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Q&A: When a Social Security spousal benefit goof is suspected

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Dear Liz: A family member recently lost her spouse. His monthly Social Security check was $1,800 and hers is $750. I have two questions.

First, is my understanding correct that she is able to begin collecting his monthly amount instead of her own?

Second, instead of collecting Social Security based on her earnings history, was she eligible instead to have collected 50% of her husband’s monthly benefit? If so, she was entitled to $150 more than she’s been collecting. If this is accurate, is there any recourse for collecting the additional benefit from Social Security?

Answer: To answer your first question, yes, your relative will now receive a survivor’s benefit equal to what her husband was receiving. She will no longer receive her own benefit.

The answer to your second question is a bit more complicated. Your relative may have started benefits before her own full retirement age, which used to be 65 and is now 66. When people start benefits early, they receive a permanently reduced amount whether they’re receiving their own retirement benefit or a benefit based on a spouse’s earnings. It’s possible that her reduced retirement benefit was more than her reduced spousal benefit.

Another possibility is that she started benefits before her husband. To get spousal benefits, the primary earner typically needs to be receiving his or her own benefit. (There used to be a way around this, called “file and suspend,” that allowed the primary earner to file for benefits and then suspend the application. That no longer exists.)

If your relative started benefits before her husband, she may have been able to get a bump in her check once he applied, assuming her spousal benefit was worth more than her own retirement benefit. That bump in benefits is now automatic, but if she turned 62 before 2016, she would have had to apply to get the increase, says Mary Beth Franklin, a Social Security expert who writes for Investment News.

She wouldn’t be eligible to get all the missed benefits back at this point, but she could get up to six months’ worth.

Q&A: Health sharing plans don’t work for everyone

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Dear Liz: I read your column about healthcare options for couples planning for retirement today. I’ve recently learned about and signed up for health sharing. The benefits are closely comparable to traditional insurance and less expensive. If you haven’t heard about this, I think it’s worth looking into.

Answer: Christian health sharing plans are an alternative to traditional insurance, but they’re not actually health insurance. Members agree to pay each other’s medical bills, up to certain limits. Members typically must be Christians who attend church regularly and don’t use tobacco, among other restrictions. These plans often don’t cover preventive care such as mammograms or colonoscopies and may not cover mental health care, addiction treatment or other so-called “essential services” that are typically required of health insurance.

The plans can help with some healthcare costs, but the amounts that can be paid out are typically capped. That means that an accident or illness could still bankrupt you. In addition, the plans typically don’t cover preexisting conditions or limit the coverage they offer. Since few people reach their 50s and 60s without a preexisting condition or six, these plans aren’t a viable substitute for many people approaching retirement.

Q&A: Healthcare costs and retirement

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Dear Liz: You usually don’t give me such a laugh, but today’s letter was from someone who’s 41 and her husband is 51. They now have $800,000 saved and want to retire early. You told them they might do better leaving the country since it will be so bad for them with health insurance.

My husband was a teacher in Los Angeles, with no Social Security. We have $60,000 in the bank and together we bring in $3,400 a month. We have Kaiser insurance that totals $2,400 a year for both. We have a house, a car, not so much money, but are happy. He’s 82, I’m 79. What planet do you live on? I guess people who have so much money can’t imagine people like us.

Answer: You’re living on Planet Medicare, so perhaps you can’t imagine what people are facing who don’t have access to guaranteed medical coverage.

Currently, those without employer-provided insurance can buy coverage on Affordable Care Act exchanges, but that option may soon be going away. Congress ended the ACA’s individual mandate, which requires most people to have insurance, so costs are expected to rise sharply.

In addition, the future of so-called “guaranteed issue” is in doubt. The ACA currently requires health insurers to accept people with preexisting conditions and limits how much people can be charged, something known as “community rating.” The U.S. Department of Justice recently announced it would not defend those provisions against a lawsuit filed by several states.

When health insurance is unavailable or unaffordable, it doesn’t matter if you have $1 million or more in savings. A hefty retirement fund can disappear in a few months without coverage.

Q&A: What to do when a financial advisor doesn’t act in your best interests

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Dear Liz: I hired a fee-only financial advisor a year ago. The advisor’s firm also included a CPA who prepared my 2017 tax return.

My tax liability was 100% more than what I paid via my W-2 withholding because the advisor traded constantly, incurring short-term capital gains. He authorized 45 trades in a three-month period. My capital gains for 2017 were more than I have ever earned annually in my 40-plus years of filing returns, yet the overall gain in my account was negligible.

I am 67 and soon to be retired. I do not believe he was acting in my best interests as his client. Is there any action I can take?

Answer: If you’re considering legal action, you’ll need to consult an attorney. If you want to take your beef to a regulatory agency, you can start by contacting the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

Just because an advisor is fee-only does not mean he or she is competent or is a fiduciary (someone who is legally required to put your best interests first). Most advisors are held to a lower standard of “suitability,” which basically means their recommendations can’t be unsuitable, given the client’s situation.

