Mary Beth Franklin

Retirement 2.0blog

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

Mar 27, 2017, 3:07 PM EST

Hiring freeze and budget cuts impact Social Security claims

Social Security-Main

By Mary Beth Franklin

Last week, 50 members of Congress sent a letter to President Donald J. Trump asking him to exempt the Social Security Administration from the federal hiring freeze "to ensure that the American people receive the first-class service they have already earned through a lifetime of hard work."Don't hold your breath waiting for a reply.To start, all 50 of the letter signers are House Democrats with little sway over Mr. Trump's public policy agenda. In addition, the president had his hands full trying to rally members of his own Republican party to vote to repeal the Affordable Care Act and replace it with a controversial health care plan of his own. "Social Security is efficiently administered, spending less than a penny of every dollar on administration all while the American population is rapidly aging with 10,000 people, on average, turning 65 every day," the Democratic lawmakers noted in their letter to Mr. Trump.The agency, already... Read full post

Mar 8, 2017, 6:22 PM EST

Study finds most retirees want guaranteed lifetime income


By Mary Beth Franklin

Most Americans are comfortable with the idea of working towards a savings goal as they approach retirement, but few know how to create an income strategy once they get there. The greatest financial challenge facing retirees is determining how to make their money last as long as they do. That challenge is exacerbated by the disappearance of traditional pensions and the current low interest rate environment which produces relatively little income from the safe types of investments that many retirees favor."Our new survey finds that 61% of Americans age 55-75 place a high value on having guaranteed lifetime income to supplement their Social Security income," said Doug Kincaid, director of the "Third Annual Guaranteed Lifetime Income Study" released Wednesday. "Retirees can adjust their discretionary spending in retirement if they need to, but it's clearly comforting to know that essential expenses are covered by a source of income that... Read full post

Feb 28, 2017, 4:04 PM EST

Strict timeline governs health savings accounts and Medicare


By Mary Beth Franklin

Many clients have chosen to enroll in health savings accounts (HSAs) because they like the triple tax savings that HSAs offer when paired with a high-deductible health insurance plan. But things can get very complicated when clients approach Medicare-eligibility age. The rules are complex and the penalties are steep.HSAs offer a triple tax-break. Contributions are tax-deductible. Assets grow tax-free. And distributions are tax-free if used for qualified medical expenses. Non-qualified distributions are subject to ordinary income taxes and a 20% penalty if withdrawn before age 65. Once you turn 65, you can use HSA funds for any purpose penalty-free, but if distributions are used for non-medical expenses, they are subject to income tax.Because health care expenses often represent a significant portion of a retiree's budget, there is no shortage of ways to spend HSA dollars tax-free in retirement. Most medical and dental procedures count... Read full post

Feb 21, 2017, 5:25 PM EST

Using IRAs to reduce Medicare premiums


By Mary Beth Franklin

High-income Medicare beneficiaries who are age 70 1/2 or older can use a recent change in the tax code to reduce their Medicare premiums surcharges.Individuals whose modified adjusted gross income (MAGI), which encompasses all income including tax-exempt interest, tops $85,000 and married couples whose joint income exceeds $170,000, pay higher premiums for both Medicare Part B, which covers doctor visits and out-patient services, and Medicare Part D, which covers prescription drug costs. There are five income tiers and if your MAGI exceeds an income bracket by just $1, you are catapulted into the next tier and will pay a higher surcharge. Medicare premiums are based on the latest available tax return, so 2017 premiums are based on 2015 tax returns that were filed last year.In 2017, most new enrollees in Medicare Part B pay a standard premium of $134 per month. So do existing Medicare beneficiaries who do not receive Social Security... Read full post

Feb 15, 2017, 3:32 PM EST

Small and large course corrections can add up to big savings for retirement

By Mary Beth Franklin

American retirement is a huge riddle. How do you save for something when you don't know what it will cost or how long it will last? That's the challenge faced by millions of Americans, so it may not be surprising that most are coming up short.While most people realize retirement will be the biggest purchase of their lifetimes, averaging about $700,000 or about 2.5 times the cost of an average home, 81% say they do not know how much money they will need to fund retirement, according to a new study from Bank of America Merrill Lynch.This lack of preparedness extends even to the wealthy. Of those with at least $1 million in investable assets, only 60% say they feel prepared for a 30-year retirement. Among those with $500,000 to $1 million in investable assets, the confidence level drops to 37%.The study, conducted in partnership with Age Wave, a research and consulting firm, offers some insights into how key trends of U.S. demographics,... Read full post

