Michigan Estate Planning Blog

Should I Ask Mom and Pop about Their Finances?

 

Adult children should know about their parents’ finances in case of any emergency. They should also know critical information in case of death. NASDAQ’s recent article entitled “9 Questions to Ask Aging Parents About Their Finances” acknowledges that speaking to aging parents about their finances isn’t easy. However, to start this process, the article gives us nine important topics you may want to discuss with your parents:
Do You Have a Financial Plan (and is it enough)? See if your parents have a financial plan. Some parents will have a solid financial plan that will let them to live comfortably into their 80s or 90s. On the other hand, you may discover they’re living on a fixed budget and money is tight. If you see that you’ll need to help them financially now or in the future, start planning ASAP. Any decision to provide them with financial support will likely have an effect on your own financial plan.
Do You Have an Accessible List of All Your Accounts? Ask your parents to draft a list of their financial assets and those named as beneficiaries of those accounts and keep it in a safe place. They should also put together important contacts, such as clergy, CPA, estate planning attorney, physician, etc.
Where’s Your Will, and Who’s the Executor? See where your parents keep their wills and estate documents. Some estate planning attorneys retain an original copy. If your parents don’t have a will, encourage them to see an estate attorney. An item that’s not commonly listed in the will, that you may want to ask about, is if your parents have prepaid for a burial plot or memorial arrangements.
Do You Have Life Insurance Policies that I Should Know About? See if your parents have any active life insurance policies. Get the details of the policies and the policy numbers. If your parents are still working, they may also have life insurance through an employer.
Are There Any Special Bequests to Family and Friends? Family heirlooms and special personal property may be a part of your parents’ estate plan. A sibling may have claimed your dad’s coin collection. Knowing your parents’ intentions and wishes for their keepsakes will make things much easier when they pass. Moreover, having conversations about family heirlooms now can help prevent any hard feelings later. Some people make up a list for their personal bequests and reference it in their wills.
Who Have You Named as Your Financial Power of Attorney? This document lets your parents name a primary and secondary person to make financial decisions on their behalf, if they become incapacitated. If you’re the one named as the person to make financial decisions, find out where all of your parents’ financial assets are held. You should also get information about their Medicare policy, any pensions and their Social Security benefits. It even helps to know their utility companies in case you need to pay these bills and must prove power of attorney.

Do You Have a Living Will? They should each have an advance health care directive or living will and health care power of attorney. These documents designate who has authority to make medical decisions on their behalf, if they became incapacitated or terminally ill. This also includes your parents’ preferences for life-sustaining treatment, including a “Do Not Resuscitate” clause, as well as their preferences on organ donation.
Have You Had Trouble Balancing Your Checkbook Lately or Forgotten to Pay Bills? Have a discussion about key financial decisions with your parents while they are in good health. This will let you make a plan, if they show signs of memory loss. The signs of memory loss include forgetting appointments, making occasional errors while managing household finances, or getting confused about the day of the week.
Do You Have a Long-Term Care Policy? To claim benefits of long-term care insurance, a person typically needs to be unable to perform two out of six common “activities of daily living” (bathing, dressing, toileting, eating, transferring and continence) or have a severe cognitive disorder. If your parents have a policy, access it and review its core benefits, in case you need to help them file a claim.
Discussing your parents’ financial and estate plans isn’t fun, but it will help give both you and your parents some peace of mind to know that they will be provided for, and things will be taken care of in their absence.
Reference: NASDAQ (Aug. 27, 2021) “9 Questions to Ask Aging Parents About Their Finances”

Do I Have to Give My Husband’s Children from First Marriage Anything When He Dies?”

 

