Joe Lucey

A newly widowed client came to my office this month in despair. Her husband Dave had just passed away from an unexpected and sudden heart attack. She, the surviving spouse, was not currently working, opting instead to stay home to raise her son, (age 13) and step-daughter (age 17) who are both in public school.

Understandably she came to me asking for guidance and financial advice. She had no idea how she was going to be able to take over paying the families bills.My answer?: My client and her children can apply for a Social Security survivor payment.

When Dave worked, he paid into Social Security, because his employer deducted a portion of his earnings from every paycheck. Many people see this deduction on their paychecks and think FICA is code for Uncle Sam sticking his hand into their wallet.

In reality, Dave was paying for insurance for his survivors. Social Security calls this protection survivor benefits.

Through this program, spouses and children under the age of 18, and even dependent parents can become eligible to be paid survivor benefits.

Based on their father’s former earnings level, and the number of years worked; Dave accumulated worker credits that Social Security will use to determine how much each of Dave’s surviving family will receive as a monthly benefit. Both his spouse and his children are eligible to receive a monthly benefit from Dave’s Social Security.

Social Security Survivors Benefits Can Be Paid to:

• A widow or widower—full benefits at full retirement age, or reduced benefits as early as age 60

•  A disabled widow or widower—as early as age 50

• A widow or widower of any age who takes care of the deceased’s child who is younger than age 16 or physically challenged, and receiving Social Security benefits
• Divorced spouses under certain conditions
• Unmarried children younger than age 18, or up to age 19 if they attend elementary or secondary school full time
• Dependent parents age 62 or older

Under certain circumstances, benefits can be paid to stepchildren, grandchildren, or adopted children who were disabled before age 22 and remain physically challenged.

Source: 2015 How to Earn Credits Brochure- Social Security Administration

Worker Credits

The Social Security Administration requires up to 10 years of work, to be eligible for survivor benefits, at the family member’s time of death. Anyone born in 1929 or later needs ten years of work (40 credits) to be eligible for retirement benefits. People born before 1929 need fewer years of work. Survivors of very young workers may be eligible if the deceased worker was employed for 1½ years during the three years before his or her death.

When Dave died at age 57, he had only achieved 35 credits on his work record.

Since the number of credits needed for Dave’s case was 40, his family will be unable to apply for fully insured status. However, they will be able to apply for currently insured status through Social Security by using Dave’s credits for one and one-half year’s work (6 credits) in the three years just before his death. 

If the Spouse Is Younger than Full Retirement Age

My client was the same age as her husband – age 57. She has not yet reached full retirement age. Since she is caring for the worker’s (Dave’s) children, she will receive his Social Security benefit as a widow now. If she were not caring for his children, she would still receive a widow’s survivor’s benefit, but it would have been reduced, and would represent a smaller amount of his Social Security benefit. Social Security calculates full retirement ages for survivors based on the year they were born.

In the chart from their website listed below they include an example of 62 survivor benefits based on an estimated monthly benefit of $1,000 at full retirement age. If monthly benefits are applied for prior to full retirement age, the amount is smaller to take into account the lengthier period a person will receive them.

Children’s Benefits

Unmarried children who are under age 18 (up to age 19 if attending elementary or secondary school full time) are also eligible to receive Social Security benefits when parent dies.

In some cases stepchildren, grandchildren, step grandchildren or adopted children may also be eligible to receive survivor benefits under certain circumstances.

The Social Security Administration Requires Surviving Children to be:

• Unmarried
• Younger than age 18
• 18-19 years old and a full-time student (no higher than grade 12)
• 18 or older and disabled. (The disability must have started before age 22.)

Within a family, a child may receive up to one-half of the parent’s full retirement or disability benefit, or 75 percent of the deceased parent’s basic Social Security benefit.

The formula used to compute the family maximum in 2015 is similar to that used to calculate the Primary Insurance Amount (PIA).

The family maximum payment is determined as part of every Social Security benefit computation. The formula sums four separate percentages of portions of the worker’s PIA. For 2015 these portions are the first $1,056, the amount between $1,056 and $1,524, the amount between $1,524 and $1,987, and the amount over $1,987.

