Thursday’s need-to-know money news

Today’s top story: How teachers can ace retirement without Social Security. Also in the news: Why credit cards are serving big restaurant rewards, making sure your spending personality matches your credit cards, and the one mistake that can cost millennials millions.

Teachers: Here’s How to Ace Retirement Without Social Security
It varies from state to state.

Why Credit Cards Are Serving Big Restaurant Rewards
Everyone has to eat.

Does your spending personality match your credit cards?
Make sure you’re earning rewards you’ll actually use.

This one mistake can cost millennials millions
Stop avoiding the stock market.

Q&A: Social Security lets you un-retire to avoid a benefit hit, but only once

Dear Liz: My wife recently retired at age 62 and will collect Social Security. But she has decided to return to work full time. I know she will collect less if she makes more than Social Security allows per month. If she eventually goes back to not working at all, can she go back to collecting the original amount?

Answer: Yes, but she’d be smart to reconsider her decision to start collecting Social Security early because she’s permanently reducing her benefit for little (if any) good reason.

The earnings test, which applies when people start Social Security early, takes away $1 of benefits for every $2 she earns over a certain limit, which is $16,920 in 2017. The earnings test will end when she reaches her full retirement age, which for people born in 1955 is 66 years and two months. Her check at that point would be what she originally received at 62, plus any cost of living increases.

But that original check is reduced by nearly 25% from what she would get at full retirement age, and the reduction lasts for the rest of her life. That’s a huge hit, and it should make her question the advisability of starting benefits early when so much could be taken away from her.

Fortunately, she has a little time to change her mind. Social Security allows applicants to withdraw their applications, allowing their benefit to continue growing, if they do so within 12 months of becoming entitled to benefits. People who withdraw their applications have to pay back any benefits that received in order to restart the clock.

This is a one-time do-over: Applications can be withdrawn only once in a lifetime and can’t be withdrawn after a year has passed. She can read more about this at the Social Security site, https://www.ssa.gov/planners/retire/withdrawal.html.

Social Security benefits make up half or more of most people’s retirement income. Making smart decisions is essential if you want to avoid a lifetime of regret.

At a minimum, people should use a free claiming-strategies calculator, such as the one on the AARP site, to determine when and how to begin benefits. For $40, they can use more sophisticated planners such as MaximizeMySocialSecurity.com and SocialSecuritySolutions.com.

Another good option is to consult a fee-only financial planner familiar with Social Security claiming strategies to make sure they’re not making an irrevocable mistake.

Q&A: When a government pension doesn’t reduce Social Security benefits

Dear Liz: I have contributed to Social Security for 40 years and have no government pension. My husband selected a reduced teacher’s pension so I would receive that same amount should he predecease me. Will my Social Security be reduced in this scenario?

Answer: No. The provisions that may reduce Social Security payments such as the government pension offset and the windfall elimination provision apply only to the person receiving the pension, not the spouse. If he dies first, your income would remain the same. If you die first, his survivor’s benefit from Social Security could be reduced or eliminated.

Monday’s need-to-know money news

Today’s top story: What to do when you’ve reached your savings goal. Also in the news: What to do when you’re upside down on a car loan, Social Security surprises that may leave money on the table, and what to do if you need $100 fast.

Reached Your Savings Goals? Here’s What to Do Next
Don’t stop now.

What to Do When You’re Upside-Down on a Car Loan
How to get right side up.

3 Social Security surprises that may leave money on the table
Make sure you get what you’re owed.

What to Do When You Need $100, Fast
Almost half of Americans would struggle to cover a $100 emergency.

Thursday’s need-to-know money news

Today’s top story: How to keep Mother’s Day spending down. Also in the news: How the rise in student loan rates will affect borrowers, where to sell your stuff online, and will you see a Social Security check in your lifetime.

Mother’s Day Spending Is up, but You Can Keep Costs Down
It’s the thought that counts.

How Rise in Student Loan Rates Will Affect Borrowers
What to expect.

Where to Sell Your Stuff Online
Making some extra cash.

Will You See a Social Security Check in Your Lifetime?
What are the odds?

Q&A: The confusing balancing act between government pensions and Social Security benefits

Dear Liz: I am a public school teacher and plan to retire with 25 years of service. I had previously worked and paid into Social Security for about 20 years. My spouse has paid into Social Security for over 30 years. Will I be penalized because I have not paid Social Security taxes while I’ve been teaching? Should my wife die before me, will I get survivor benefits, or will the windfall elimination act take that away? It’s so confusing!