This is a common question with second (or third marriages) and blended families. Questions frequently arise about Social Security, investments and savings, when the husband is divorced from the children’s mother and is paying child support until each child turns 18.
Nj.com’s recent article entitled “Are my husband’s kids from another marriage due assets when he dies?” says that these questions demonstrate why estate planning is critical to revisit after a divorce. You can take action to make certain that you’re taken care of, but if you don’t do this at the time of the divorce, it could be too late.
Let’s look at what you should know about beneficiaries and wills. First, beneficiary designations supersede a will. Make sure that all beneficiaries and contingent beneficiaries are consistent with your wishes. There are beneficiary designations on retirement accounts, pensions, life insurance policies, annuities and other accounts that take precedence over what may be stated in a will.
While New Jersey does not provide for beneficiary designations on certain assets like a house, vehicles, and real estate, many other states do. For assets without a beneficiary, it’s important to determine the way in which they’re titled.
The titling of assets has an effect on how the assets will be distributed after death. Thus, when married again, spouses should review and update their wills to have an idea of how a spouse’s estate would be disbursed at his or her death.
If a husband is paying child support, divorce decrees will often dictate that he purchase life insurance to cover that obligation upon his death. Therefore, there may be a life insurance policy for the children from a first marriage.
With Social Security, if a spouse remains unmarried after the spouse’s death, he or she can claim a survivor spousal benefit as early as age 60, and if he or she is caring for the spouse’s children from the first marriage who are under 16 years of age, he or she may be entitled to receive a payment earlier. The deceased spouse’s unmarried children can also claim a survivor benefit until age 18, or longer if in high school or disabled.
Reference: nj.com (Aug. 4, 2021) “Are my husband’s kids from another marriage due assets when he dies?”

Planning A Special Inheritance For A Special Beneficiary Mid-Michigan

We plan our estates to ensure our loved ones will be okay after we are gone. If a loved one has mental or physical special needs, then your estate planning needs some special planning itself. So what more should you do to ensure the happiness and wellbeing of your child with special needs? Special planning is, of course, very much tied to the needs of your child with special needs and to the needs of the rest of your family. As you might imagine, such planning entails important tools, rules and guides. To get started, consider a recent article in The Slott Report titled “3 Tips When Planning for a Special Needs Child.” One of the keys to special needs planning is understanding how public assistance aid works and its sources. Generally, the two major sources are Supplemental Security Income (SSI) and Medicaid. Both programs are “needs-based.” In other words, eligibility to receive benefits is all about qualifying financially, preserving that qualification, and ensuring a painless transition (read: not getting caught in bureaucracy). Tip #1: Consider implementing the all-important Supplemental Needs Trust. Properly drafted and funded, this is a special trust designed to offer security and care, without endangering needs-based program benefits. Tip #2: Plan ahead and plan carefully! These public assistance benefits may not be enough or offer as much security as you would want to ensure. In fact, you might want to find a way to leave more behind. Life insurance is an excellent option. Tip #3: What’s the final tip? You need to plan for yourself, too, and for your entire estate. As important as your loved one with special needs is, you have to ensure that the rest of your plans work together, too. For example, make sure to plan for threats to your own financial security, like high long-term care costs in old age. Without proper planning now, all could be lost later. In the end, if there is no security for you, then there may be no future security for your loved ones. The original article has a bit more to chew on, with some helpful pointers to get you moving in the right direction.

Reference: The Slott Report (November 20, 2013) “3 Tips When Planning for a Special Needs Child”

For more information, see www.jerryreiflawyer.com

Social Security Likes Diet COLA Mid-Michigan

According to the numbers recently released by the Social Security Administration, 2014 will be a “diet COLA” year. That means the Cost Of Living Adjustment (COLA) made to Social Security payments will only be a 1.5% increase. ElderLawAnswers weighed in on the news in an article titled “Social Security Benefits to Rise Only 1.5 Percent in 2014,” while the SSA has issued its own COLA Fact Sheet. The COLA is an important adjustment for many Social Security beneficiaries, especially those on a fixed income. These can be very important dollars and cents. If costs of living go up on an annual basis, then Social Security beneficiaries would be left with fewer dollars to purchase more expensive goods (and services) without the COLA increase. On a positive note, this COLA increase is welcome. Historically, there have been years without any COLA increase. That noted, at 1.5% the 2014 COLA is still less than the 1.7% COLA in 2013, which some regarded as too low. The math, as summarized by ElderLawAnswers, works out like this: Starting in January 2014, the average monthly Social Security retirement payment will rise from $1,275 to $1,294 a month for individuals and from $2,080 to $2,111 for couples. The 1.5 percent increase will apply to both elderly and disabled Social Security recipients, and individuals who receive both disability and retirement Social Security will see increases in both types of benefits. The maximum Social Security benefit for a worker retiring at full retirement age, which is age 66 for those born between 1943 and 1954, will be $2,642 a month. The good news is that it is not all bad news. While the SSA is seeing a lower COLA, it is worth noting that Medicare Part B will not be seeing an increase from the 2013 standard monthly premium of $104.90. In the end, then, for many beneficiaries 2014 might not be too unreasonable.