Exemptions

While most employers in the United States deduct Social Security from workers’ paychecks, there are some jobs that still do not. As a result, survivors would be ineligible Social Security survivor benefits. These employers include those who have worked for a railroad for at least ten years, and some employees of state and local governments who opted not to pay into Social Security. In these situations, their employers provided them a retirement pension plan instead of Social Security.

Conclusion

Naturally each survivor’s situation is different. Monthly survivor benefits from Social Security may not be the only payments possible for your surviving family members. Social Security offers a one-time LSDP payment ( Lump Sum Death Payment.) Of course, additional life insurance is recommended. In most cases, Social Secuirty helps but does not adequately cover the income needed when a spouse passes away.

It is prudent to contact a financial advisor to discuss not only your Social Security for retirement, but also explore what options your family would be able to have, in case something happened to you before reaching a full retirement age.

Social Security survivor benefits provide a valuable income for your surviving family members. Knowing how to apply and how to maximize these payments can significantly help family members through a difficult time.

Image by Pictures of Money via flickr, licensed under CC by 2.0

Post written by Dale Decker

In the first Austin Powers movie, the lead plays blackjack with Dr. Evil’s henchman, “Number 2.”

Number 2, with x-ray vision, holds a 17, and scopes the next card as a 4. He hits for a 21 saying that he likes to live…dangerously. Austin Powers in turn then stays on his 5 and says slowly with a wink: “I too like to live dangerously.”

In retirement and regarding social security, we shouldn’t stay on a 5 or leave money on the table. It’s funny in movies, but in real life…not so much. On last Saturday’s Secured Retirement Radio show, Joe Lucey and Derek Fautsch talked about the paradigm shift that occurs when we approach retirement–the transition from accumulation to return.

In years past, it was all about growth. Now transition income and endurance are more important. In that context, retirement is the time to be informed of options before funds from income and Social Security are left on the table. Don’t stay on a 5!

At Secured Retirement Financial we offer classes, workshops, Social Security analyses, and a 3-step review to keep you informed. These are all built to help maximize income and Social Security while reducing taxes to enhance your retirement years. Contact us here for more information.

Here’s a link to this week’s show:

Blog post by Dale Decker.

We all save something.

From childhood to retirement years, we set aside keepsakes that mean the most: a teddy bear, a blanket, sports cards, photos, you name it…it’s saved by someone.

Often times things are saved and forgotten or placed in a box somewhere. Just knowing they’re there is the important thing.

For some, investments from the workplace can be like that: company sponsored 401ks, IRAs and others that have accumulated, maybe rolled over but sit in a “shoe box” ready to grow.

On last Saturday’s Secured Retirement Radio show, Joe Lucey, Kari Donnelly, and Derek Fautsch talked about  saved resources and retirement. Retirement can sneak up on us. For those who have worked many years at the same place or perhaps switched jobs over the years, the accumulation in our set-aside accounts can be a welcome surprise.

For those approaching retirement, now is the time to consult with a professional on optimizing your financial “keepsakes.”

Savings, Social Security, pensions, and more can comprise a successful retirement plan. At Secured Retirement Financial, we offer a 3-step review that can help maximize income and Social Security, and reduce taxes to enhance your retirement years.

Call us at 952-460-3260 or click below to set up a free 3-Step review.

“You never miss the water until the well runs dry.”
His Girl Friday (1940) – Walter Burns (Cary Grant)

In the 1940’s movie His Girl Friday, Cary Grant’s character of Walter Burns reminds us that nothing lasts forever. Many baby boomers now approaching their retirement timeline, have begun to realize that shortly they won’t be bringing home a bi-weekly paycheck.

But the well isn’t dry. Often I urge my clients to create a checklist to help understand what their monthly retirement income will be when they decide to retire.

Retirement signifies the end of person’s fixed income. It does not mean that an individual’s life and interests are over. How might you free up enough money to purchase that boat? Is there a way to travel to those places you have always wanted to experience?

