Social Security Archives - Page 22 of 30

February 18, 2015 By Liz Weston

3 new, must-read money books

Three recently-published books are well worth your time and money, thanks to talented authors who offer new takes on some familiar financial topics: Social Security, raising money-smart kids and investor manias.

The first is “Get What’s Yours: The Secrets to Maxing Out Your Social Security” by economist Laurence J. Kotlikoff and journalists Philip Moeller and Paul Solman. This book is a deep dive into Social Security claiming strategies, which may not sound sexy until you learn that people are costing themselves hundreds of thousands of dollars by making bad decisions about when and how to get their benefits. Larry is one of my go-to sources for Social Security questions, and his grasp of the intricacies of this complex system is amazing. Even more amazing is how readable this book is given those complexities.

“The Opposite of Spoiled: Raising Kids Who Are Grounded, Generous, and Smart About Money” by New York Times personal finance columnist Ron Lieber is one of the best books I’ve read about children and money. Ron aims his book at more affluent families–those with incomes over $50,000–but most of what he writes pertains to any American family that can buy its children everything they need and at least some of what they want. The chapters on what to tell your kids about how much you make and how to handle allowances are particularly thought-provoking.

“The Great Beanie Baby Bubble: Mass Delusion and the Dark Side of Cute” by best-selling author and all-around wunderkind Zac Bissonnette. You don’t even have to be old enough to remember the Beanie Baby craze to enjoy this gossipy (but deeply researched) account of how so many people lost their minds–and not infrequently their savings–in a frenzy to corner the market on mass-produced stuffed animals. It’s not just collectors who should read this book. Any investor who wants to avoid being taken in by an unsustainable mania should take note. In fact, this book should be required reading for every high school personal finance course, although some of Beanie creator Ty Warner’s weirder proclivities might have to be edited out.

Filed Under: Liz's Blog Tagged With: Beanie Babies, crazes, financially smart kids, kids and money, Laurence Kotlikoff, manias, raising kids, Ron Lieber, Social Security, Zac Bisonnette

February 13, 2015 By Liz Weston

Want to protect yourself from tax return theft? You can’t.

A surge of bogus tax return filings has highlighted a grim truth: We can’t protect ourselves from this rising threat.

An underfunded, understaffed IRS manages to thwart many attempts, but still sent more than $5 billion in refunds to identity thieves in the 2013 tax year. Most state tax agencies aren’t nearly as sophisticated in detecting fraud, which is why the bad guys seem to be targeting them this year.

The core problem is that the key to your tax refund–as well as to your credit and your health records–is your Social Security number, which was never intended as an all-purpose identifier.

Even if you’re vigilant in protecting your number, you’re still at risk, because a lot of companies aren’t so vigilant.

Court Ventures, now a subsidiary off Experian, sold an unknown number of records including Social Security numbers to identity thieves from a database of 200 million files. Anthem’s breach exposed 80 million people’s records. And they’re hardly the only ones. The US Postal Service, University of California Berkeley, the Oregon Employment Department, dozens of hospitals and medical centers–the list of places Social Security numbers have been stolen goes on and on and on. (Check out the Privacy Rights Clearinghouse chronology of breaches, showing more than 1 trillion records have been compromised.)

You may be able to beat the thieves to your tax refund by filing early–but that boat has already sailed for many victims.

Read more in my Reuters column, “Why identity thieves are targeting your tax return.”

Filed Under: Liz's Blog Tagged With: database breaches, Identity Theft, IRS, Social Security, tax identity theft, tax refund theft, Taxes

December 8, 2014 By Liz Weston

Q&A: When to start Social Security benefits

Dear Liz: I am 63 and my husband is almost 64. He lost his job last year. We have been living on his $1,500 monthly pension plus what I could make from small contracts and drawing down our emergency fund. The fund and the contracts are now gone. We would like to get jobs, but we live in an isolated area and must sell our house first so we can move. It’s worth about $350,000 with no mortgage, but selling it could take a while.

My question: Is it better to pull from our retirement investments of $750,000, use our home equity line of credit until we sell our house or have me file for early Social Security benefits? We plan to have my husband wait to apply until his full retirement age and then file a restricted application so he gets only spousal benefits until age 70, when his own benefit maxes out. Meanwhile, we need money to live on. I ran a Social Security calculator, and it seemed to say the difference between my starting early and the maximum we could get for waiting was $35,000. Our financial advisor says to take Social Security, but he also manages our investments. We pay him 1% of our portfolio, so reducing it would reduce his income. Can you offer any guidance?

Answer: The benefit from delaying the start of your Social Security benefits is typically so great that knowledgeable financial planners would suggest tapping other funds, including your retirement account, if that’s the only way you can hold off.

If you followed the 4% rule for sustainable withdrawals, you could take $30,000 from your retirement fund the first year without having to worry too much about running out of money. You could take more, of course, and plan to cut back when the Social Security checks start flowing, but you run the risk of a downturn dramatically increasing the chances that you won’t have enough money to last your lifetimes.