 

Reference: ElderLawAnswers (October 31, 2013) “Social Security Benefits to Rise Only 1.5 Percent in 2014”

For more information, see www.jerrryreiflawyer.com

 

Social Security Likes Diet COLA

According to the numbers recently released by the Social Security Administration, 2014 will be a “diet COLA” year. That means the Cost Of Living Adjustment (COLA) made to Social Security payments will only be a 1.5% increase. ElderLawAnswers weighed in on the news in an article titled “Social Security Benefits to Rise Only 1.5 Percent in 2014,” while the SSA has issued its own COLA Fact Sheet. The COLA is an important adjustment for many Social Security beneficiaries, especially those on a fixed income. These can be very important dollars and cents. If costs of living go up on an annual basis, then Social Security beneficiaries would be left with fewer dollars to purchase more expensive goods (and services) without the COLA increase. On a positive note, this COLA increase is welcome. Historically, there have been years without any COLA increase. That noted, at 1.5% the 2014 COLA is still less than the 1.7% COLA in 2013, which some regarded as too low. The math, as summarized by ElderLawAnswers, works out like this: Starting in January 2014, the average monthly Social Security retirement payment will rise from $1,275 to $1,294 a month for individuals and from $2,080 to $2,111 for couples. The 1.5 percent increase will apply to both elderly and disabled Social Security recipients, and individuals who receive both disability and retirement Social Security will see increases in both types of benefits. The maximum Social Security benefit for a worker retiring at full retirement age, which is age 66 for those born between 1943 and 1954, will be $2,642 a month. The good news is that it is not all bad news. While the SSA is seeing a lower COLA, it is worth noting that Medicare Part B will not be seeing an increase from the 2013 standard monthly premium of $104.90. In the end, then, for many beneficiaries 2014 might not be too unreasonable.

Reference: ElderLawAnswers (October 31, 2013) “Social Security Benefits to Rise Only 1.5 Percent in 2014”

For more informstion, see www.jerryreiflawyer.com

 

 

 

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Social Security Likes Diet COLA in Virginia

How To Collect Social Security Benefits … From Your Ex-Spouse

Today’s retiring generations face new challenges simply not seen much by past generations. The wax and wane of Congress for one, and the dramatic rise of healthcare costs for another. An additional challenge hits a little closer to home for other retirees – those who are divorced. If you have been divorced, it is critical that you understand how Social Security benefits take divorce into account. Demographically speaking, this is even more essential for retiring women. The role of Social Security benefits in the retired life of a divorcee can be crucial, as discussed in a recent Reuters article titled “Column: Knowing Social Security rules can help divorced spouses.” Basically, Social Security payments are related to your paid work during your working years. As a result, many ex-spouses simply have not built up sufficient “numbers” because of how household incomes were split back in the day. Interestingly, you may be eligible for many of the same benefits as if you had remained married to your ex. But it is not automatic. Here are some threshold requirements: • You must be currently single, • You must have been married to your ex for at least 10 years, • Your divorce must be “final” for at least two years, • You must have reached the minimum Social Security eligibility age (62), and • You must not be currently collecting a benefit amount greater than that of your ex. Note: Your eligibility is completely independent of the benefits collected by your ex, but you will lose the benefits if you remarry. I recommend reading the original article for additional tips and traps. Call or visit your local Social Security office regarding the folder of paperwork you will need to gather for qualification.

Reference: Reuters (May 9, 2013) “Column: Knowing Social Security rules can help divorced spouses”

For more information, see www.jerryreiflawyer.com

 

Lowest Ever Social Security Increase

At a mere 1.7%, Social Security will see its lowest increase ever come 2013. What does this mean for seniors today? The COLA is the Cost Of Living Adjustment added to Social Security annually, based on inflation and increases in the Consumer Price Index (CPI.) For some seniors, planning for the new year means planning around the COLA and hoping for the best. Alternatively, a reduction or a weak increase in COLA may mean seniors will need to make up the difference out of savings. Nevertheless, the CPI is an imperfect indicator and a debated one as well. This matter was taken up recently by USA Today in an article titled “Social Security benefits to rise 1.7% in 2013.” In conjunction with the small Social Security increase and the uncertainty of taxes for next year, you may want to brush up on what could happen in 2013. A recent Forbes article titled “Social Security Benefits To Rise 1.7%; Workers Face Up To $2425 Payroll Tax Hike” may offer some knowledge on these very important changes. Seek appropriate counsel if you have further questions about your benefits.

