Mary Beth Franklin

Retirement 2.0blog

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

Aug 24, 2015, 3:07 PM EST

How and why to file for Social Security benefits online

By Mary Beth Franklin

More than 50% of all prospective retirees now file for their Social Security benefits online, according to the Social Security Administration. That's a safe and efficient option even for people who want to exercise creative claiming strategies.I used to recommend that individuals who wanted to do anything out of the ordinary — such as file and suspend their benefits when they reach full retirement age or restrict their claim to spousal benefits at 66 — make an appointment for a face-to-face interview at their local Social Security office.Not anymore. Given the shrinking SSA workforce and the increasing demand for services from aging baby boomers resulting in long waits on the phone or for in-person appointments, I think online applications are the way to go.Part of my decision was based on a recent conversation with Andy Landis, a former Social Security employee and author of “Social Security: The Inside Story,” ... Read full post

Aug 19, 2015, 9:30 PM EST

Health care costs can derail retirement plans

By Mary Beth Franklin

Many financial advisers rely on income replacement ratios to estimate the annual income needed to maintain a desired lifestyle in retirement. Although a general inflation assumption of between 2.5% and 3% may be appropriate for most future expenses, it could fall far short of actual health care expenses and derail the overall retirement income plan in the process.The most widely used range of income-replacement ratio in financial planning is 75% to 85% of pre-retirement income. This rule of thumb is useful to both financial advisers and retirement plan participants to assess future retirement-income needs without having to calculate individual line-item expenses. The problem is health care expenses are expected to rise at double the rate of core inflation for the foreseeable future. The Centers for Medicare & Medicaid Services Office of the Actuary project health care spending to rise by about 6% per year through 2024.Because many past ... Read full post

Aug 10, 2015, 6:55 AM EST

Then and now: A look back at Social Security's 80-year history

By Mary Beth Franklin

President Franklin D. Roosevelt signed the Social Security Act into law 80 years ago on Aug. 14, 1935. Over the past eight decades, the Social Security program has expanded from a retirement program for workers to a broader safety net that includes dependent benefits for spouses and minor children, survivor benefits and disability benefits.During those 80 years, no beneficiary ever missed a check. Even when the Social Security system was threatened with insolvency in 1983, Congress intervened in the nick of time to approve a reform package that kept benefits flowing for the past 32 years. The crucial retirement and survivor program is expected to have sufficient revenue to continue paying full benefits through 2034, but unless Congress steps in again, disability benefits for 11 million workers could be cut by about 20% late next year.In the meantime, let's review some of the highlights of the program's last 80 years, thanks to the... Read full post

Aug 3, 2015, 12:23 PM EST

Social Security cost-of-living adjustment unlikely for 2016

By Mary Beth Franklin

It looks like Social Security recipients will not see a cost-of-living adjustment in their benefits next year. And some high-income retirees may actually see a net reduction in benefits in 2016 as their Medicare premiums, which are deducted from monthly Social Security payments, continue to rise.The Social Security Administration will make official announcement about the 2016 COLA — or lack thereof — in October. That should give you plenty of time to get ready for some unhappy clients come January when they ask you — their financial adviser — why their Social Security benefits went down.COLA HISTORYBeginning in 1975, Social Security benefits began receiving automatic cost-of-living adjustments each year so beneficiaries' buying power could keep pace with inflation. Before that, it took congressional action to increase benefits.Over the years, the method of calculating that increase has changed. Since 1983, COLAs ... Read full post

Jul 28, 2015, 3:23 PM EST

New life insurance study debunks 'buy term, invest the difference'

By Mary Beth Franklin

For decades, the rallying cry of the financial advice industry has been for clients to buy inexpensive term life insurance rather than more expensive whole life insurance and invest the premium savings on their own. The only problem is most clients never execute the second part of the equation, leaving many of them uninsured in later life and unprepared for retirement.“People don't buy term and invest the difference,” said David F. Babbel, professor at the Wharton School of the University of Pennsylvania and co-author of “Buy Term and Invest the Difference Revisited,” published in the May 2015 issue of Journal of Financial Service Professionals.“They most likely rent the term, lapse it and spend the difference,” he said. And even the minority of those who do invest the difference are prone to the real-world emotional investing when individuals investors tend to buy high and sell low, perennially... Read full post

