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Q&A: A young widow seeks help with Social Security survivor benefits

November 16, 2020 By Liz Weston

Dear Liz: My husband died at 30, making me a widow at 29. I did receive Social Security survivor benefits for our underage children, but what, if anything, am I entitled to as his wife? At the time of his death, we were living separately, although we were still legally married.

Answer: The earliest a widow or widower can get survivor benefits is typically age 60, unless they are disabled, when survivor benefits can begin at 50. Starting benefits before their own full retirement age of 66 to 67 means accepting a reduced payment, but widows and widowers have the option of switching to their own retirement benefit later. (Retirement benefits begin at a reduced amount at age 62 and reach their maximum at age 70.)

Like other Social Security benefits, survivor benefits also are subject to the earnings test if you start them before full retirement age. The earnings test reduces your benefit by $1 for every $2 you earn over a certain amount, which in 2020 is $18,240.

You mentioned receiving survivor benefits for your children, but you probably also received benefits then. A spouse caring for the children of a deceased worker is entitled to survivor benefits until the youngest of those children turns 16. (A child’s survivor benefits can continue until age 18, or 19 if the child is still in high school, or indefinitely if they are disabled and the disability began before age 22.) Each family member can receive up to 75% of the deceased worker’s benefit, but there’s a maximum any household can receive based on one worker’s earnings record. The limit varies but is generally 150% to 180% of the worker’s benefit.

If you had been divorced rather than separated when he died, you would still have been entitled to survivor benefits as the caretaker of underage children, no matter how long the marriage lasted. You would only receive regular survivor benefits at 60, however, if your marriage had lasted at least 10 years.

Filed Under: Q&A, Social Security Tagged With: q&a, Social Security, Social Security survivor benefits

Q&A: Your prized collection isn’t going to sell itself

November 9, 2020 By Liz Weston

Dear Liz: I am in the process of winding down my duties as executor of the estate of a 91-year-old gentleman who, like the reader who wrote to you, had a prized collection. I had repeatedly urged him to dispose of his prized things. I reasoned that because he was retired and had the time, and because he knew the story behind his prized items, he was in a far better position to find a buyer than I would ever be. (Knowing the provenance of the item is important because people purchase the story, not just the item itself.) He did dispose of some of the more valuable things and actually got some good cash, which he was able to enjoy. But he didn’t follow my advice completely, which meant that when he died, I had to deal with his remaining prized collectibles.

My suggestion to any older person who has collectibles is: Don’t wait to dispose of items that have market value. If you’re retired and have the time, sell the items yourself! If you don’t need the cash, deposit the money into the bank account that will pass to your heirs in due course. Don’t burden your executor — who is probably still working full time and who has bigger things to deal with, like your house, car and investment accounts — with disposing of your collectibles.

Answer: Obviously, parting with collectibles can be tough. The alternative, though, could be that precious items wind up in a yard sale or a dumpster. Collectors who sell get the satisfaction of knowing that the items are going to people who really want them.

Filed Under: Estate planning, Follow Up, Q&A Tagged With: collectibles, Estate Planning, follow up, q&a

Q&A: His new job won’t hurt future Social Security benefits

November 9, 2020 By Liz Weston

Dear Liz: I am 67 and currently receiving a Social Security survivor’s benefit based on my deceased spouse’s work record. At 70, I plan to switch to my own Social Security retirement benefit. I’ve been offered a part-time position with a charity that I’d like to accept. However, I am concerned about how it will affect my Social Security. If I show earned income this year, it will knock off one of my 35 highest-earning years. If I stay in this position for many years, as I hope to do, each year could knock off a high-earning year. I’ve offered to do the job for free, but that is not an option for them. My high-earning years are in the $55,000 range, while this job pays maybe $6,000 a year. Am I wrong? Is not working reducing my benefit, and should I switch to my Social Security now?

Answer: Social Security can be surprisingly complicated, which is why it’s so easy to get the facts wrong and make unfortunate choices.

“Highest earning” means just that. A current year can’t “knock off” a previous year unless you make more than you did in that prior year. Only if you make more than one of those prior years will the older year be dropped from the formula. And if that happens, your benefit would go up, not down.

So take the job, enjoy giving back to your community, and allow your own benefit to continue growing by 8% each year until it maxes out at age 70.

Filed Under: Q&A Tagged With: employment, q&a, Social Security

Q&A: Refinancing brings tax questions

November 9, 2020 By Liz Weston

Dear Liz: I recently refinanced my house and got $9,400 cash back. I also received a $2,400 escrow check from my previous mortgage lender. Is this money taxable? Should I put away a certain percentage of it to pay those taxes? My plan is just to put it back into household repairs (fireplace, painting, etc.).

Answer: You got cash back because you took out a larger loan than the one you previously had. You have to pay that money back, so it’s not taxable income. The escrow check represents a refund of money you’d already paid to the first lender. You don’t get taxed on that, either.

Filed Under: Q&A, Real Estate Tagged With: q&a, real estate, Taxes

Q: They paid off the mortgage. Then the credit score fell. Can that be right?

November 9, 2020 By Liz Weston

Dear Liz: My wife and I recently paid off our mortgage. We have no other debt. Soon after, I received a message from Experian that my FICO score, which has been perfect for quite a while, was reduced by 31 points. What justifies such action, and what do I need to do to bring up my score?

Answer: Credit scores were never intended to be a measure of anyone’s financial health. Instead, they were created to help lenders gauge the risk that an applicant would default on a loan or credit card debt.

Having a mix of types of credit, including installment loans (such as a mortgage) and revolving accounts (such as credit cards), generally helps your credit score. Because the mortgage was your only installment loan, that could have led to a larger-than-normal effect on your scores.

If your previous score was “perfect,” or 850 on the FICO scale, then there’s nothing you need to do. Once your scores are over about 760, you’re getting the best rates and terms, and there’s typically no other benefit to shoot for, other than bragging rights.

Filed Under: Q&A Tagged With: Credit Score, mortgage, q&a

Q&A: Death doesn’t take a holiday

November 2, 2020 By Liz Weston

Dear Liz: In a recent response, you wrote, “Your living trust should name a successor trustee who can take over managing your affairs if you should become incapacitated or die.” This sort of writing is not uncommon but it implies some people won’t die. It would have been better to write “… take over managing your affairs when you die or if you should become incapacitated.” This is important, since it is noteworthy how many people are unwilling to face the facts when it comes to being prepared and finances: None of us are going to get out of this alive.

Answer: Good point!

Filed Under: Estate planning, Follow Up, Q&A Tagged With: Estate Planning, follow up, q&a

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