Giving an advisor authority to make trades in your account is risky business. When you don’t know an advisor well, it’s better to start with a non-discretionary account that requires your approval for any trades.

If the advisor earns your trust, you can consider switching to a discretionary account that allows trading — but first you should have an investment plan that makes clear, in writing, what your goals for the account are, what investments are appropriate and how often the advisor expects to make trades.

Most people are best served by passive investment strategies that seek to minimize fees and match various market benchmarks. Attempting to beat the market with frequent trading is usually futile, and costly. That’s especially true in taxable accounts because short-term capital gains are taxed at regular income tax rates, while investments held long term can qualify for lower capital gains rates.

Q&A: How to find credit scores

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Dear Liz: How do you go about checking your credit scores? I’m a recent widow and have no idea how to do these things.

Answer: Checking your credit scores can help you monitor your credit and give you a general idea of how lenders view your creditworthiness. Many banks and credit cards offer free scores to their customers, so that’s the first place you should look.

Otherwise, Discover and Freecreditscore.com, a service of credit bureau Experian, offer free FICO credit scores to anyone. FICO is the leading credit score, although the score you see may not be the same one a lender uses.

There are different versions of the FICO for different industries (credit cards, auto lending, mortgages) and different generations of each formula. Some lenders use the latest version, FICO 9, while most use some version of FICO 8. Mortgage lenders tend to use even older versions.

Also, credit scores change because the information in your credit bureau reports, on which the scores are based, changes constantly. A higher or lower balance on a single credit card can cause your scores to swing significantly.

Another type of score is the VantageScore, a FICO rival that’s used by fewer lenders but commonly offered for free on personal finance sites including Credit Karma, Mint and NerdWallet. CapitalOne also offers free VantageScores to anyone, not just its customers.

It’s best to use the same type of score from the same credit bureau if you want to monitor your credit over time. It’s not very helpful to view a FICO 8 from Experian one month and try to compare it the next month with a FICO Bankcard Score 5 from Equifax or a VantageScore 3 from TransUnion.

The data used in the scores, their formulas and even the scoring ranges may be different. Most credit scores are on a 300-to-850 scale but some industry-specific scores are on a 250-to-900 scale.

Keep in mind that getting a free score means handing over information about yourself, including your Social Security number, and typically means the provider will try to market other products or services to you.

Q&A: Paying for a younger spouse’s health insurance until Medicare kicks in

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Dear Liz: My husband and I have started discussing when he’ll retire. I’d like him to retire somewhere around 65 or 67. He thinks he’ll have to work until at least 70, if not longer, for health insurance coverage for me. (It’s possible that he could do so, since his is an intellectual job where experience is highly valued. Several of his colleagues are in their 70s now, and one retired last year in his 80s.) My husband is 51, and I will be 41 this year.

We’ve used retirement calculators, and even restricting the rate of return to 3% or 4%, we’ll have at least $800,000 in his 401(k) by the time he’s 67. If we use the historical return rate, we get well over $1 million. We then made a rough guess of what minimum distributions would be based on current IRS tables. This number alone will cover 70% or more of our retirement budget.

I think we can do this, even if we have to pay for my health insurance, and even if we have to start withdrawing from the 401(k) at 65. Is this a bad idea? If he gets there and wants to keep working, then no problem, but if he’s fed up at age 64 and 355 days, I want him to feel able to walk away.

Answer: That’s a wonderful goal, but you may be underestimating the cost and difficulty of securing health insurance for your future self.

Currently, people without employer-provided insurance can buy coverage on Affordable Care Act exchanges, but the future of those is in doubt. Congress ended the ACA’s individual mandate, which requires most people to have insurance, so costs are expected to rise sharply next year. If enough healthy people opt out, the exchanges will collapse.

It’s not hard to imagine a future that looks like the past, where people had to keep working at jobs that offered employer coverage until both they and their spouses were old enough for Medicare. Under current rules, that would mean your husband working until he’s 75 and you’re 65.

Your husband might be able to quit a bit earlier thanks to COBRA rules, which allow people to continue employer-provided coverage for 18 months if they can pay the full cost of the premiums, plus a 2% administrative fee. The average annual premium is $6,690 for single coverage and $18,764 for family coverage, according to the Kaiser Family Foundation. The cost is likely to be substantially more in the future if medical cost inflation isn’t brought under control.

If you really want to give your husband the option to quit at 65, you may need to look into employment for yourself that includes health insurance benefits. Another option is to move abroad to one of the many countries that offer affordable healthcare for expatriate retirees. Sites such as International Living at www.internationalliving.com and Live and Invest Overseas at www.liveandinvestoverseas.com can help you identify potential options. You could plan to return home once you’ve qualified for Medicare.