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Q&A: How disability income affects survivor benefits

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Dear Liz: My wife and I are essentially the same age (62), high school sweethearts married 44 years. She had a severe stroke at 57 and I became her full-time caregiver. She began receiving Social Security disability benefits about nine months later, at 58. I began taking my Social Security retirement benefits this year. I had a heart attack at 51 and am doubtful I’ll live much past 75 or so. My wife was always the higher-earning spouse so her benefits (equivalent to retiring at 70) are double mine.

First, if my wife passes before I do (which is a toss-up), am I entitled to survivor benefits? Secondly, will my Social Security benefits simply be replaced with the amount my wife currently receives?

Answer: When your wife reaches her full retirement age of 67, her disability benefit will become her retirement benefit. You referenced age 70, when benefits typically max out, but that’s only if they haven’t been started yet.

When one of you dies, the larger of your two benefits will become the survivor’s benefit. The smaller benefit will end.

Q&A: Was it a mistake to incur a large tax bill?

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Dear Liz: We are a retired couple in our late 70s. I worked as a carpenter and my wife worked as a nurse. We saved and invested for the long haul with a well-known discount brokerage. Last summer, we were wooed by another financial services firm with a “much better idea.” Our combined portfolio at the time was $1,985,000. We transferred our holdings, including $340,000 in a taxable account.

The transfer triggered a capital gain of $184,000 as the new company sold the old funds and reinvested the money according to their plan. This caused us to owe about $50,000 in income tax this year rather than breaking even or receiving a refund. Our holdings have grown to $2,013,119 after our 2026 required minimum distributions have been taken. Was this a good move given the large tax bill? Our tax accountant is very critical of the sale of these funds.

Answer: Your accountant may not be in the best position to evaluate whether this was the right move for you.

Tax pros are typically focused on saving their clients money. That often means delaying or avoiding moves that could trigger capital gains taxes. Sometimes, though, such moves are necessary to avoid even bigger financial costs down the road.

The stock market gains of recent years mean that many people have portfolios that are now too heavily invested in stocks, particularly if they haven’t been regularly rebalancing their investment mix. These stock-heavy portfolios can leave people painfully exposed to downturns.

I redacted the names of the firms, but both companies you mentioned in your letter have good reputations. Your previous brokerage caters to do-it-yourself investors who want to minimize fees, while your new one provides fiduciary advice, meaning that they’re required to put their clients’ best interests first. It’s easy to imagine you investing for decades on your own without an advisor’s help or appropriate rebalancing; the new firm sees how risky your portfolio has become and diversifies it after careful discussions with you about your age, situation and goals.

Imagination is not reality, though, and the most concerning part of your letter is your vagueness about why you moved your money. You should be able to articulate in basic terms why this transfer made sense. “Our portfolio was too risky” or “I had too many of the same type of stocks” or “I realized I needed help” are all appropriate reasons. “A much better idea” is not.

The right move now might be to get a second opinion from a fee-only financial planner. Someone who charges by the hour could review your portfolio and let you know if you’re now on the right track. You can get referrals from the Garrett Planning Network at https://garrettplanningnetwork.com/.

Q&A: Is there a way to avoid taxes on RMDs?

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Dear Liz: I have read advice on how to minimize taxes for people who potentially could have higher incomes and taxes after age 70 when they have pensions, Social Security payments and retirement account RMDs. The most common strategy seems to be doing Roth conversions during the later stages of employment, particularly if one spouse retires before the other so family income decreases.

However, I have not read good advice for older people when this problem has already started (other than noting that one way to avoid paying taxes is to donate the RMD funds). Is there any strategy for people who already have this triple income to reduce paying taxes and high Medicare premiums? We lived below our means for our working lives to save for retirement, but now see our savings dissipate due to the taxes and Medicare premiums.

Answer: Your situation illustrates why it’s so important to get good tax advice years before RMDs start, because you have fewer options after that point.

