Retirement 2.0
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
Apr 11, 2013, 3:48 PM EST
Widower can collect survivor benefits now, retirement benefits later
So often when I write or talk about Social Security benefits, I refer to the fact that actuarially, women are likely to survive their husbands. Consequently, many of my discussions of survivor benefits focus on widows.But Social Security benefits are gender neutral. Surviving widowers have the same rights as surviving widows. That means if they are entitled to both retirement benefits on their own work record and survivor benefits based on their late spouse’s earnings, they can choose when and how to receive those benefits.Think of retirement benefits and survivor benefits as two separate pots of money. You can claim one benefit now and switch to a different benefit later if it would result in a bigger benefit.Garry Patrick, a Certified Financial Planner from Englewood, Co., had a question about one of his clients, a soon-to-be 65-year-old man who was recently widowed. The man is not yet collecting Social Security retirement... Read full post
Apr 9, 2013, 9:46 PM EST
Divorced man takes advantage of spousal benefit strategy
Okay guys, listen up. This one's for you.I received a great e-mail from one of my loyal readers, Scot Hanson, a Certified Financial Planner from Shoreview, Minn.Mr. Hanson said he received a call from one of his clients last week, a 66-year-old man who is still working because he must. The client was married and divorced after 10 years.The client was all set to start taking Social Security at age 66, but Mr. Hanson offered him a better plan: Delay claiming his own retirement benefits and instead file a restricted claim for spousal benefits only—a tip Scot learned from reading my columns.That strategy would allow his client to collect about $800 per month for the next four years and delay collecting his own greatly increased benefits—including four years' worth of delayed retirement credits—until age 70.In another smart move, the client plans to sock that $800 per month into a Roth IRA, creating some future tax-free... Read full post
Apr 5, 2013, 3:15 PM EST
Obama backs new inflation formula for Social Security
It's official — almost. President Barack Obama's new budget proposal calls for reductions in the growth of Social Security and other benefit program, according to several news sources.Although the administration's proposal for the Fiscal 2014 federal budget that begins October 1 won't be officially released until next week, details were leaked to major news agencies today. A key feature of the plan, according to Associated Press, calls for using a new measure of inflation to adjust Social Security benefits and other inflation-sensitive parts of the federal budget, such as income tax brackets. The new formula is called the "chained CPI."Currently, the federal government relies on the consumer price index (CPI) to index provisions of the budget and tax code to account for cost-of-living changes and maintain purchasing power for beneficiaries. There are several variations of the CPI. The CPI-W, which is based on the typical... Read full post
Apr 4, 2013, 3:35 PM EST
No limit to confusion over Social Security earnings cap
My interview on National Public Radio's Morning Edition program earlier this week and a recent rebroadcast of my Social Security special on the PBS WealthTrack program has touched off a flood of e-mails and phone calls from consumers. Their questions offer some insights into how financial advisers might address their clients' concerns about the best time to claim benefits.A recurring question involves the earnings cap. That's the rule that restricts how much an individual can earn from a job while collecting Social Security benefits before full retirement age. For 2013, individuals lose $1 in benefits from every $2 they earn over $15,120.Essentially that means if you earn $45,360 or more this year while collecting Social Security benefits before your full retirement, all of your benefits will be withheld. Once you reach your full retirement age, you can collect benefits while still working without any reduction.The earnings cap claw... Read full post
Apr 1, 2013, 1:14 PM EST
How long you're hitched makes big difference in Social Security payouts
The recent Supreme Court hearing on whether the 1996 Defense of Marriage Act (DOMA) should be overturned has thrust gay marriage into the national spotlight. DOMA, which states that a marriage must be between one man and one woman, makes it impossible for same-sex couples who were legally married by their state to qualify for valuable Social Security spousal benefits during life and survivor benefits upon the death of the first spouse. Gay marriage is legal in nine states — Connecticut, Iowa, Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont and Washington — and the District of Columbia.If the Supreme Court overturns the rule that bans gay marriage, it could open up Social Security benefits, as well as a variety of income tax and estate planning options, to homosexual couples. The Supreme Court is expected to hand down its decision in June.Given all the recent attention about who qualifies as a spouse, I... Read full post
Mar 27, 2013, 2:37 PM EST
Military Service does not reduce Social Security benefits
My recent column on how the Government Pension Offset (GPO) rule can reduce or eliminate Social Security benefits for some spouses and survivors triggered several more questions from InvestmentNews readers. George, a financial adviser from South Carolina, who is retired from both the military and from a 30-year banking career, wondered if his future Social Security benefits could be affected.No. Generally, there is no reduction in Social Security benefits because of your military service. You can collect both your Social Security and military retirement benefits with no reduction in either one.Since 1957, all active duty military personnel paid Social Security taxes on their earnings. And since 1988, inactive duty service in the armed forces reserves (such as weekend drills) has also been covered by Social Security. If you served in the military before 1957, you did not pay Social Security taxes, but you will receive a special credit... Read full post
Mar 26, 2013, 3:05 PM EST
Now entering: Pension offset zone, a Social Security nightmare
I received a question from a reader the other day wondering why his ex-spouse was denied Social Security benefits. She collects a pension based on her years as a public school teacher in Rhode Island, where employees in some local jurisdictions do not pay into the Social Security system.He said they were married for 15 years, so he figured she should be able to collect benefits on his earnings record as an ex-spouse.Although their marriage lasted long enough for her to qualify for Social Security benefits as an ex-spouse and at age 62, she was old enough to collect a reduced spousal benefit, her pension from work not covered by Social Security wiped out her potential benefit.Welcome to the Government Pension Offset (GPO) zone—one of the most confusing rules in the Social Security benefits system.If you receive a pension from a federal, state or local government—including some public school systems—for work where you... Read full post
Mar 22, 2013, 5:08 PM EST
Mary Beth Franklin: Age difference creates Social Security quandry
Most Social Security claiming examples assume that the two spouses are the same age or that the husband is slightly older. In most of those cases, it makes sense for the higher-earning spouse, usually the husband, to delay claiming benefits as long as possible up to age 70 to lock in the maximum retirement benefit for himself and the largest possible survivor benefit for his wife.For many married couples, the main Social Security claiming goal should be to maximize benefits for the surviving spouse, particularly if there is no traditional pension or annuity to guarantee retirement income once the first spouse dies.Social Security survivor benefits are equal to 100% of what the deceased worker received or was entitled to receive at time of his or her death—including any delayed retirement credits worth 8% per year for each year benefits are postponed between normal retirement age and age 70.But depending on the couple's ages and... Read full post
Mar 19, 2013, 10:53 AM EST
A fresh approach to talking to clients about Social Security
Many Social Security calculators focus on how to maximize benefits over a married couple's lifetime. Such strategies usually involve at least one spouse waiting until age 70 to collect the maximum benefit.But what if your client doesn't want to wait that long?Mutual Fund Company T.Rowe Price launched a free new tool this week that puts the client in the driver seat by focusing on their goals, such as their desire to maximize their income during their years together or to minimize the drop in income after the death of the first spouse. The Social Security Benefits Evaluator (www.troweprice.com/socialsecurity) then prescribes the claiming strategy to accomplish those goals.“We don't see how you can create a retirement income strategy without considering Social Security,” said Christine Fahlund, senior financial planner for T. Rowe Price who has devoted the last two years to developing the Evaluator. The robust tool, designed ... Read full post
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