Just Scratching the Surface -Divorce and Social Security

October 11, 2011

For those of you who are divorced, you may have some Social Security eligibility options that you don’t even know about. Everyone’s case is different. But, in this article, I have touched on some of the most general eligibility rules for those of you who are divorced.

Please read the footnotes too. There are lots of potential disqualifying events. 

Can I claim Social Security benefits based on my ex-spouse’s earnings? 

In many cases, if all 5 requirements below are met, a divorced party can qualify as a dependent for Social Security purposes. As a dependent, you may be entitled to 50 percent[1] of your former spouse’s benefits. 

So,  if your former spouse has reached full retirement age and he/she is still alive, to qualify for one-half of your ex-spouse’s Social Security benefits, all of the following conditions must be met: 

  1. Your ex-spouse is now entitled to receive Social Security retirement or disability benefits
  2. You and your ex-spouse had been married for at least 10 years before the divorce became final
  3. You are not currently married
  4. You are age 62 [2]or older
  5. You aren’t entitled to collect a retirement or disability benefit based on a PIA[3] that equals (or exceeds) one-half of your ex-spouse’s PIA 

Example: Assume John has retired and collects $1000 per month in Social Security benefits. If he was married to Jean for at least 10 years before he divorces her, Jean can collect $500/month (one-half of John’s benefit) when she reaches age 65. Note that Jean will have the option to take the Social Security benefits she earned in her own name. Of course, she’ll choose the higher figure. 

What if one or both of us has remarried?  

If your ex-spouse gets remarried and you don’t, your Social Security entitlement will be unaffected. If your ex-spouse is married to a second spouse for at least 10 years and then they get a divorce, you and that second spouse will each be entitled to collect an amount equal to one-half of the former spouse’s benefits (assuming that you each meet the requirements set forth above).

If you’re the one who remarries, you would then look to your current spouse’s PIA in computing your dependent Social Security benefit. However, if you worked for a sufficient period of time, you may be entitled to a larger benefit amount computed based on your own earnings record.[4] 

I know that many of you may think that understanding Social Security eligibility is easy. But, if the number of footnotes for this short article is any clue, you’ve already guessed that determining Social Security eligibility is neither easy nor straightforward. There are many qualifying events and specific guidelines that will be used to determine eligibility including: the age of recipients,  the number of  years you were married, number of years you’ve been divorced, if there are children, the ages of the children, if the ‘wage earner’ is alive or deceased etc. 

So, always check directly with the Social Security Administration to see what benefits you may be entitled to. And, take the time to understand the advantages and disadvantages (penalties) of each option that you may have.

 Jane Nowak is a CERTIFIED FINANCIAL PLANNER™ specializing in , Women’s Retirement,  Financial Planning for Women and AT&T Retirement Plans. Located in the Smyrna, Marietta, Vinings area of Atlanta, GA, Jane’s goal is to educate and help her clients to take control of their daily finances so they can fully fund their retirement dreams and needs. Jane has recently been quoted in articles or published  on-line at the: NASDAQ, Yahoo Finance, Womenetics.com, Smart Money Chicks, Fox Business News, CreditCards.com, U.S. News and World Report and Financial Planning Association (FPA) websites. She can also be found on Facebook and on Twitter as @MoneyGal2020.

 Securities offered through Triad Advisors, Inc. Member, FINRA/SIPC

 

 
 

[1] Note: That this entitlement doesn’t reduce your ex-spouse’s benefits by one-half; rather, this merely establishes the amount of money you may collect. For basic information about the Social Security program and for detailed treatment of Social Security rules, see Social Security.

[2] Note: If you’re age 62 or older and you’ve been divorced for at least two years, you can receive Social Security benefits immediately (based on your former spouse’s earnings) regardless of whether that spouse has chosen to retire or has submitted an application for Social Security benefits. This, of course, is assuming that the other four requirements listed above have been satisfied. However, if you choose to receive benefits at age 62 instead of your normal retirement age, the benefit that you would have received at your normal retirement age will be reduced by at least 25 percent (assuming you don’t have a dependent child who’s entitled to benefits on the deceased spouse’s Social Security record). In other words, if you choose to receive reduced benefits at age 62, you will not be entitled to collect full benefits when you reach your full retirement age.  Jane’s comment: Be aware of the penalty!

[3] The “primary insurance amount” (PIA) is the benefit (before rounding down to next lower whole dollar) a person would receive if he/she elects to begin receiving retirement benefits at his/her normal retirement age. At this age, the benefit is neither reduced for early retirement nor increased for delayed retirement.

[4] Portions of this text were excerpted from material provided by Forfield Advisor


Why is Financial Planning Important for You?

October 6, 2011

October is the time to add some  Financial Planning to your life! The Georgia Chapter of the Financial Planning Association as well as FPA Chapters across the nation have named October 3rd through the 9th as Financial Planning week.