Of course, everybody’s situation is different. If the gap between your strategy and maximum benefits is just $35,000 over your lifetimes, you’ll have to decide if that’s incentive enough to wait. Understand, though, that calculators designed to evaluate Social Security strategies aren’t all equal. The free ones tend to be simpler, while the ones that require a fee (typically $40) are more sophisticated and allow you to take more factors into account.

So here’s a game plan. Run one or more of the more sophisticated calculators such as MaximizeMySocialSecurity.com, SocialSecuritySolutions.com and SocialSecurityChoices.com. Then take the results to a fee-only financial planner who charges by the hour to get another opinion. You want a planner who uses Social Security maximizing software and who has received education in Social Security planning strategies (just ask). If you can’t find someone locally, there are plenty of good planners willing to consult long-distance via phone and email. You can get referrals from Garrett Planning Network, among other sources.

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

December 1, 2014 By Liz Weston

Q&A: Pensions and the windfall elimination provision

Dear Liz: As a faculty member who was only recently allowed to participate in our state’s public employees’ retirement system, I will have a very small pension. I’m told that Social Security will then reduce my benefit by up to 50% as a result of the so-called windfall elimination provision. Can you tell me how this is legal?

Answer: Many people affected by Social Security’s windfall elimination provision are outraged that their benefits will be reduced. Before the provision was enacted in 1983, though, people who paid less into the Social Security system wound up getting an outsized benefit.

Here’s why. Social Security is designed to replace more of a worker’s income the less he or she makes, with the understanding that saving for retirement is harder the lower your income.

When you get a pension from an employer who doesn’t pay into the Social Security system, but you also qualify for Social Security benefits from other jobs, your Social Security earnings record can look as if you were a long-term, low-wage worker even when you’re not. Without the windfall elimination provision, you could wind up with a Social Security check that replaces more of your income than you would have received had you only worked in jobs covered by Social Security.

How much your benefit will be reduced depends in part on how many years you worked in those other jobs — the ones that were covered by Social Security. The longer you worked at jobs covered by Social Security, the less the windfall elimination provision affects you, as long as you had “substantial earnings” from those jobs. The amount that’s considered substantial varies by year, ranging from $3,300 in 1974 to $21,750 this year. You’ll experience the maximum 50% reduction if you have 20 or fewer years of substantial earnings. If you have 30 years of such earnings, the provision doesn’t affect you at all.

Filed Under: Q&A, Retirement Tagged With: Pension, q&a, Social Security, windfall elimination provision

November 24, 2014 By Liz Weston

Q&A: Social Security and same-sex marriage

Dear Liz: My partner of 30 years recently died. Am I eligible for Social Security survivor benefits? I don’t want anything I don’t deserve, but if I’m entitled to something, every penny would be appreciated. I am 54 and make minimum wage.

Answer: Your eligibility for Social Security benefits as a spouse depends on three factors: whether your state recognizes same-sex marriages, whether it did so on the date your partner died and whether you were legally married. (You wrote “partner” rather than “spouse,” which suggests you may not have been.)

The Supreme Court paved the way for Social Security to offer same-sex benefits when it ruled parts of the federal Defense of Marriage Act unconstitutional last summer. Social Security has taken the position that it must follow state law in recognizing same-sex marriages and that what matters is where the couple live, not where they married. Even in states where same-sex marriage is currently legal, Social Security denies survivor benefits if it wasn’t legal when the spouse died.

If you are eligible, you can start receiving benefits as early as age 60. (Survivor benefits are available at any age if the widow or widower takes care of a child receiving Social Security benefits who is younger than 16 or disabled.)

Starting early reduces your survivor benefit significantly compared with what you would get if you wait until your full retirement age of 67. As a survivor, though, you’re allowed to switch to your own benefit later, if that benefit is larger. (That’s different from spousal benefits, where spouses are precluded from switching to their own benefits if they start getting Social Security checks before their own full retirement age.) If your survivor benefit is likely to be larger than any benefit you’ve earned on your own, though, it typically makes sense to delay starting Social Security as long as possible to maximize what you’ll get.

Filed Under: Q&A, Retirement Tagged With: q&a, same sex marriage, Social Security, survivor benefits

November 21, 2014 By Liz Weston

Friday’s need-to-know money news

Today’s top story: A little known tax credit could save future retirees money. Also in the news: How to avoid overspending during the holidays, making the right upgrades when selling your home, and how to maximize your Social Security benefits.

The Crucial Tax Credit Retirement Savers Don’t Know About
Your 401(k) contributions could save you money come tax time.

Watch out! 11 ways retailers get you to overspend
Retailers have their eyes on your wallet for the holidays.

Know Your Market When Doing Home Upgrades To Increase Value
Investing in the right improvements.

How to Maximize Social Security for Your Retirement
When you decide to start taking benefits can make a huge difference.

5 Ways to Whip Your Budget Into Shape for the Holidays
The holidays don’t have to leave you broke.

Filed Under: Liz's Blog Tagged With: 401(k), holiday shopping tips, home improvements, real estate, Retirement, Social Security, Taxes

November 12, 2014 By Liz Weston

Wednesday’s need-to-know money news

Today’s top story: With the holidays comes identity theft. Also in the news: What divorcees need to know about Social Security, a different way to budget, and how money can wreck your marriage (but it doesn’t have to).