Mary Beth Franklin

Retirement 2.0blog

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

Jan 9, 2015, 2:14 PM EST

Social Security's special tax rule for repaying benefits

By Mary Beth Franklin

Increasingly, some financial advisers are encouraging their retirement-age clients who have no immediate need for extra income to repay Social Security benefits they've already received and reapply for benefits later when they will be worth more.But what if those Social Security benefits have already been taxed? Is there a way to recoup taxes on benefits that are later repaid?That's the question Mary Dean, a financial planner with Dean Roland Russell Family Wealth Management in San Diego, posed in a recent email.“My 68-year-old client will make over $100,000 in 2015 and does not need Social Security,” Ms. Dean wrote in an e-mail. “Her first Social Security check was received in December 2014,” she explained. “What form does she need to repay the Social Security received?” Anyone who changes their mind within 12 months of first receiving Social Security retirement benefits can withdraw their... Read full post

Jan 5, 2015, 6:47 AM EST

How Social Security cost-of-living adjustments change benefits this year

By Mary Beth Franklin

Starting this month, more than 58 million Social Security recipients will see a slight increase in their monthly retirement and survivor benefits — up 1.7% from last year — while high-income workers will pay up to $114.75 more in payroll taxes.The maximum Social Security benefit for someone retiring at the full retirement age of 66 in 2015 is $2,663 per month. That's up $21 from the maximum benefit of $2,642 per month for someone who retired at full retirement age in 2014.But typical retirees, many of whom claim reduced benefits early, receive a lot less. The Social Security Administration estimates the average Social Security benefit in 2015 will be $1,328 per month, up $22 from last year.Retirees can claim Social Security benefits as early as age 62, but they are reduced by 25% compared with claiming at full retirement age. And those who claim Social Security before full retirement age while continuing to earn income from ... Read full post

Dec 30, 2014, 3:36 PM EST

Resolving confusion over Social Security survivor benefits

By Mary Beth Franklin

Social Security benefits can be pretty darn confusing. But sometimes, what a Social Security representative tells prospective beneficiaries and what those consumers hear may be two different things. As memorialized in the 1967 movie “Cool Hand Luke,” what we've got here is a failure to communicate.For example, financial adviser James Williams of FMG Financial Management Group in Lancaster, Pa., emailed me about his new clients. The husband, John, is 64 and began collecting reduced Social Security benefits early at 62, before engaging Mr. Williams as his adviser. John's wife, Mary, who is 50 and still working, is the higher-earning spouse.According to Mr. Williams, John and Mary visited their local Social Security office two years ago to determine whether he should claim benefits early at 62. The couple said the Social Security representative told them that because of the couple's age difference and because there are no... Read full post

Dec 23, 2014, 2:55 PM EST

Understanding Social Security rules for divorced spouses

By Mary Beth Franklin

Two financial planners in Tennessee wrote me recently asking to confirm a Social Security claiming strategy that they planned to suggest to one of their female clients who is divorced. Jason Frazier and Nick Sowell of Shoemaker Financial sent me a list of questions to verify their understanding of the Social Security rules for divorced spouses. While they got most of the answers right, I was able to deliver a Christmas surprise that made them — and their client — very happy.Here's a summary of our correspondence, which I think is an excellent example of questions that advisers should review with their divorced clients who are nearing retirement age. Feel free to play along with today's installment of Social Security Trivia: Divorce Edition.(More: How one single woman can collect three types of Social Security benefits)The facts: The woman is divorced, almost age 60 and not remarried. She was married to her ex-husband for... Read full post

Dec 12, 2014, 2:55 PM EST

How to trim Social Security reductions for public employees

By Mary Beth Franklin

I've noticed an increased interest among financial advisers about Social Security rules that affect their public employee clients. It was a hot topic during my Dec. 9 webcast on Social Security claiming strategies.It is critical for financial advisers to know that clients who have worked for the city, state or federal government — or in some cases, public school systems — may be affected by rules that can reduce or eliminate their Social Security benefits. The Windfall Elimination Provision affects individuals who have worked in the private sector at least 10 years — long enough to qualify for Social Security benefits — and who also have worked in the public sector where FICA payroll taxes were not deducted from their earnings. To be subject to WEP rules, clients must have earned a pension from that public sector job. The WEP rules reduce monthly Social Security benefits by up to 50% of the amount of a public... Read full post

Dec 8, 2014, 6:43 AM EST

No double dipping on Social Security claiming

By Mary Beth Franklin

This the season of holiday parties and the dreaded social faux pas of double dipping your crudité in the ranch dressing. (You know, dip, bite, and dip again. Ew!)Let that be a reminder to you and your clients: no double dipping on Social Security claiming strategies either.I am always delighted to share the many rules and strategies of maximizing Social Security benefits with new readers and audiences. Inevitably, one of those novices will raise the very logical question of why married couples can't both file and suspend their benefits and then both file restricted claims so they can each collect spousal benefits while their own retirement benefits continue to grow up to age 70.It's a great idea, but the Social Security rules don't work that way. When it comes to collecting retirement benefits, each person is entitled to one Social Security election. (Survivor benefits are another story).You can claim reduced retirement benefits as... Read full post

Dec 5, 2014, 2:59 PM EST

How children can reap the benefits of Social Security

By Mary Beth Franklin

Most consumers and financial advisers tend to think of Social Security benefits in terms of retirement income. But the program is a major provider of disability and survivor benefits, too. And not all of the beneficiaries are adults.In fact, about 4.4 million children receive roughly $2.5 billion each month because one or both of their parents are disabled, retired or deceased. When it comes to Social Security benefits for children, there are three important ages to remember: 16, 18 and 22.A child can receive Social Security benefits if he or she is the biological child, adopted child or dependent stepchild of a parent who is disabled or retired and entitled to Social Security benefits. Dependent children are also entitled to survivor benefits following the death of a parent who had worked long enough in a job where he or she paid Social Security taxes.When a parent collects disability or retirement benefits, the child is entitled to... Read full post

Dec 2, 2014, 5:54 PM EST

How one single woman can collect three types of Social Security benefits

By Mary Beth Franklin

Sometimes real life provides the best case studies. Mary Lou Daly, a financial adviser in Charlotte, N.C., posed an interesting client scenario the other day.Her client, Jane, is 63 years old. Jane was married to Rob for more than 10 years. They are divorced, and Rob is still alive and older than 62. Following her divorce, Jane married David. They were married for five years when David died.Ms. Daly wondered if Jane would be entitled to all three types of Social Security benefits: survivor benefits based on her second husband's earning record, spousal benefits on her ex-husband's earnings record, and a retirement benefit based on her own earnings. And if she could collect all three types of benefits, what would be the optimum way to claim them?Normally, if you are eligible for both your own retirement benefit and a spousal benefit and you claim Social Security before your full retirement age, you are “deemed” to have filed... Read full post

Nov 26, 2014, 5:02 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

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