Mary Beth Franklin - also known as the 'client whisperer' - on what your clients really want when they talk about retirement.
Oct 27, 2014, 3:45 PM EST
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
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
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
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
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
Oct 1, 2014, 3:20 PM EST
Social Security benefits are likely to increase by 1.7% in 2015, slightly more than this year's 1.5% increase but still well below average increases over the past few decades, according to an unofficial projection by the Senior Citizens League. The Social Security Administration will issue an official announcement about the 2015 cost-of-living adjustments for both benefits and taxable wages later this month.Based on the latest consumer price index data through August, the advocacy group's projection of a 1.7% increase in Social Security benefits for 2015 “would make the sixth consecutive year of record-low COLAs,” Ed Cates, chairman of the Senior Citizens League, said in a written statement. “That's unprecedented since the COLA first became automatic in 1975.”Inflation over the past five years has been growing so slowly that the annual increase has averaged only 1.4 % per year since 2010, less than half of the... Read full post
Sep 29, 2014, 3:10 PM EST
My girlfriends whisper, “How are things going?” I think they half expect me to rant about 24/7 togetherness with my recently retired husband. I hate to disappoint them, but life is grand!My husband, Mike, retired after 20 years as a federal employee at the beginning of the summer, topping off a 40-year career that included stints as a Washington reporter and a self-employed public relations consultant. He is grateful for the break while he recharges his batteries and figures out what to do nextIn the meantime, I hope by offering a glimpse into our new day-to-day life, I can provide some insights for advisers working with retired clients.(Related: Husband's retirement ushers in a new era for contributing editor)A different mindset set in rather quickly as Mike traded his blaring pre-dawn alarm clock and soul-sucking commute for a box full of Saturdays. He's busied himself with household projects, painting almost everything... Read full post
Sep 25, 2014, 3:40 PM EST
Medicare's annual open enrollment season is an ideal time for clients to shop around for new Medicare coverage — even if they are happy with their current plan — to see if it is still appropriate for their needs.Open enrollment this year begins Oct. 15 and runs through Dec. 7.Checking on the coverage your clients currently have could be extremely worthwhile. Only 19% of current Medicare beneficiaries say they understand their health care options, according to a recent Merrill Lynch study conducted by AgeWave on the convergence of health and retirement planning. That lack of understanding could be costing your clients a lot of money. (Don't miss: 7 things you don't know about Medicare)Insurance plans unveil new pricing and benefits during the annual open enrollment period every fall, so it is important for clients to review their Medicare options each year. They shouldn't assume that their drug coverage and other co-payments ... Read full post
Sep 22, 2014, 1:05 PM EST
Only a minority of financial advisers are well-versed in Social Security rules and comfortable recommending specific claiming strategies to clients, according to a recent report on this increasingly important facet of retirement planning.“Advisers view Social Security as growing in importance, but only one in three are comfortable making claiming recommendations,” said Howard Schneider, president of Practical Perspectives and author of the report, which is based on the results of an online survey of more than 600 advisers conducted earlier this year. Mr. Schneider and his co-author Dennis Gallant, president of GDC Research, discussed the results of their report, “Social Security Support and Financial Advisors — Insights and Opportunities 2014” last week during a webcast sponsored by the Retirement Income Industry Association.(More: Advice industry adapts to changing concept of retirement)They noted that... Read full post
Sep 17, 2014, 3:21 PM EST
The Social Security Administration announced Tuesday that it will resume mailing estimated benefit statements to most workers every five years, while encouraging all workers to create personalized Social Security accounts online that will allow them to access their benefit information at any time.The Social Security statement is a valuable financial planning tool providing workers age 18 and older with important information regarding their earnings, tax contributions, and estimates for future retirement, disability and survivor benefits.Beginning this month, workers attaining ages 25, 30, 35, 40, 45, 50, 55, and 60 who are not receiving Social Security benefits and who have not registered for a My Social Security online account 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.The... Read full post
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