. Unfortunately, many of them will spend their final years alone due to divorce, widowhood or never being married."Women face... Read full post

Jul 10, 2017, 9:38 AM EST

How Social Security treats the survivors of young workers


By Mary Beth Franklin

I just received a sad question from a financial adviser in Indiana who asked if there would be any Social Security benefits available for a young widow and child following the death of their 25-year old husband and father in a traffic accident. She noted that the young man had not worked long enough to accrue the 40 credits usually required to be eligible for Social Security benefits.I assured her there is an exception to the 40-credit rule when a very young worker dies or becomes disabled. The adviser's question really hit home, as I was on the way to a funeral of my 31-year-old nephew who had died over the July 4th weekend. Although most of us think of Social Security as a government program for older people who retire or become disabled or that pays survivor benefits to elderly widows and widowers, it also provides valuable benefits for very young workers. Because of their brief careers, the eligibility rules are more lenient.A... Read full post

Jul 6, 2017, 2:58 PM EST

Dual income couples complicate Social Security earnings test


By Mary Beth Franklin

With so many people planning to work beyond normal retirement age, dual-income couples create a challenge for financial advisers when it comes to recommending a Social Security claiming strategy.Anyone who claims Social Security benefits before full retirement age while continuing to work could lose some or all of their benefits — at least temporarily — if they earn too much. In 2017, "too much" is defined at $16,920 if someone is under full retirement age for the entire year. They would lose $1 in benefits for every $2 earned over that limit.In the year someone reaches full retirement, during the months before their 66th birthday, a more generous earnings test applies. They would lose $1 in benefits for every $3 earned over $44,880 in 2017. Once someone (who was born from 1943 through 1954) reaches 66, the earnings test disappears. Benefits lost due to excess earnings are automatically restored at full retirement age in... Read full post

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