So Why all the Hubbub around Financial Planning?

There are many studies[i] that have been done over the last several years about Americans who have a financial plan and those who don’t. And as self-serving as it many sound, those Americans surveyed who have a financial plan and work with financial planners have many common characteristics. Americans who work with a financial planner:

  • Feel more confident about their financial futures
  • Have a clear financial direction
  • Are more likely to know how much they need to save for retirement
  • Feel ready to deal with market ups and down
  • Are more optimistic about their financial futures
  • Are able to save more than average

Having been a financial planning client for many years before I decided to make Financial Planning my encore career, I can honestly say that I enjoyed many of the above advantages. A consistent relationship with a financial planner did give me confidence, peace of mind and an annual review of my financial situation and investment direction.

Many Americans Say: It’s All in Their Head

Tongue in cheek, I’m talking about American’s financial plans. A recent survey sponsored by the CFP® Board showed that, 86% of the survey respondents agreed with the idea that everyone should have a financial plan.  And, 79% said they have a plan in place. However, less than half of the respondents have a formal plan in place––46% said they just have a plan in their head, and 11% just have notes and ideas.[ii]

Folks,  unless you have already met your financial goals,  having ideas in your head about your financial plan, just won’t cut it. Many of the formal written plans that I do for middle-income clients have more than 10 pages of information and two pages of recommendations. How can anyone keep all that detailed information in their head?

After having said that having a formal financial plan is important,  I think the survey respondents were simply trying to save face. It is clear to me that they really have no financial plan.  And, if you haven’t heard me say this before, ’If you fail to plan, you plan to fail.’

I know most folks are just plain overwhelmed by just the thought of doing a financial plan. But, I do urge you to give yourself the gift of a financial plan and a long-term relationship with a trusted financial advisor. That way you can work on reaching your financial dreams and goals year over year, one step at a time.

How do I choose a Financial Planner?

Here are two  sources that I trust will give you good advice on what questions to ask, what to consider and how to choose a financial planner.

Choosing a Financial Planner – FPA.net

CPF Board -How to Choose a Planner

Celebrating  Your Very  Own Financial Planning Month

Take at least one step forward with your own financial planning by doing one or more of the activities below taken from The FPA of Georgia’s article titled 20 Ways to Celebrate Financial Planning Week [iii]:

  • Balance your checkbook
  • Start a savings account for a child, vacation or a gift for yourself
  • Help teach your children how to save and spend wisely
  • Get your estate in order: Create or revise your will and other estate-planning documents
  • Call your financial planner and share your appreciation for their service
  • Pay off a credit card
  • Establish an emergency fund
  • Evaluate your employee benefits and begin planning for open enrollment
  • Develop your holiday spending budget
  • Plan for year-end tax strategies
  • Purchase a session with a financial planner for a relative, friend or colleague
  • Give a relative, friend or colleague a subscription to a personal finance magazine
  • Invite a financial planner to speak at your workplace
  • Review your insurance coverage
  • Write down your financial goals and revisit them periodically
  • Start using personal finance software to help you better understand your money
  • Look up three financial terms that have baffled you and resolve to understand them
  • Talk to a relative about their plans for long-term care
  • Talk to your relatives about your plans for long-term care

If you have thought about working with a financial planner, now is always the best time to move forward.  And, begin today by completing one or more of the suggested ways for you to celebrate Financial Planning week.

As always I welcome your comments and suggestions for future articles.

 Jane Nowak  is a CERTIFIED FINANCIAL PLANNER™ specializes in AT&T Retirement Plans, Women’s Retirement and Financial Planning for Women. Located in the Smyrna, Marietta, Vinings area of Atlanta, GA, Jane’s goal is to educate and empower her clients to take control of their daily finances so they can fully fund their retirement dreams and needs. Jane has recently had articles quoted and published on-line at the NASDAQ, Yahoo Finance, Womenetics.com, Smart Money Chicks, Fox Business News, CreditCards.com, U.S. News and World Report and Financial Planning Association (FPA) websites.

Securities offered through Triad Advisors, Inc. Member, FINRA/SIPC

                                                                                                                                                 


[i] Surveys by ING and Ameriprise Financial

[ii] The findings from the survey of 1,011 adults, conducted earlier this month by Certified Financial Planner Board of Standards Inc. in tandem with KRC Research

[iii] FPA of Georgia  20 Ways to Celebrate Financial Planning Week http://www.fpanet.org/WhatisFinancialPlanning/FinancialPlanningWeek


Read:#Boomer Women Focus More on #Retire

September 29, 2011

Read:#Boomer Women Focus More on #Retirement Finances than Health @RRMagazine http://ow.ly/6C69O I’m not convinced that this is true.