The first step is to have a clear vision of your retirement income potential. Let’s evaluate what current assets you now own, and how they might become additional monthly income during your retirement years.

Silver Screen Income Planning Retirement Check List

Before planning on your retirement dream home, or second home, it is essential you understand what your monthly retirement income will be. To estimate this amount and where your money will derive from, make a listing of the following income assets:

1. Social Security
2. 401K Accounts
3. IRA Accounts
4. Pension Benefits
5. Annuities & Insurance Assets
6. Bonds & Stocks
7. Other tangible assets. (Housing, Investment Property, Business Property, etc.)

Needless to say, covering all of these income sources would be a lengthy endeavor. In this post, I want to talk about retirees’ top three monthly income assets: Social Security, 401(k) plans, and your housing.  

Social Security 

To understand your monthly Social Security benefit, you can check your current earnings at the Social Security Administration website. Deciding when to claim your benefit and at what age is essential to maximizing your principal monthly income resource during retirement.

At age 62, you are allowed to take your Social Security benefit. Yet, if you delay taking your benefit, it will grow every year until you reach age 70. Postponing retirement gives you time to build a bigger nest egg. Tabling your retirement also delays withdrawing your retirement capital.

Numerous financial advisors will recommend waiting until full retirement age, which is 66 for people born between 1943 and 1954. Before opting to take your Social Security benefit, it is best to discuss this with an expert who specializes in Social Security. Once you choose to take your Social Security benefit there is no way to change your options, so make sure you are opting for the best choice before making a permanent decision.

401(k)

If you have a workplace 401(k), this will most likely be part of your long-term monthly income plan. You may need income from this fund at retirement age. Some people do not. 401(k) accounts require minimum distributions by the time you reach age 70-1/2. If you do not need to tap these cash assets at age 70 and ½, you can delay withdrawals while enjoying your tax-deferred benefit by working for pay. Rules only permit this if you are not a corporate owner with more than a 5% share in the company that employ’s you.

Housing: Moving Out of Beverly Hills

When planning for retirement, one of the shrewdest strategies to create more income is to lower your housing expenses. But take caution. Trading down or downsizing without professional advice can sometimes reduce your standard of living and not necessarily your monthly payments.

Do you currently carry a mortgage? A Consumer Financial Protection Bureau Report from May of 2014, reveals that 30 percent of homeowners over the age of 65 still are making a monthly mortgage payment. The same survey reports that 8.4 percent to 21.2 percent over age 75 make a monthly mortgage payment.

One way to diminish monthly housing is to sell your home and rent. Others choose to sell a larger home and repurchase something smaller.

Of course, the first step to selling a home is to engage a professional appraisal and calculate how much cash value you currently have in your home. The second logical step is to understand how renting or downsizing will affect your monthly expenses. For example, if you relocate to a condo, be careful to evaluate the association that governs it. Have they recently made capital improvements? If not, you might take a hit with a capital upgrade assessment. If you downsize to a smaller or newer home, what is the monthly property tax burden?

Active Adult Community

Some retirees consider buying or renting housing that is located in a 55+ community. Most of the time these establishments offer group activities and attractive amenities. Monthly housing costs of active-adult communities vary depending on the area they are located in, size of the home, and amenities.

Consider association costs of these communities and perhaps create an expense projection for living within them projecting for ten years or even twenty years to understand what actual costs may be.

Conclusion

Having enough income to retire like Cary Grant takes careful planning. Even Cary Grant would agree that he needed an experienced director to shine upon the silver screen.

Likewise, consider making an appointment with a financial advisor that specializes in retirement. Investment planners are not necessarily retirement advisors. Your long-term investment financial advisor is not a retirement expert.

Retirement advisors offer tools to make a complete checklist of retirement income and can provide planning for health insurances, and other monthly expenses that you may not have considered as part of your list.

To discuss your retirement risk list with a financial advisor, contact us for a free consultation at Secured Retirement Financial. Our goal is to help our clients preserve and protect their wealth through offering comprehensive financial planning.

