Will the Pandemic Affect My Social Security?

Kiplinger’s recent article entitled “Social Security Shocker: Pandemic to Reduce Benefits by 9% for Americans Turning 60 in 2020” explains that retirees can mitigate some of the damage, by waiting to claim their benefits. For every year you delay benefits past your full retirement age until age 70, you’ll receive an increased benefit of about 8%.

Eligibility for Social Security benefits requires a senior to have earned no less than 40 “credits.” You can earn up to four credits a year, so it takes 10 years of work to qualify for Social Security benefits. In 2020, you have to earn $1,410 to get one Social Security work credit and $5,640 to get the maximum four credits for the year.

Your benefit is based on the 35 years in which you earned the most amount of money. If you have fewer than 35 years of earnings, each year with no earnings is calculated as a zero. You can increase your benefit by swapping out those zero years, by working longer, even if it’s only part-time. However, don’t worry about a low-earning year replacing a higher-earning year. It won’t happen. The benefit isn’t based on 35 consecutive years of work, it’s based on your highest-earning 35 years. As a result, if you decide to ease into retirement by working part-time, you won’t wreck the amount of your Social Security benefit at all, if you have 35 years of higher earnings. If you earn more money, however, your benefit will be adjusted upward—despite the fact that you’re still working while taking your benefit.

There is a maximum benefit amount you can get. However, it depends on your age when you retire. If you retire at full retirement age this year, the maximum monthly benefit is $3,790.

In the past, a great perk of Social Security benefits was that every year, the government would adjust the benefit for inflation. This is called a cost-of-living adjustment, or “COLA.” It’s an inflation protection to help seniors keep up with rising living expenses during retirement.

The COLA is automatic and is quite valuable because purchasing inflation protection on a private annuity can be expensive.

The COLA is calculated based on changes in a federal consumer price index (CPI). The amount of the COLA depends largely on broad inflation levels determined by the federal government.

For 2021, Kiplinger anticipates that there won’t be a Social Security cost of living adjustment. That is due to the COVID-19 pandemic.

Reference: Kiplinger (July 30, 2020) “Social Security Shocker: Pandemic to Reduce Benefits by 9% for Americans Turning 60 in 2020”

Care from a Distance
Sad senior woman feel lonely thinking or mourning at home

Care from a Distance

Trying to coordinate care from a distance becomes a challenge for many, especially since as many as 80% of caregivers are working. Add COVID-19 into the mix, and the situation becomes even more difficult, reports the article “When your parent is far away and you are trying to care for them” from the Pittsburgh Post-Gazette.

The starting point is to have the person you are caring for give you legal authorization to act on their behalf with a Power of Attorney for financial affairs and a Health Care Directive that gives you authority to receive health information under HIPAA (Health Insurance Portability and Accountability Act). It is HIPAA that addresses the use, disclosure and protection of sensitive patient information.

Next, have a conversation about their finances. Find out where all of their important documents are, including insurance policies (long-term care, health, life, auto, home), Social Security and Medicare cards. You’ll want to know where their tax documents are, which will provide you with information on retirement accounts, bank accounts and investments.

Gather up family documents, including birth, death, and marriage certificates. Make sure your loved one has completed their estate planning, including a last will and testament.

Put all of this information into a binder, so you have access to it easily.

Because you are far from your loved one, you may want to set up a care plan. What kind of care do they have in place right now, and what do you anticipate they may need in the near future? There should also be a contingency plan for emergencies, which seem to occur when they are least expected.

Find a geriatric care manager or a social worker who can do a needs assessment and help coordinate services, including shopping for groceries, medication administration and help with basic activities of daily living, including bathing, toileting, getting in and out of bed, eating and dressing.

If possible, develop a list of neighbors, friends or fellow worshippers who might create a local support system. If you are not able to visit with any degree of frequency, find a way to see your loved ones on a regular basis through video calls. It is impossible to accurately assess a person’s well-being, without being able to see them. In the past, dramatic changes weren’t revealed until family members made a trip. Today, you’ll be able to see your loved one using technology.

You may need to purchase a smartphone or a tablet, but it will be worth the investment. A medical alert system will provide further peace of mind for all concerned. Regular conference calls with caregivers and your loved one will keep everyone in touch.

Care from a distance is difficult, but a well-thought out plan and preparing for all situations will make your loved one safer.

Reference: Pittsburgh Post-Gazette (Sep. 28, 2020) “When your parent is far away and you are trying to care for them”

Make the Most of Your Social Security Benefits

Famous motivational speaker Zig Zigler reportedly said “If you want to earn more, learn more.” That’s true for careers and investments. It is also true for Social Security. The more you know about how Social Security benefits works, the more likely you’ll be able to maximize these benefits, says the article “Social Security tips: 10 ways to get more money in benefits” from USA Today.