Social Security Pays a Lifetime Bonus -If You Delay Benefits

September 29, 2011

The Very Wonderful Magical Math of a Delayed Retirement   

Retirement credit? Good heavens! I call it a bonus. Do you know how much of a bonus that you get if you delay receiving Social Security past your normal retirement date? 

Boring Stuff AKA Fine Print about the Credit for Delayed Retirement  

Born in 1943 or after? Eligible for Social Security benefits? For every month that you delay receiving Social Security benefits past your normal retirement age you will increase your retirement paycheck by .00667 =2/3 of 1% per month! 

Why am I so excited? That itsy bitsy .00667 per month benefit doesn’t sound like much. But, the .00667 increase per month equals 8% per year!! And, you can delay taking Social Security retirement benefits up to the maximum age of 70. 

Note that because the normal retirement age will be increasing to age 67, eventually, retirees will only be able to receive a delayed retirement credit for three years instead of four or five.  

Translation of Your Social Security Delayed Retirement Math

 Chart data is for example only. The Full Monthly Retirement benefit shown may or may not show your actual benefit! Check with SSA.gov for more information. 

Actual Retire-ment Age Social Security Normal Retire-ment Age Full Monthly Retire-ment Benefit at age 66/67 Actual Benefit Amount at age 70 Dollar Amount per Mo. Difference % Amount per Mo. Differ-ence Annual Dollar Differ-ence for life
66[1] 70 $1200 $1584 +$384 +32% +$4608
672 70 $1200 $1488 +$288 +24% +$3456

 [1] At age 70 with a retirement age of 66, your credit is an increase of your monthly benefit by 32%. (That is: .00667 x 48 months for ages 66-70. You increase every dollar you earn by waiting until retirement age 70, you get $1.32 cents. So, in dollar terms, what an annual salary of $14,400 is increased to $19,008 per year, for life. 

 [2]At age 70 with a retirement age of 67, your credit is an increase of your monthly benefit by 24%.(That is: .00667 x 36 months for ages 67-70. You increase every dollar you earn by waiting until retirement age 70, you get $1.24 cents. So, in dollar terms, what an annual salary of $14,400 is increased to $17,856 per year, for life. 

Jane Nowak  is a CERTIFIED FINANCIAL PLANNER™ specializes in AT&T Retirement Plans, Women’s Retirement and Financial Planning for Women. Located in the Smyrna, Marietta, Vinings area of Atlanta, GA, Jane’s goal is to educate and empower her clients to take control of their daily finances so they can fully fund their retirement dreams and needs. Jane has recently had articles quoted and published on-line at the NASDAQ, Yahoo Finance, Womenetics.com, Smart Money Chicks, Fox Business News, CreditCards.com, U.S. News and World Report and Financial Planning Association (FPA) websites.

Securities offered through Triad Advisors, Inc. Member, FINRA/SIPC

    

 

 

 


Social Security – The Truth About the Early Retirement Penalty

September 27, 2011

How many times have you heard that it’s better to wait before taking your Social Security? Well, if you are eligible for Social Security, in good health and don’t need the money to live, I do recommend that you wait until your full retirement age or later before drawing Social Security.

Part I The Not So Magical Math of an Early Retirement 

Hint: It’s called a penalty for a reason.

 Here it is in black and white. Its copied right from the Social Security documentation fine print and presented here for your reading pleasure. This information is also really boring stuff! First I’m going to let you read it, then I’m going to translate it into the not so magical math of the financial cost of an early Social Security retirement. 

Boring Stuff AKA Not so Fine Print about the Penalty for Early Retirement  

The minimum age at which you can retire and receive Social Security retirement benefits is now 62. If you retire at age 62, you will be eligible for reduced retirement benefits based on a percentage of your primary insurance amount (PIA) entitlement, if you are fully insured. Your retirement benefit will be reduced by 5/9ths of 1 percent (or.55556 percent) for every month between your retirement date and normal retirement age, up to 36 months, then by 5/12ths of 1 percent thereafter. 

Translation of Your Social Security Early Retirement Math 

If you qualify for Social Security benefits, you will pay a penalty forever once you begin to take your Social Security benefits early. There are no ‘do-overs’. –The ‘pay back’ loop hole has been closed. 

The chart below breaks down the math and penalties for early retirement for Social Security. Read ‘em and weep… 

Chart data is for example only. The Full Monthly Retirement benefit shown may or may not show your actual benefit! Check with SSA.gov for more information. 