The alternative you mentioned is called a qualified charitable distribution. QCDs allow you to transfer a certain amount (up to $111,000 per individual in 2026) directly from your IRA to a charity. The transfer can satisfy your RMD requirement, but the amount is not included in your taxable income.

Another option is buying a qualified longevity annuity contract, or QLAC. These deferred income annuities start paying out guaranteed income for life once you’ve reached a certain age (up to age 85). You can use up to a certain lifetime amount of IRA money ($210,000 per individual in 2026) to purchase the contract. That money is excluded from RMD calculations until payouts begin.

As with any annuity, you’ll want to research your options, understand the downsides — including lack of liquidity, because the amount you spend typically can’t be recovered — and seek out fiduciary advice before you proceed.

Q&A: How do I get tax forms from my online bank?

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Dear Liz: I have a savings account and a revocable trust money market account with an online bank. They provide the 1099-INT tax form for the savings account as a downloadable file. However, they do not provide a downloadable form for the trust account money market.

They insist that it can only be mailed after Jan. 31 and cannot be downloaded online. When I complained several times, saying that I received trust account tax forms from other financial institutions, I received frivolous answers.

Can you explain what is going on here and what I should do to get my 1099-INT early so I can do my taxes without having to wait for it?

Answer: What’s going on is that the bank and its customer service reps are ignorant of the law.

There’s no requirement that the form be downloadable, but the Internal Revenue Service does require 1099-INT forms to be provided to recipients and to the IRS by Jan. 31, says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. This year, the deadline was actually Feb. 2, since Jan. 31 fell on a weekend.

Since the IRS can levy penalties for late filing, you can be sure the bank has found a way to electronically provide the forms to the tax authorities, even if it can’t be bothered to get them to you.

As you’ve personally experienced, other financial institutions give their customers access to the forms well before the deadline. You can’t personally reform a dysfunctional institution, so consider moving your business to one that provides actual customer service.

Q&A: Broker made mistake calculating RMDS

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Dear Liz: While preparing our 2025 taxes, I noticed that our brokerage doubled the required minimum distributions for my husband and me for 2025. I called, and they said they were “running two systems” and sent a notice to investors to look for any problems. I do not recall ever receiving such a notice. Also, I did not notice the increase, as the bank used for these direct deposits also has multiple CDs, and the account is a “rainy day” fund that we use only for emergencies.

This money moved us into another tax bracket and we will be hit with a big tax bill. Also, we have lost out on future returns from the money that was distributed rather than left alone to grow. What is the brokerage’s responsibility? Do we just have to bite the bullet and pay the taxes on a mistake?

Answer: You had a 60-day window to return the excess withdrawal to your retirement accounts without incurring taxes, says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.

Assuming that window has passed, you can consider making a claim against the brokerage firm for the higher taxes and lost earnings. Start by making a written complaint to the brokerage firm’s compliance department. If you don’t get satisfactory results, you can file a complaint with the FINRA, the Financial Industry Regulatory Authority, at https://www.finra.org/investors/need-help/file-a-complaint.

Unfortunately, the IRS holds taxpayers responsible for correctly calculating and taking RMDs, even when their brokerage firms make mistakes. You would be wise to put reminders in your calendar to check your brokerage’s calculations as well as the actual distributions while you still have time to correct any errors. You may also want to consider consolidating your finances to make it easier to monitor your accounts.

Q&A: How working abroad affects Social Security

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Dear Liz: In your answer to the person who wants to move abroad, you forgot to mention that they would have to have 40 work credits to receive Social Security benefits.

Answer: Actually, the United States has made “totalization agreements” with more than 30 other countries regarding Social Security coverage. Essentially, a worker who doesn’t have enough credits in one country’s Social Security system can use credits from the other country to qualify for benefits. These agreements also ensure that workers don’t face dual taxation; typically, workers abroad who are covered by these agreements pay into the host country’s Social Security system.