References: USA Today (October 16, 2012) “Social Security benefits to rise 1.7% in 2013”

Forbes (October 16, 2012) “Social Security Benefits To Rise 1.7%; Workers Face Up To $2425 Payroll Tax Hike.”

Timing of Social Security is Important for Women

As we age, planning for longevity includes many important decisions and compromises. The timing of these plans when it comes to Social Security is often misunderstood, especially for married couples when one spouse outlives the other. And since statistically women live longer than men, the ladies in our lives should pay close attention to the details of their plans. The title of a recent article in MarketWatch says it all - “Widows getting cheated out of Social Security.” The longevity calculus is oftentimes missing as it concerns women who rely on Social Security. Especially amongst earlier generations, wives may be more reliant upon their spouse’s Social Security and, therefore, on their spouse’s work history. This is almost a given if the wife was a homemaker. If the married couple begins taking Social Security early, then it may adversely affect the spouse who did not work outside the home (or worked for a short duration, usually at reduced compensation), but who will survive longer. Even aside from Social Security, this disparity between the sexes is not something that should escape a prudent financial planner’s attention. Unfortunately, this is an easy fact to forget. In addition to the MarketWatch article, a recent Forbes article titled “Sudden Loss: Financial Advice For Widows” provides some practical pointers to widows and those who advise them. So make sure you discuss the timing issues with your financial advisor and professional counsel in order to make the right decision for your Social Security benefits.

Reference:

MarketWatch (August 24, 2012) “Widows getting cheated out of Social Security”

Forbes (August 28, 2012) “Sudden Loss: Financial Advice For Widows”

Protect (And Preserve) Your Wealth through Trusts

Creating wealth is one thing, but protecting it is another matter. Whether your objective is to protect the wealth for yourself and your family right now or to preserve the wealth through multiple generations, a trust can be an especially powerful tool. Recently, Bloomberg took up this discussion in an article titled “Wealthy Americans Turn to Trusts to Shield Assets.” According to the article, a properly structured trust is one of the most popular asset protection tools, especially amongst the wealthy and those in the thick of business transactions. Consider this: when it comes to litigation, you don’t want to be the lowest hanging fruit (i.e., both the deepest pocket and the easiest pickings) for a plaintiff’s attorney. Remember, lumberjacks choose the tallest trees, fishermen choose the largest fish, and plaintiffs choose the fattest wallets. Although there is insurance to fill this risk, the right trust (or trusts) should be considered as part of your financial self-defense strategy. To read more about asset protection through trusts, I recommend the original article. As a side bonus, a properly drafted trust also can transfer – and preserve – wealth for multiple generations.

Reference: Bloomberg (May 22, 2012) “Wealthy Americans Turn to Trusts to Shield Assets”

Protect (And Preserve) Your Wealth through Trusts

Creating wealth is one thing, but protecting it is another matter. Whether your objective is to protect the wealth for yourself and your family right now or to preserve the wealth through multiple generations, a trust can be an especially powerful tool. Recently, Bloomberg took up this discussion in an article titled “Wealthy Americans Turn to Trusts to Shield Assets.” According to the article, a properly structured trust is one of the most popular asset protection tools, especially amongst the wealthy and those in the thick of business transactions. Consider this: when it comes to litigation, you don’t want to be the lowest hanging fruit (i.e., both the deepest pocket and the easiest pickings) for a plaintiff’s attorney. Remember, lumberjacks choose the tallest trees, fishermen choose the largest fish, and plaintiffs choose the fattest wallets. Although there is insurance to fill this risk, the right trust (or trusts) should be considered as part of your financial self-defense strategy. To read more about asset protection through trusts, I recommend the original article. As a side bonus, a properly drafted trust also can transfer – and preserve – wealth for multiple generations.

Reference: Bloomberg (May 22, 2012) “Wealthy Americans Turn to Trusts to Shield Assets”

Decision-Making Declines As Birthdays Increase

Why do many of the most difficult decisions we face come later in life? I guess it’s just fact of life. Unfortunately, we’re not always at the top of our game when those decisions must be made. Therefore, it’s essential to make proper plans earlier, rather than later. According to a recent study, reported on here by the Wall Street Journal, the decline starts around age 60. The scores on a test measuring knowledge of investments, insurance, credit and money basics fell about 2% each year starting after age 60. In fact, they fell from about 59% correct for those in their 60s to a dismal 30% for those 80 and older. What’s almost as bad is that these very people actually grew more confident in their decisions and knowledge. Problem: These are the very same people who are attempting to sift through the messy and confusing programs like Medicare and Social Security, at the very same time they are undergoing this dramatic change in their mental agility. These also are the people who will want to take care of their loved ones in their estate plans in an era of constantly changing laws and regulations. If you are the adult child of older parents, this is something to bear in mind when seeking to help them, perhaps especially when your assistance is unwanted. Likewise, as a parent, fact of life will necessitate a bit of self-understanding. And for everyone, this means that proper estate planning should be done earlier, rather than later.