The number one news headline grab this month isn’t the Kardashians or Donald Trump. Nor is it Spieth’s distressing loss at the Open Championship by one stroke. Surprisingly, according to BuzzSumo.com some of this week’s top trending news headlines sensationalized Social Security.

This Week’s 5 Top Trending Virtual Social Security Headlines:

1. 6.5M Social Security Numbers Linked to People Aged 112 & Up– 95.7K shares, Fox News
2. Puerto Ricans who can’t speak English qualify as disabled for Social Security– 76.4K shares, Washington Post
3. Warren: ‘The GOP is inventing a Social Security crisis’, 62.7k shares, MSNBC
4. Obama admin looks to ban some Social Security recipients from owning guns– 61.5K shares, Fox News
5. Bush: Retirement age should be Phased into ’68 or 70’– 57K shares, Thehill.com

No doubt, we all hear hundreds of alleged complaints about the Social Security program. The headlines listed above make that crystal clear. But Americans have, in essence, purchased the coverage of Social Security and its protection. So despite all the saber rattling and political conflict the program finds itself surrounded in, Social Security is alive and well and continues to offer startling strength. Finally, a positive headline for Social Security!

It is true that Social Security checks come from our government, and many individuals consider them to be a handout or benefit, especially young workers who look at their deductions printed on each paycheck. However, the fact remains that every working American has purchased their Social Security benefit, by paying into it their entire working career.

Social Security Payments: Inflation Proof

Your savings account, checking account or certificate of deposit at your local bank may not keep up with inflation, but a monthly Social Security check will. Social Security payments are inflation proof. Every year the consumer price index is applied to monthly Social Security benefits. This prevents the erosion of your monthly benefit, making it a fixed-dollar endowment that is locked in for life.

When reading your news headlines regarding Social Security, be leery of political moves that would reduce the COLA (Consumer Price Index to an inflation rate minus 5%). Over time, if this were to pass, your own Social Security check would significantly lose its buying power.

Social Security Is Insurance, Not Welfare.

Social Security is not a public assistance program, although many of this week’s headlines treat it as such. Social Security is a social insurance program. The argument that Social Security is not public assistance can be made because Social Security benefits are not calculated on a needs basis. They are calculated by the amount of money you earned during your working years and your age.

Social Security originated as a savings program for taxpayers. Some political types are calling for this to be changed. Be leery of political persons who suggest eliminating or reducing a Social Security benefit for retirees with an outside income. Social Security was purchased in advance by each worker. Working beyond retirement age should not be considered when calculating one’s age and contributions to the program.

Part of Social Security’s strength is based on the facts that age and contributions to the program are concrete. These two concrete qualifications are easy to assess. Probing into need is not required and never should be required. 

1970’s – The Social Security Storm Front

In the late 1970’s, Social Security fought quite a tempest. News headlines predicted that the program would soon run out of money. Congress voted to “fix” the squall between 1977 and 1983, yet the program remained in deficit. Finally in 1983, Congress voted to raise taxes and cut benefits in an amendment to The 1983 Social Security Act. The program has been running in a surplus ever since.

Reformers predict that the program will remain stable until the year 2037. Although the threat could emerge 22 years from now, we can see that political moves are being made today to reform Social Security. While a solution for long-term solvency should be worked on, we all need to be leery of today’s headlines that report individuals who want to modify the Social Security program claiming there is fraud, a financial crisis, or that benefits can be held because of any reason, including the ownership of guns. These are simply non-related red herrings that plague our political stage.

The truth is, Social Security is strong, sturdy, resilient, and worth protecting.

In fact, it is your duty to maximize your own Social Security benefit. Make an appointment to seek professional advice in this matter. Talking to a financial advisor that specializes in Social Security is the first step to a complete and robust retirement plan.

Countless questions arise with regards to individuals’ Social Security benefits. With so much at stake, the most valuable asset to understand in your retirement portfolio is your Social Security benefit. As always, our advisors are happy to discuss any of these items with you. If you have any questions or if you would like to schedule a visit, don’t hesitate to call our office at (952) 460-3260.

For more information on Social Security, explore our free Social Security Kit or calculate your own Social Security benefit by clicking here.