  1. Check your Social Security work record for errors. Create an account for yourself at the “My Social Security” page on the Social Security Administration’s website. You’ll be able to see your entire income history. Check it against your tax returns to be sure that the numbers are right. If you see mistakes, call the SSA and have them fixed now.
  2. Work for at least 35 years. The SSA uses a formula to calculate benefits based on 35 years of earnings (adjusted for inflation). If you’re thinking about working for 28 years, your benefits are going to be lower. If you can keep working to reach the 35-year mark, you’ll increase your benefits.
  3. Boost your earnings. Bigger paychecks equal bigger benefits. If it’s too late for a career change, adding a part-time job could boost your lifetime income. You could also just work a few more years—it makes a difference. The annual statement from SSA on the website will show you just how much.
  4. Wait until age 70 to start collecting. For every year after your full retirement age, your benefits grow by about 8%. If you are able to tap other sources of income before you turn 70, you can maximize this benefit.
  5. You can also start collecting benefits at age 62. Your checks will be smaller, but if you have had a job loss and need the money, you are now eligible to take them. There will be many more checks now, than if you waited until age 70. If your health is poor, or your family history does not include longevity, there’s no benefit in waiting.
  6. Understand how spousal benefits work. For non-working spouses, Social Security allows a spouse to collect a benefit based on their spouse’s earnings record – up to one half (50%) of the spouse’s benefits.
  7. Can you delay a divorce? You might be able to collect benefits based on your former spouse’s earnings record, if you meet the requirements. You need to have been married for at least ten years. If it’s been nine years, and if your not-soon-enough ex has significantly higher earnings than you, consider delaying until the ten year mark. Not everyone can do this, but if you can, it could make a big difference.
  8. Keep your income lower, while collecting Social Security. If you plan on working while collecting benefits, understand that some of your benefit dollars will be withheld. For someone who is younger than their Full Retirement Age in 2020, for every $2 earned over $18,240, $1 dollar will be deducted. If you reach Full Retirement Age in 2020, the SSA will deduct $1 for every $3 you earn above $48,500, until the month you do reach full retirement age. Be mindful of the “cost” of your working on your benefits.
  9. Find out if you qualify for survivor or disability benefits. There are Social Security benefits for spouses, ex-spouses, the disabled and survivors. Other programs with benefits include Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).  If your spouse dies after working long enough to qualify for Social Security, the surviving spouse and children under age 17 may also be able to collect survivor benefits.
  10. Think strategically about Social Security. If your spouse has a stronger earnings history than you, they might delay collecting benefits to age 70 to maximize the size of their benefit checks. If they die before you, as a surviving spouse you may collect either their benefit amount or your own—whichever is larger.

Reference: USA Today (July 28, 2020) “Social Security tips: 10 ways to get more money in benefits”

Important Medicare Deadlines

Here are the important dates for Medicare enrollment:

  • You can initially enroll in Medicare during the seven-month period that begins three months before you turn 65.
  • If you continue to work past 65, sign up for Medicare within eight months of leaving the job or group health plan or penalties apply.
  • The six-month Medicare Supplement Insurance enrollment period starts when you’re 65 or older and enrolled in Medicare Part B.
  • You can make changes to your Medicare coverage during the annual open enrollment period, from Oct. 15 to Dec. 7.
  • Medicare Advantage Plan participants can move to another plan from January 1 to March 31 each year.

Yahoo News’ recent article entitled “Medicare Enrollment Deadlines You Shouldn’t Miss” takes a look at when you need to sign up for Medicare and the penalties that can be imposed for late enrollment.

Medicare Parts A and B Deadline. Individuals who are getting Social Security benefits, may be automatically enrolled in Parts A and B, and coverage starts the month they turn 65. However, those who haven’t claimed Social Security must proactively enroll in Medicare. You can first sign up for Medicare Part A hospital insurance and Medicare Part B medical insurance during the seven months that starts three months before the month you turn 65. Your coverage can start as soon as the first day of the month you turn 65, or the first day of the prior month, if your birthday falls on the first of the month. If you fail to enroll in Medicare during the initial enrollment period, you can sign up during the general enrollment period between January 1 and March 31 each year for coverage that will begin July 1. Note that you might be charged a late enrollment penalty when your benefit begins. Monthly Part B premiums increase by 10% for each 12-month period you delay signing up for Medicare, after becoming eligible for benefits.

If you or your spouse are still working after age 65 for an employer that provides group health insurance, you must enroll in Medicare within eight months of leaving the job or the coverage ending to avoid the penalty.

