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.

Q&A: Social Security calculators may overestimate your benefits

Dear Liz: All of the Social Security calculators that I have found assume that you will work until you start drawing Social Security benefits. However, I plan on retiring around 62 but not drawing my benefits until age 66 or later. Whenever I calculate my future benefits, the calculator assumes that I will continue to draw the same salary as I have today until I start benefits. I’m worried the calculators are overestimating my benefit.

Answer: As you probably know, Social Security uses your 35 highest-earning years to calculate your benefit. When you work longer than 35 years, you’re typically replacing your lower-earning years in your teens or 20s with higher earnings from your 50s and 60s.

Free Social Security calculators usually assume that pattern will continue. If you stop working or earn less, the calculators may overstate your benefits. To get a better estimate, you’ll need to shell out $40 to use MaximizeMySocialSecurity.com, which allows you to customize your future earnings assumptions.

When Social Security Turns You Into a Zombie

If the Social Security Administration thinks you’re dead, you might wish you were.

People who accidentally wind up on the agency’s Death Master File have seen their bank accounts frozen, credit cards closed, health insurance cut off and benefit payments canceled or even pulled back from checking accounts.

One California man told me his 97-year-old mother nearly had her utilities shut off after her bank froze her account and all her checks bounced, including a birthday gift to a grandchild. A retired professor in Massachusetts wasn’t allowed to get his prescriptions filled and found that all his medical appointments had been canceled, according to a recent article in the New England Journal of Medicine. A woman in New Hampshire told CNNMoney couldn’t get her driver’s license renewed for months.

In my latest for the Associated Press, what to do when Social Security thinks you’re dead.

Tuesday’s need-to-know money news

emergency-fund-1940x900_36282Today’s top story: When to ditch your state’s health insurance exchange. Also in the news: Tailgating blunders your insurance will pay for, how to handle unexpected financial disasters, and how much next year’s Social Security cost of living increase will be.

When to Ditch Your State’s Health Insurance Exchange
When to look off of the exchanges.

5 Football Tailgating Blunders Insurance Will Pay For
Accidentally grill your car? You’re covered!

No Savings, No Backup Plan, No Fairy Godmother: How to Handle a Financial Disaster
This is why you need an emergency fund.

Next year’s Social Security raise? Less than $4 a month
Lowering your expectations.

Q&A: Friend erroneously declared deceased

Dear Liz: I have an elderly friend who was recently erroneously declared deceased by the Social Security Administration. She received no notice of this declaration and her first awareness that something might be wrong was when her personal checks and automatic payments to utilities and others began to bounce. When she called her bank, she was informed that all of her accounts had been frozen by the Social Security Administration.

My friend is now faced with multiple returned check charges, threatening phone calls and cut-off services. Efforts to straighten things out with Social Security and her bank have been only moderately successful so far. Although they will probably clear things up eventually, this will take time and quite a bit of legwork on her part.

Under what authority does Social Security freeze someone’s assets? And is this common? Aren’t they required to at least notify someone of impending action? After all, when any one of us does in fact die, we still have financial obligations and such actions can only create headaches for survivors.

Answer: The Social Security Administration doesn’t freeze bank accounts, but it does erroneously declare people dead a few thousand times every year. Financial institutions check Social Security’s death notices and may freeze or close accounts as a result. It can take weeks or months to clear up the confusion.

People in this situation should visit their local Social Security office and bring some identification, such as a driver’s license or passport, to establish that they are, in fact, alive. Social Security will issue a letter called an “Erroneous Death Case — Third Party Contact” notice that can be shown to financial institutions, doctors and others who may have been misinformed of their deaths. Your friend should not only ask that services be restored but that bounced-check fees and other costs be waived. There’s no guarantee that they will be, but she should ask.

Your friend also might consider whether it’s time to ask for help in managing her finances. It sounds from your description as if she didn’t notice the problem for quite some time. Utilities don’t shut off service at the first missed payment. Threatening phone calls — presumably from collection agencies — typically don’t start until accounts are months overdue. She should consider adding a trusted person to her checking account or at least sharing online credentials so that another set of eyes is monitoring what’s going on with her money.