Reference: The Wall Street Journal (October 30, 2011) “Financial Acumen Declines After 60”

Social Security’s Rule 11-1p – Catch 22?

According to a recent press release out of the Digital Journal, the Social Security Administration has been changing some of its rules, and that can mean a tough time for those applying for Social Security Disability (SSD) or Supplemental Security Income (SSI) benefits. According to the Social Security Administration’s (SSA) 11-1p rule, it used to be possible to have multiple filings for the same benefits. It’s a pretty useful ability when your first filing is denied and it has to be appealed. Why? Because then you can file an entirely new claim and wait for either the new claim or the appealed claim to come back. Waiting for an appeal can take an awfully long time (and during that time you likely are in need of those benefits). Of course, 11-1p is the rule that’s been flipped and now you can’t have two filings for the same benefit. As a result, you will need to choose between waiting out the appeals process or letting it drop and then filing an entirely different one. Using the appeal track alone might cost you that much more time, and simply filing again will mean that you’ll miss out on back-benefits (for the time you were waiting), if the appeal would have gone through. It’s an unfortunate position and it highlights the need to file with the SSA correctly the first run through.

Reference: Digital Journal (December 1, 2011) “New SSA Rule Disallows Multiple Benefits Applications”

Decision-Making Declines As Birthdays Increase

Why do many of the most difficult decisions we face come later in life? I guess it’s just fact of life. Unfortunately, we’re not always at the top of our game when those decisions must be made. Therefore, it’s essential to make proper plans earlier, rather than later. According to a recent study, reported on here by the Wall Street Journal, the decline starts around age 60. The scores on a test measuring knowledge of investments, insurance, credit and money basics fell about 2% each year starting after age 60. In fact, they fell from about 59% correct for those in their 60s to a dismal 30% for those 80 and older. What’s almost as bad is that these very people actually grew more confident in their decisions and knowledge. Problem: These are the very same people who are attempting to sift through the messy and confusing programs like Medicare and Social Security, at the very same time they are undergoing this dramatic change in their mental agility. These also are the people who will want to take care of their loved ones in their estate plans in an era of constantly changing laws and regulations. If you are the adult child of older parents, this is something to bear in mind when seeking to help them, perhaps especially when your assistance is unwanted. Likewise, as a parent, fact of life will necessitate a bit of self-understanding. And for everyone, this means that proper estate planning should be done earlier, rather than later.

Reference: The Wall Street Journal (October 30, 2011) “Financial Acumen Declines After 60”

COLA Is Increasing

Although it’s been two years since Social Security beneficiaries saw some additional respite from rising inflation, finally we’ll see a COLA increase for 2012 and an adjustment of 3.6%. The COLA, or Cost Of Living Adjustment, has been a nearly annual increase in Social Security payments. Why? To keep benefits consistent with inflation. Otherwise, seniors would be at the mercy of rising prices on fixed incomes. Lean times in the economy, however, have meant cutting back COLA for the past two years, leaving many seniors with no choice but to further tighten their belts. The 3.6% increase will be warmly received by many. For example, beneficiaries receiving $1,186 a month, the average for retired workers, will see monthly benefit increase of $43. To be sure, it’s not a dramatic increase (and less than the last COLA of 5.8%), but it is better than no increase at all.