Answer: It is confusing, but you should understand that the rules about windfall elimination (along with a related provision, the government pension offset) are not designed to take away from you a benefit that others get. Rather, the rules are set up so that people who get government pensions — which are typically more generous than Social Security — don’t wind up with significantly more money from Social Security than those who paid into the system their entire working lives.

Here’s how that can happen. Social Security benefits are progressive, which means they’re designed to replace a higher percentage of a lower-earner’s income than that of a higher earner. If you don’t pay into the system for many years — because you’re in a job that provides a government pension instead — your annual earnings for Social Security would be reported as zeros in those years. Social Security is based on your 35 highest-earning years, so all those zeros would make it look like you earned a lower (often much lower) lifetime income than you actually did. Without any adjustments, you would wind up with a bigger check from Social Security than someone who earned the same income in the private sector and paid much more in Social Security taxes. It was that inequity that caused Congress to create the windfall elimination provision several decades ago.

People who earn government pensions also could wind up with significantly more money when a spouse dies. If a couple receives two Social Security checks, the survivor gets the larger of the two when a spouse dies. The household doesn’t continue to receive both checks. Without the government pension offset, someone like you would get both a pension and a full survivor’s check. Again, that could leave you significantly better off than someone who had paid more into the system.

Q&A: Social Security benefits for children

Dear Liz: My older brothers-in-law signed up for Social Security benefits at 62 and then suspended their benefits so that their children, who were under 18, could receive 50% of their checks. Is this process still available at age 62 for those with children who are below the age of 18?

Answer: In order for family members to receive spousal or child benefits based on the primary earner’s work record, that primary earner has to be receiving his or her own benefit.

In the past, people who had reached full retirement age — which used to be 65, is now 66 and is rising to 67 — had the option of immediately suspending their applications so their family could receive benefits while their own continued to grow. The “file and suspend” option was not available to people who applied for benefits before their full retirement age. And now it’s no longer available period, thanks to Congress.

If you do apply for your benefit early, keep in mind that your checks — and your children’s checks — will be subject to the earnings test. That reduces Social Security benefits by $1 for every $2 you earn over $16,920 in 2017. (The earnings test goes away at full retirement age.) Your benefit also will be reduced to reflect the early start.

Also, there’s a limit to how much a family can receive based on the worker’s record. The family maximum can be from 150% to 180% of the parent’s full benefit amount.

If you’re still working and your children will be younger than 18 by the time you reach full retirement age, it may make sense to wait until then to apply. To know for sure, though, you should use one of the calculators that takes child benefits into account, such as MaximizeMySocialSecurity.com.

Thursday’s need-to-know money news

Student-LoansToday’s top story: 9 facts about FHA loans. Also in the news: What we learned about the stock market in 2016, 3 student loan resolutions to make in the new year, and why many seniors are having their Social Security cut by student loans.

9 Facts About FHA Loans
What you need to know.

5 Things We Learned About the Stock Market in 2016
A year of moodiness.

3 Student Loan Resolutions for 2017
Make them and stick with them.

For many seniors, student debt eats into Social Security
Social Security checks are being garnished to pay back loans.

Friday’s need-to-know money news

interest-rates-300x225Today’s top story: 7 questions and answers about the fed rate hike. Also in the news: How to avoid the Social Security tax bubble, how the fed rate hike could affect your student loans, and how not to be tricked by retailers’ “regular prices.”

Fed Rate Hike: 7 Questions (and Answers)
What you need to know.

How to Avoid the Social Security ‘Tax Bubble’
Know how and when Social Security benefits are taxed.

Fed Rate Hike: What It Means for Student Loans
How your loans might be affected.

Don’t Be Tricked by Retailers’ Unreal Regular Prices
Don’t fall for the bait-and-switch.

Monday’s need-to-know money news

Today’s top story: Is student loan debt really ‘Good Debt’? Also in the news: Banking moves to make next year’s holidays brighter, how to save big money when buying a used car, and how to find your Social Security earnings online.

Is Student Loan Debt Really ‘Good Debt’?
How to keep your good debt from going bad.

Banking Moves to Make Next Year’s Holidays Brighter
Getting a head start on 2017.

To save big money, find the used-car-buying sweet spot
How to get the most value for your money.

You Can Find Your Social Security Earnings Online
A look into the future.