Actual Retire-ment Age Social Security Normal Retire-ment Age Full Mo. Retire-ment Benefit Actual Benefit Amount at age 62 Dollar Amount per Mo. Differ-ence % Amount per Mo. Differ-ence Annual Dollar Differ-encefor life
62 66 $1200 $900 -$300 -25% $3600
62 67 $1200 $840 -$360 -30% $4320

  [1] At age 62 with a retirement age of 66, your penalty is a permanent reduction of your monthly benefit by 25%. (That is: .55556 x 36 months for ages 62-65 and .41667 x 12 for the months from ages 65 to 66). For every dollar you would earn by waiting until full retirement age at 66, you get .75 cents. So, in dollar terms, what would have been an annual salary of $14,400 is reduced to $10,800 per year, for life.

[2] At age 62 with a retirement age of 67, your penalty is a permanent reduction of your monthly benefit by 30%. (That is: .55556 x 36 months for ages 62-65 and .41667 x 24 for the months from ages 65 to 67). For every dollar you would earn by waiting until full retirement age at 67, you get .70 cents. So, in dollar terms, what would have been an annual salary of $14,400 is reduced to $10,080 per year, for life. 

Jane Nowak is a CERTIFIED FINANCIAL PLANNER™ specializes in AT&T Retirement Plans, Women’s Retirement and Financial Planning for Women. Located in the Smyrna, Marietta, Vinings area of Atlanta, GA, Jane’s goal is to educate and empower her clients to take control of their daily finances so they can fully fund their retirement dreams and needs. Jane has recently had articles quoted and published on-line at the NASDAQ, Yahoo Finance, Womenetics.com, Smart Money Chicks, Fox Business News, CreditCards.com, U.S. News and World Report and Financial Planning Association (FPA) websites.

Securities offered through Triad Advisors, Inc. Member, FINRA/SIPC

       


Paying for your kids’ college vs. your

September 12, 2011

Paying for your kids’ college vs. your own retirement @USAToday
http://ow.ly/6khq1 NEVER use #401K or #IRA to pay for college for your kids


Beware! Financial Pitfalls of Living Together

July 12, 2011

There are many ways to describe an unmarried committed relationship. Some of the ones that I’ve heard over the years are: ‘living in sin’, cohabitating, shacking up, domestic partnership, civil union and living together. In fact the US census bureau has recently come out with new data that shows that the number of couples living together has recently risen by 13% nationwide[1] . Southern states are leading the way with the largest percentage increase in cohabitating couples from 2009-2010.

I don’t know if this change is driven by the current economy, unemployment, baby boomer children who have seen what divorce can do to a family and won’t marry, commitment phobia or just a willingness to report cohabitation when surveyed by a government agency. All moral judgment and any speculation as to the reasons for increased in cohabitation aside, living together presents some really serious financial challenges that many of us in an unmarried union may simply be taking for granted.

If you are living with someone in a committed relationship, did you know that?

  • Social Security provides no spousal benefits to an unmarried partner
  • Health care benefits paid for by an unmarried partner are taxable income to the recipient
  • There is no divorce court for unmarried couples
  • If unmarried, your property does not pass to your partner like it would if you were married
  • There are no uniform legal guidelines for dividing your shared property if your relationship ends

In fact,  whether we are talking about a same-sex couple or an opposite-sex couple in states where cohabitating unions are not recognized or governed by law[2], several aspects of your  financial lives should be carefully considered to avoid common pitfalls. Financial areas that unmarried couples need to pay particular attention to are:

  • Insurance planning
  • Naming beneficiaries including: 401ks, IRAs, SEPs, insurance policies, annuities etc.
  • Titling of financial/bank accounts and property
  • Health Insurance
  • End of life planning with powers of attorney, health care powers of attorney, trusts and insurance

As more adult couples choose to cohabitate, in the absence of the protections given by law to married couples, unmarried couples should  meet with financial and legal professionals who understand how to best provide for unmarried partners financial and legal needs.

 Remember that: privileges given to married couples do not necessarily apply to couples in non-legally recognized relationships.


 [1]Survey data from January 2009 to July 2010 US Census Bureau and ACS (American Community Survey)Working Paper on the Change in Cohabiting Couples from 2009 to 2010.

[2] Currently the states of New York, Vermont, New Hampshire, Connecticut, Massachusetts, Iowa and the District of Colombia allow same-sex marriage. Seven additional states allow for domestic partnerships and civil unions. http://www.stateline.org/live/details/story?contentId=347390

About Jane Nowak, CFP® – MoneyGal2020

Jane Nowak, CFP® is a Financial Planner who specializes on AT&T retirement and benefit plans and on Women’s Retirement and Financial Planning for Women. Located in NW Atlanta suburbs Jane’s goal is to educate and empower her clients to take control of their daily finances so they can fully fund their retirement dreams and needs. Jane has recently had articles published or has been quoted in articles published online at  NASDAQ, Womenetics.com, Fox Business News, Smart Money Chicks, CreditCards.com and Financial Planning Association websites.

Securities offered through Triad Advisors, Inc. Member, FINRA/SIPC


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