Reference: AARP (October 19, 2011) “Social Security Beneficiaries Welcome 3.6 Percent COLA”

Debt Deal is a Mixed Bag for Older Americans

For months we’ve been on the edge of our seats trying to figure out what Congress would do about the debt ceiling, and how their actions would affect the nation’s seniors. Finally, we can all breathe a quick sigh of relief … then go back to waiting. The recent debt deal did not raise taxes and it did not make the threatened cuts to Social Security or Medicare, but it does lay the groundwork for renewed discussion in the future. The AARP says the deal is mixed bag for older Americans, but not as bad as it might have been. Proposed cuts to Social Security and Medicare did not make it into the final bill. Of note, too, is that the proposed changes for calculating the Social Security Cost Of Living Adjustment (COLA) – a less generous formula that effectively cuts the benefit – did not make it into the final bill either. But in order to preserve these programs many other programs were slashed, including those emphasizing nutrition, senior job placement, and home and heating assistance. Nevertheless, the debt discussion was not put to rest, merely put on hold. One of the biggest results of the law is to create a congressional super-committee of six Democrats and six Republicans who must make significant budgetary recommendations by late November. By Christmas-time this year, Congress must act on these recommendations, or find a better solution, or else severe cuts will go into effect across both military and entitlements spending like Medicare and Social Security. For now, seniors can breathe a bit easier. But, clearly, the debt crisis has been postponed rather than resolved.

Reference: AARP (August 2, 2011) “Debt Deal: No New Taxes and No Social Security or Medicare Cuts – Yet

ESTATE PLANNING / SOCIAL SECURITY

When should you start taking your Social Security benefits? The current common advice is to wait as long as possible, in order to maximize your eventual monthly benefit. In fact, AARP recently launched a new online calculator to help you decide when to start taking benefits … and it clearly illustrates the benefits to claiming later. The calculator is a useful tool, and worth checking out, but as Reuters Wealth points out, the calculator is not totally neutral, and lacks advanced features that could allow you to estimate more complex situations. For example, the AARP calculator does not allow you to figure out when you should start benefits if you are no longer working and have to weigh savings withdrawals against starting benefits. It also won’t allow you to figure the tax impact of your decisions, which can be sizable. Further, it really does not allow you to compare the outcome of various scenarios in which you and your spouse choose different start dates to coordinate benefits. For those types of complex calculations, you probably will still want to consult with a professional who can help identify issues pertinent to your unique situation. Other websites with helpful calculators include: • Should you Start Social Security Early • Break-Even Calculator • Social Security Administration.

Reference: Reuters Wealth – (July 12, 2011) “Now or Later? AARP’s new Social Security Calculator?”

Debt Deal: Not (Really) A Done Deal

I suppose it goes without saying that the past few weeks have been a rather tumultuous time, and especially so for America’s seniors. It’s quickly proving to be a vital time to take stock of the situation and prepare. Luckily, the news is awash with important reminders and advice about what’s at stake. First, the debt deal was finally passed. As I mentioned last week, it’s already been called a mixed bag by AARP, but the bad may outweigh the good and there are specific changes to watch with interest. Robert Powell of MarketWatch has put together another resource detailing what you ought to know with a special emphasis on budget cuts on programs (both the $1 trillion already going into affect and future cuts to Medicare), along with interest rates and taxes. Immediately following on the heels of the debt deal, however, the S&P downgraded the U.S. and forced a rather volatile “market correction.” As SmartMoney points out in this article, it’s like 2008 all over again, because it’s the baby-boomers who have the most to lose and must taken action to engage strategies to protect their nest egg if market forces continue to threaten it. And, finally, there’s looking to the future… the future of rehashing the past few months and the debt debate. The deal that was reached calls for the commission of a super committee to make more suggestions for cutting the debt. That means Medicare and Social Security might not remain safe, since the debate isn’t actually over. Indeed, if the committee’s suggestions are not implemented, then immediate spending cuts to Medicare will go into affect by Christmas. Reuter’s, for one, thinks there’s reason enough to be wary of the super committee altogether, especially if you’re concerned about retirement. In fact, they’ve found eight reasons to worry.

Reference: MarketWatch (August 4, 2011) “How the Debt Deal Will Affect Retirees”

                  SmartMoney (August 8, 2011) “The 2011 Correction: Another Bad Turn for Boomers.”

