Ask Liz Weston

Get smart with your money

Social Security

Tuesday’s need-to-know money news

By

321562-data-breachesToday’s top story: Yet another data breach hits a major retailer. Also in the news: Five costly Social Security mistakes, which tax breaks will be making a comeback in 2015, and why you should still save money even if you’re in debt.

The Kmart Data Breach: What You Need to Do
Here we go again.

Five Costly Social Security Mistakes
Avoid these at all costs.

Will Your Favorite Tax Break Be Restored?
The clock is ticking on restoration for 2015.

Why You Should Still Save When in Debt
Emergency funds are essential no matter how much you owe.

Tips for Giving Money to Needy Family Members
Making the difficult decision to say yes or no.

Q&A: Social Security spousal benefits

By

Dear Liz: I am 13 years older than my wife. Is it possible for me to receive Social Security spousal benefits based on her earnings when I reach full retirement at age 66? I’d like to shift to my benefit when it reaches its maximum at age 70. If I can do this, what impact, if any, would there be on the benefits she ultimately receives?

Answer: Spousal benefits wouldn’t reduce her checks, but she has to be old enough to qualify for Social Security for you to get these benefits. Given your age gap, waiting for that day probably isn’t an optimal solution.

On the other hand, she could file for spousal benefits when she reaches her own full retirement age (which will be somewhere between 66 and 67, as the full retirement age is pushed back). That would give her own benefit a chance to grow, and she could switch to that amount if it’s larger at age 70. If she starts benefits before full retirement age, she would lose the option to switch.

AARP’s free Social Security calculator can help you figure out the claiming strategy that makes the most sense for your situation.

News you can use for retirement

By

seniorslaptopReuters news service has posted its “Retirement Roadmap 2014,” a collection of good advice on topics that don’t get as much attention as they should. My favorite of the bunch is Beth Pinsker’s piece on choosing a rehab facility after surgery, either for yourself or a parent. It’s not a sexy topic, but if you’ve ever been in this situation you realize how little information is out there to help you choose well. Another important topic is choosing a new Medicare plan, since open enrollment is coming up and most people just stick with what they have–not realizing they’re paying more than they should.  This would be a great article to pass along to anyone you know who’s 65 or over.

And then, for fun, read about a couple who sold their house to travel the world…and dream a little.

Here are the links you’ll need:

Video: Guide to Healthcare Costs
From Medicare to long-term care to health savings accounts. We explore the options – and the possibilities – in episode one of our 12-part series.

Stern Advice: Should you tap your 401(k)to buy a house?

Why it pays to pore over your Medicare drug plan – every year

How to choose the best rehab facility after a hospital stay

It happens: Seniors with student debt – and smaller Social Security checks

Extreme retirement abroad: How one footloose couple sees the world

Q&A: Which work years determine Social Security?

By

Dear Liz: My wife and I are both 59. We expect to retire in two or three years. We would not take Social Security until probably 67 because we will not need it when we retire. But would our Social Security benefits be less because we do not work for those five years before applying to Social Security? Is Social Security affected at all by the last few years of income or simply by the total lifetime deposits into the system?

Answer: Your Social Security benefits are based on your 35 highest-earning years. So if you’ve worked more than 35 years, a few years at the end of your career in which you earn less or don’t earn anything at all shouldn’t affect your benefits.

While you’re researching your options for claiming Social Security, check out the “claim now, claim more later” strategy that would allow one of you to claim spousal benefits while allowing his or her own benefit to grow. It’s one of a number of strategies available to married couples that can significantly increase the amount of Social Security benefits over a lifetime. Another important factor to consider is that one of you is likely to survive the other, perhaps by many years, and will have to get by on a single check. You should make sure that check is as large as it can be to lessen the chances the survivor will face poverty in old age. You can find more information about Social Security claiming strategies at the AARP site (aarp.org).

Q&A: Waiting to claim Social Security benefits

By

Dear Liz: I am 64 and happily, gratefully receiving early Social Security benefits. My wife is 59, and when she turns 62 she will get half of my $1,650 monthly benefit. My question, though, is this: If she starts getting half of my benefit at 62, can she later switch to her own benefit? If she can get spousal benefits at 62 and switch to her own benefit when it maxes out at age 70, then starting early would be a no-brainer.

Answer: Yes it would, but that’s not how Social Security works.

First, your wife will not receive an amount equal to half of your check if she applies for spousal benefits before her own full retirement age, which is 66. Instead, she would be locked into a significantly discounted amount — closer to 35% of your benefit than 50% if she applies at 62. She also would lose the option of switching to her own benefit later. The “claim now, claim more later” strategy of starting with spousal benefits and then switching to one’s own benefit isn’t available to those who start early.

You’ve already left a lot of money on the table by starting benefits before you reached your own full retirement age. Having her begin benefits prematurely would just compound the problem. Remember too that when one of you dies, the other will have to live perhaps for many years on a single check. It makes sense to make sure that check is as large as it can possibly be.

AARP has excellent information on its site about Social Security claiming strategies, as well as a calculator that can help you see how much it pays to wait. Please educate yourselves before making a decision that you, or she, could live to regret.

Q&A: Social Security and spousal benefits

By

Dear Liz: A friend of mine has told me that he thinks that I can apply for spousal benefits at my full retirement age and hold off getting my Social Security under my own work record until I am 70. Here is the scenario: My husband is 77 and has been collecting Social Security since he was 62. He continues to work. I will be 66 in November and I am still working. I plan to take Social Security at age 70. Can I apply for spousal benefits and receive an amount equal to half of what my husband receives from the age of 66 until I turn 70 and then apply under my own account at age 70 and receive my maximum benefit at that age? My friend feels strongly that this can be done, but I called Social Security and explained it clearly (or at least I thought I did) to them and they said that this could not be done. Then I went into the Social Security website and looked under “Spousal Benefits,” but the wording did not clearly say that this couldn’t be done.

Answer: What you’re describing is the “claim now, claim more later” strategy that can boost a couple’s lifetime Social Security by tens of thousands of dollars. It’s one of the approaches outlined in AARP’s excellent primer, “How to Maximize Your Social Security Benefits,” which you’ll find on its site, http://www.aarp.org, along with a calculator to help you understand how different claiming strategies could affect what you get.

These strategies capitalize on the fact that delaying the start of Social Security benefits results in substantially larger checks for life. In the case of two-earner couples, the “claim now, claim more later” strategy allows one spouse the option of getting checks (the spousal benefit) for a few years while allowing her own benefit to grow to its maximum.

As long as you wait until your own full retirement age to apply for spousal benefits, and your spouse is already receiving benefits, then you should be allowed to switch to your own benefit when it maxes out at age 70. If your spouse weren’t receiving benefits yet, but had reached his full retirement age, he could file for benefits and immediately suspend his application (“file and suspend”) so that you would be eligible for spousal benefits and his own benefit could continue to grow.

It’s not clear why you would have been told otherwise, since this isn’t exactly a secret strategy. But not all Social Security employees are equally informed. Sometimes calling back and asking your question again of another representative will result in a different or more complete answer.

When you file for benefits, make clear on the form that you are restricting your application to the spousal benefit only and aren’t collecting your own retirement benefit