Feb 13, 2017, 3:00 PM EST

Social Security Administration continues to give bad advice on claiming rules

By Mary Beth Franklin

I don't know who is more frustrated about the rash of bad advice being doled out by Social Security Administration staffers recently — financial advisers, their clients or me.More than a year after Congress approved changes to Social Security claiming rules as part of the Bipartisan Budget Act of 2015, agency representatives continue to deny legitimate claims for spousal benefits by applicants who are clearly grandfathered under prior rules and tell other applicants they can take advantage of claiming rules that no longer exist.Mark Beaver, a financial adviser with Benedict Financial in Atlanta, wrote to me about a recent client situation. The wife, age 67, claimed her Social Security benefit of about $1,100 per month when she reached her full retirement age in 2015. When the husband retired last year, Mr. Beaver recommended that he wait until he turned 66 to file a restricted claim for spousal benefits. That would entitle the... Read full post

Feb 6, 2017, 5:35 PM EST

Two ways to boost Social Security benefits

By Mary Beth Franklin

Now that Congress has eliminated some of the more lucrative Social Security claiming strategies, financial advisers are always looking for ways to help their clients maximize their retirement benefits.Scott Willingham, a financial adviser with LPL Financial, wrote to me recently with a question about one of his clients who will turn 66 this summer.“I am aware that [my client's] yearly Social Security payout will increase by 8% for every year he postpones claiming benefits beyond his full retirement age,” Mr. Willingham said in an email. “My question is will the higher payout after age 66 increase even more because he had higher income in recent years that will replace earlier low-income years?”“Yes, your client will receive delayed retirement credits of 8% per year for every year he postpones collecting benefits beyond his full retirement age,” I confirmed. “And if his current earnings are... Read full post

Jan 27, 2017, 6:07 PM EST

When claiming Social Security early makes sense

By Mary Beth Franklin

A question from an InvestmentNews reader warmed my heart because it perfectly demonstrates how financial advisers can continue to help their clients maximize their Social Security benefits even after the recent changes to the claiming strategy rules are fully phased in.This strategy, which applies to surviving spouses and surviving ex-spouses, is not going away.The question involves a widow, age 62, who is still working. She earns about $45,000 per year and plans to continue working through her full retirement age of 66.(More: 2016 tax returns determine 2018 Medicare premiums)Her survivor benefit would be worth $2,057 per month if the widow waited until 66 to collect, or about $1,666 per month if she claimed now at age 62. But because she is still working, her benefit would be subject to earnings restrictions. In 2017, someone who is under full retirement age for the entire year would forfeit $1 in benefits for every $2 earned over $16,... Read full post

Jan 19, 2017, 12:36 PM EST

Some compensation is exempt from Social Security earnings test

By Mary Beth Franklin

Talk about double whammy! One adviser asked me for guidance on a Social Security claiming strategy for a newly widowed client. Not only did she lose her husband recently, but at the end of last year, she also lost her job.The adviser, Dewey Engelsma with D.A.E. Capital Advisors near Grand Rapids, Mich., wanted to help his client through a rough patch and to create stable cash flow for her as she grapples with her new status as an unemployed widow.The client is 60. Her full retirement age benefit at 66 and 4 months is $2,300 per month. Her late husband died at age 59 before claiming Social Security. His full retirement age benefit would have been $2,100 per month. Although reduced survivor benefits are available as early as age 60, there is a complicating factor. The client will receive a severance package this year equal to one year's salary. Mr. Engelsma asked if the severance package, which would significantly exceed the 2017 Social... Read full post

Jan 10, 2017, 3:07 PM EST

Social Security to stop mailing paper statements — again

By Mary Beth Franklin

The Social Security Administration announced it will stop mailing estimated benefit statements to most American workers in a cost-saving move that is expected to save about $11 million this year. Well, “announced” may be too strong a word. A senior agency official posted a blog Monday alerting the public that paper statements will now be sent only to people who are 60 or older who have not established online My Social Security accounts with the agency and who are not yet receiving Social Security benefits.“We know that our cutbacks will affect many of you, but we have no choice,” Doug Walker, deputy commissioner of communications for the Social Security Administration, wrote in a blog posted on the agency's website.“During the past year, we began a hiring freeze that will reduce our staff to the lowest level since FY 2013,” Mr. Walker wrote. After adjusting for inflation, the agency's budget is now... Read full post

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