                  Reuters Money (August 5, 2011) “8 ways the super committee is not super for retirement”

Debt Deal is a Mixed Bag for Older Americans

For months we’ve been on the edge of our seats trying to figure out what Congress would do about the debt ceiling, and how their actions would affect the nation’s seniors. Finally, we can all breathe a quick sigh of relief … then go back to waiting. The recent debt deal did not raise taxes and it did not make the threatened cuts to Social Security or Medicare, but it does lay the groundwork for renewed discussion in the future. The AARP says the deal is mixed bag for older Americans, but not as bad as it might have been. Proposed cuts to Social Security and Medicare did not make it into the final bill. Of note, too, is that the proposed changes for calculating the Social Security Cost Of Living Adjustment (COLA) – a less generous formula that effectively cuts the benefit – did not make it into the final bill either. But in order to preserve these programs many other programs were slashed, including those emphasizing nutrition, senior job placement, and home and heating assistance. Nevertheless, the debt discussion was not put to rest, merely put on hold. One of the biggest results of the law is to create a congressional super-committee of six Democrats and six Republicans who must make significant budgetary recommendations by late November. By Christmas-time this year, Congress must act on these recommendations, or find a better solution, or else severe cuts will go into effect across both military and entitlements spending like Medicare and Social Security. For now, seniors can breathe a bit easier. But, clearly, the debt crisis has been postponed rather than resolved.

Reference: AARP (August 2, 2011) “Debt Deal: No New Taxes and No Social Security or Medicare Cuts – Yet”

ESTATE PLANNING / SOCIAL SECURITY

When should you start taking your Social Security benefits? The current common advice is to wait as long as possible, in order to maximize your eventual monthly benefit. In fact, AARP recently launched a new online calculator to help you decide when to start taking benefits … and it clearly illustrates the benefits to claiming later. The calculator is a useful tool, and worth checking out, but as Reuters Wealth points out, the calculator is not totally neutral, and lacks advanced features that could allow you to estimate more complex situations. For example, the AARP calculator does not allow you to figure out when you should start benefits if you are no longer working and have to weigh savings withdrawals against starting benefits. It also won’t allow you to figure the tax impact of your decisions, which can be sizable. Further, it really does not allow you to compare the outcome of various scenarios in which you and your spouse choose different start dates to coordinate benefits. For those types of complex calculations, you probably will still want to consult with a professional who can help identify issues pertinent to your unique situation. Other websites with helpful calculators include: • Should you Start Social Security Early • Break-Even Calculator • Social Security Administration. Reference: Reuters Wealth – (July 12, 2011) “Now or Later? AARP’s new Social Security Calculator?”

ELDER LAW / MEDICARE & SOCIAL SECURITY

In this article, MarketWatch’s Robert Powell takes on the problems and the hype surrounding Social Security and Medicare, as well as what they mean to you. The article first moves to cut through the media-created frenzy and outline some of the reasons why the situation isn’t so bad and that it’s important not to panic (you may also want to read a related article on retirement fears, also from MarketWatch: http://www.marketwatch.com/story/dont-let-fear-ruin-your-retirement-2011-05-23.) A few of the tips: continue working at least until your full retirement age, or to age 70 if possible, keep your skills up to date, and be sure to have disability insurance in case you need it Link: http://www.marketwatch.com/story/get-ready-for-social-security-medicare-meltdowns-2011-05-19 From MarketWatch (May 19, 2011) “Get Ready for Social Security, Medicare Meltdowns”

SMALL BUSINESS / SOCIAL SECURITY TAXES

This article examines the unfortunate burden that Social Security taxes pose on the self-employed, who have to pay both side of the tax as they are, effectively, both employer and employee. The article runs some hard numbers to find the actual costs in various cases and then to predict future costs with the projected increases to the Social Security taxes ceiling. Link: http://www.smartmoney.com/taxes/income/just-what-you-needed-higher-taxes-1306271420886/?link=SM_hp_ls4e From SmartMoney (May 25, 2011) “Just What You Needed: Higher Taxes”