Jul 23, 2015, 3:02 PM EST

Social Security claiming strategy short-circuited by excess earnings

By Mary Beth Franklin

Financial advisers have their clients' best interests in mind when they try to craft an optimal Social Security claiming strategy to maximize clients' benefits over their lifetimes. But sometimes, it just amounts to wishful thinking.Chris Hughes, a financial adviser with the Del Monte Group in Alamo, Calif., asked me to review a possible claiming strategy for his clients, Carl and Betty. Carl, 62, still works full time. Betty, his 70-year-old wife, is a homemaker.Mr. Hughes asked if it would be possible for Carl to claim Social Security benefits early at 62 in order to trigger a spousal benefit for Betty, who has no Social Security benefits of her own.A spousal benefit is equal to half of the worker's full retirement age amount, assuming the person who collects the spousal benefit is full retirement age or older. Spousal benefits are based on the worker's full retirement age amount even if the worker claims reduced benefits early or... Read full post

Jul 21, 2015, 10:07 PM EST

I took the test, I talked the talk. Now you can call me a CFP!

By Mary Beth Franklin

I didn't think this day would ever come, but on July 15, I received an email from the Certified Financial Planner Board of Standards Inc. that said: “Congratulations! You are now a certified financial planner.”I completed the financial planning certificate program at the University of Virginia in 2013 and passed the CFP comprehensive exam on my first attempt in November 2013.But back in December 2013, when I received notice that I had passed the exam, I wrote a column noting that I probably would never be able to call myself a certified financial planner. Because of the CFP Board's narrow definition of work experience, it seemed that if I wanted to satisfy the requirement, I would have to quit my day job as a financial columnist and work in a financial services firm — something I was not willing to do.A year later, the CFP Board expanded its definition of experience to include "support activities." In a Dec. 30, 2014,... Read full post

Jul 14, 2015, 5:10 PM EST

Social Security as a backup plan for single filers

By Mary Beth Franklin

The key to financial planning is to remain flexible and be able to pivot as necessary if situations change. That's what happened to one reader who wrote to me recently about her decision to claim reduced Social Security benefits early at age 62 after she lost her job.Job loss is an excellent reason to claim Social Security early. If you need the money, take it.But shortly after Sonya Bell began collecting Social Security benefits four years ago, she found another job in her profession as a registered nurse. Although she only worked part time, her earnings significantly exceeded the annual earnings limit. In 2015, anyone who is under full retirement age for the entire year and who continues to work while collecting Social Security benefits forfeits $1 in benefits for every $2 earned over $15,720. Essentially that means if you earn $47,160 ($15,720 x 3) or more in 2015, you would temporarily forfeit all of your benefits. The earnings cap ... Read full post

Jul 8, 2015, 6:51 AM EST

Billy Joel: Poster child for the Viagra college fund?

By Mary Beth Franklin

I was surprised to hear the strains of “Just the Way You Are” on my local all-news radio station this week. It was the song that my husband and I danced to at our wedding nearly four decades ago. The music served as the lead-in for a news item about its composer, singer/songwriter Billy Joel. The Piano Man tied the knot for the fourth time over the Fourth of July weekend in a ceremony at his sprawling estate on Long Island. He married Alexis Roderick, 33, a former Morgan Stanley executive. They are expecting their first child this summer.I have no idea whether Mr. Joel is collecting Social Security benefits. I doubt he needs the money, as his upcoming appearances in Boston and New York City are sold out. But he has reached the magic age of 66, when the earnings cap no longer applies, meaning he can collect Social Security benefits without reduction even as he continues to work. What Mr. Joel may not know is his soon-to-be... Read full post

Jul 2, 2015, 1:24 PM EST

Social Security update for gay couples

By Mary Beth Franklin

Last week's landmark Supreme Court ruling allowing same-sex couples the right to marry in every state opened the door for gay couples nationwide to apply for Social Security spousal, survivor and disability benefits, as well as Medicare coverage, subject to other existing program rules.To qualify for Social Security and disability benefits, a couple must be married at least 12 months before each spouse can apply to become the other's beneficiary. A spousal benefit is worth up to 50% of the worker's full retirement age benefit, also known as the primary insurance amount, or PIA, if the spouse who is collecting the benefit is at least full retirement age — currently 66. A spousal benefit is available as early as age 62, but it is worth just 35% of the worker's PIA.To qualify for Social Security survivor benefits and one-time lump-sum death benefit of $255, a surviving widow or widower must have been married at least nine months... Read full post

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