Finance - HL 268 (1)

Helpful miscellaneous articles regarding our retirement plan and planning.  Like you, I review my retirement nestegg and plan from time to time.  Recently, I went though some continued education for some credentials I maintain and it occurred to me that we all could use a review about these issues.  So with your help, we will share and post articles and info that may be helpful and of interest to many of you in this section.

Yes, it is possible for couples to miss out on social security benefit because of not being told about the “spousal benefit.”  Either spouse may receive 50% of their spouses’ benefit!  Please read below:

Don't overlook Social Security spousal benefits

Owen Ullmann, USA TODAY Published 7:51 p.m. ET Dec. 18, 2013 | Updated 10:35 a.m. ET Dec. 19, 2013

I always considered myself savvy when it came to personal finance and retirement planning.
But here's a Social Security benefit I almost missed out on — and one that I bet a lot of others may overlook, too: a spousal benefit you can collect at the full retirement age of 66 if your spouse is retired and collecting Social Security, and you choose to continue working and postpone taking your own retirement benefit.
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The spousal benefit is equal to half of your mate's monthly benefit, a handsome inducement to put off collecting Social Security to let your benefit grow 8% a year until maxing out at age 70. Where else would you get a guaranteed 8% annual return for up to four years with no risk?

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The spousal benefit is often overlooked because it's widely thought of as the monthly payment a non-working housewife gets when her husband retires.
That was the original intention behind the benefit — to supplement the couple's income. For example, if the husband received $1,500 a month, the wife would be eligible for $750 a month, once she reached the full retirement age.
But the law creating the benefit was not gender specific. Nor did it say you couldn't collect it if you still work and had the larger salary.
So that creates a financial opportunity for the huge generation of two-income Baby Boomers who have begun to reach full retirement age in 2012.
Here's an example of how it works:
A wife who retired at age 62 collects $2,000 a month. The husband, the higher earner in the family, is turning 66 and is eligible for the maximum monthly benefit of $2,533. He chooses to put off collecting it and instead takes the spousal benefit of $1,000 a month. By doing so, he collects $12,000 a year before taxes and lets his benefit grow to $2,736 at age 67.
If the family's finances allow it, he waits to collect his regular Social Security benefit until age 70, when he'll have received $48,000 in spousal benefits (plus any annual cost of living increases), then get $3,334 a month in his own retirement benefits.

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My financial planner, Jo Thomson of Cetera Advisor Networks in Alexandria, Va., flagged the spousal benefit to me. I didn't believe she was correct until I checked with the Social Security Administration.
"I think it's surprising to many that a man who makes more money can take his wife's benefit," she told me. "Among my clients, I haven't found anyone who knows about it."
Some financial planners may not point out the spousal benefit since they don't make a commission off of it. But Thomson says, "I think it's cool to be able to give you free money you didn't know about. As two-income Baby Boomer couples retire, they are looking to replace money they've been used to coming in, and this helps."
For Social Security and taxpayers who keep it afloat, it's hardly free money. The Center for Retirement Research at Boston College estimated in a 2009 paper that the annual cost for 650,000 higher-income husbands to take the spousal benefit in 2006 was $10.5 billion. The center said a disproportionate share of those taking advantage of what is called this "claim now, claim more later" strategy were upper income groups.
Laura Bos, manager of financial security for AARP, agrees with Thomson that a lot of near-retirement couples are unaware of the spousal benefit for someone who keeps working.
"Social Security claiming can be a complicated issue — even for me, and I feel knowledgeable about it," she says. "There are so many different scenarios."
Bos says AARP provides a calculator on its website "to get the most benefits you possibly can."
She notes that the spousal benefit also applies to divorced couples who had been married at least 10 years. An ex-wife who didn't remarry can claim a benefit on her former husband's record and get 35% of his benefit at 62 or 50% at 66, Bas says. "He doesn't even have to know."
Thomson says the spousal benefit also applies to same-sex marriages.
To confirm your eligibility and the amount of the benefit you are entitled to, check with the Social Security Administration. I did, and found the agency efficient and helpful.
Good luck.

 

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(As with any of these informative articles, anyone who needs someone to talk to about

this very subject contact me and I can direct you to a knowledgeable advisor).

 


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