ELDER LAW / SOCIAL SECURITY

Should you count on Social Security for retirement income? Who knew that question would even be asked, let alone become so politically charged? The popular media today frightens people with blaring headlines that Social Security is bankrupt, and you are unlikely to receive a dime … countered by reassuring comments that the system has a multi-trillion-dollar surplus. So – which is it? Is Social Security a pipe dream, a shell game, a bankrupt program from which you will never receive benefit? Or is it a social safety net for those whose working years are over? A recent Morningstar article tries to answer those questions, and provides insight as to whether or not you should count on it. According to last year’s Gallup poll, 60 percent of Americans don’t expect to receive Social Security benefits once they stop working. Younger generations are even more pessimistic, with 77 percent of 18- to 34-year-olds reporting that Social Security either has “major problems” or is actually in a state of crisis. Those feelings are not unfounded. It is true that the Social Security Fund now pays out more in benefits than it takes in by taxes, and much of the fund itself consists in Treasury bonds rather than actual cash. But maybe things aren’t quite so bad. Many analysts, including Morningstar, insist that Social Security isn’t insolvent. But it is a very different beast to different people, depending on their age. Without question, the value of Social Security benefits to your eventual retirement income is decreasing. Gradually increasing the age when seniors can file for full benefits – the so-called Normal Retirement Age (NRA) – essentially amounts to phased-in benefit cut of 20 percent, according to [the National Academy of Social Insurance]. Additionally, dramatic increases in healthcare costs have had and will continue to have an increasing drag on Social Security income, as Medicare Part B premiums are deducted from Social Security payments. Social Security statistically accounts for 40 percent of an average retiree’s income, making it an important aspect of your retirement planning. According to Morningstar, the best way to combat Social Security’s falling value over time is to maximize your own monthly payouts by waiting at least until your NRA to file for benefits. Monthly benefit payments are eight percent higher for every year you wait, up until age 70. In fact, your monthly income will be about 76 percent higher than it would be if you had claimed benefits at age 62. Morningstar includes a handy chart illustrating the increases in their article online.

Link: http://news.morningstar.com/articlenet/article.aspx?id=378754&part=1

               From Morningstar (April 29, 2011) “Should You Count on Social Security?”

ELDER LAW / SOCIAL SECURITY

If you’re not already familiar with the Social Security Administration’s website, it may be time to start. You may already know that you can go online to get an application to replace your Social Security card, apply for Medicare, retirement or disability benefits, even search popular baby names. While all those online services may be helpful, a new addition to the website may become essential. The government is working to provide your yearly earnings statement online by the end of this year, and forego the massive mailings. The statements, mailed to 150 million people each year, show a projection of your future benefits and include a history of taxable earnings for each year – so people can check for mistakes – as well as the total amount of Social Security and Medicare taxes paid over your lifetime. While certainly a useful retirement planning tool for workers, the mailed statements cost the SSA more than $70 million a year. In a recent article from the Associated Press, Social Security Commissioner Michael Astrue says the website offers the same estimates, while also allowing the individual to run scenarios to test their preparation and various outcomes. Nevertheless, critics point out that it does not, as yet, offer the detailed history of taxable incomes, which means you’ll have no way of catching possible mistakes. Plus, if you’re not really computer-savvy, or don’t have access to high-speed internet, the website could be quite difficult to use. Stopping the mailed statements is part of a trend in government to conduct more of its business electronically. The SSA already mails out few paper checks. About 88 percent of beneficiaries have their payments deposited directly into bank accounts, and approximately 41 percent of applications for retirement benefits come in online. Visit the SSA website to find out more about what you can now do online. Link: http://www.google.com/hostednews/ap/article/ALeqM5jpAl99XogTaK8a281YRjuOQXZx1Q?docId=c2ac1867eeeb48dbbb943a8d680f9a56 From The Associated Press (April 7, 2011) “Social Security Stopped Mailing Earning Statements”

ELDER LAW / SOCIAL SECURITY

If yours was among the roughly 50 percent of marriages that ended in divorce, you may want to brush up on the Social Security rules involving spousal and survivor benefits. Why? Because mistakes can be quite costly. The LA Times recently offered a brief primer, highlighting the primary issues that could affect divorced people in their retirement years. The Basics. If you were married for at least 10 years to someone who paid into the Social Security system, you are entitled to a spousal benefit, even if you are divorced from that person. Spousal benefits, if claimed at your full retirement age, usually amount to half of the wage earner’s full benefit (if you claim benefits early, the amount is reduced). If you worked for 10 years and paid into the system, you also may be entitled to benefits based on your own work record. However, you are only entitled to one benefit, you cannot claim both your own and spousal benefits. 60 is the Magic Number. If you remarry before age 60, you lose your ability to claim spousal or survivor benefits based on your former spouse. Multiple Spousal Benefits. If you are single now but were married to more than one person for more than 10 years each, you may be eligible for spousal benefits based on the earnings record of each of those former spouses. However, you still are entitled to only benefit, though you may choose the one that would be most beneficial to you. Survivor Benefits are Best. Remember, survivor benefits are 100% of the working person’s entitlement, as compared to spousal benefits which are only 50%. So, if your former spouse is deceased, claiming survivor benefits may be your best choice. Link: http://www.latimes.com/business/la-fi-perfin-20110306,0,1315052.column From The Los Angeles Times - Business (March 6, 2011) “Divorce can Complicate Social Security Claims”

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