Medicare Part D Deadline. Part D prescription drug coverage has the same initial enrollment period of the seven months around your 65th birthday as Medicare Parts A and B, but the penalty is different. It’s calculated by multiplying 1% of the “national base beneficiary premium” ($32.74 in 2020) by the number of months you didn’t have prescription drug coverage after Medicare eligibility and rounding to the nearest 10 cents. That’s added to the Medicare Part D plan that you choose each year. As the national base beneficiary premium increases, your penalty also goes up.

Medicare Supplement Insurance Plan Deadline. These plans can be used to pay for some of Medicare’s cost-sharing requirements and some services that traditional Medicare doesn’t cover. The enrollment period is different than the other parts of Medicare. It is a six-month period that starts when you’re 65 or older and enrolled in Medicare Part B. During this open enrollment period, private health insurance companies must sell you a Medicare Supplement Insurance plan, regardless of your health conditions. After this enrollment period, insurance companies can use medical underwriting to decide how much to charge for the policy and can even reject you. If you miss the open enrollment period, you’re no longer guaranteed the ability to buy a Medicare Supplement Insurance plan without underwriting, or you could be charged significantly more, if you have any health conditions.

Medicare Open Enrollment Deadline. You can make changes to your Medicare coverage during the annual open enrollment period from October 15 to December 7. During this period, you can move to a new Medicare Part D prescription drug plan, join a Medicare Advantage Plan, or stop a Medicare Advantage Plan and return to original Medicare. Changes take effect on January 1 of the following year.

Medicare Advantage Open Enrollment Deadline. Participants can move to another plan or drop their Medicare Advantage Plan and return to original Medicare, including purchasing a Medicare Part D plan, from January 1 to March 31 each year. You can only make one change each year during this period, and the new plan will begin on the first of the month after your request is received.

Reference: Yahoo News (July 27, 2020) “Medicare Enrollment Deadlines You Shouldn’t Miss”

The Big Eight: Don’t Risk Your Retirement with These Mistakes

During our working lives, we have a cash flow called a “paycheck” that we rely on. A similar cash flow occurs when we retire and start the process of “deaccumulation” or creating income streams from sources that include our retirement funds. However, generating enough income to enjoy a comfortable retirement requires managing that cash flow successfully, says CNBC.com in the article “Here are 8 costly retirement mistakes to avoid.”

Preparing for the risk of a bear market. If markets take a nosedive the year you retire and you stick with your plan to withdraw four percent from your portfolio, your plan is no longer sustainable. Better: have an emergency fund in place, so you don’t have to tap investment accounts until the market recovers.

Investing with inflation in mind. We have been in such a low inflation environment for so long, that many have forgotten how devastating this can be to retirement portfolios. You may want to have some of your money in the market, so you can continue to get rates above any inflation. If inflation runs about 3.5% annually, a moderate portfolio returning 6% or 7% keeps up with inflation, even after withdrawals.

Be ready for longevity. Worries about outliving retirement savings are due to a longer overall life expectancy. There’s a good chance that many people alive today, will make it to 95. One strong tactic is to delay taking Social Security benefits until age 70, to maximize the monthly benefit.

What about interest rates and inadequate returns on safer investments? This is a tricky one, requiring a balance between each person’s comfort zone and the need to grow investments. Current fixed-income returns lag behind historical performance. Some experts recommend that their clients look into high-dividend stocks, as an alternative to bond yields.

Prepare NOT to dump stocks in a temporary downturn. Without strong stomachs and wise counsel, individual investors have a long history of dumping stocks when markets turn down, amplifying losses. We are emotional about our money, which is the worst way to invest. Try working with a financial advisor to remove the emotion from your investments.

Don’t withdraw too much too soon. It looks like a lot of money, doesn’t it? However, even 4% may be too much to take out from your investments and retirement accounts. It all depends upon what other sources of income you have and how markets perform. Be careful, unless going back to work in your seventies is on your bucket list.

Prepare for cognitive decline. This is way harder to conceive of than inflationary risks, but it becomes a real risk as we age. Even a modest level of age-related cognitive impairment, can make managing investments a challenge. Have a discussion with family members, your estate planning attorney and a financial advisor about deciding who will manage your investments, when you are no longer able.

Are you ready for health care costs? If at all possible, wait until 65 to retire, so you will be eligible for Medicare. Even when you have this coverage in place, there may still be considerable expenses that are not covered by Medicare. If you don’t have long-term care insurance, get it as soon as possible.

Contact an Evergreen Park Estate Planning Lawyer for Help

Being prepared for retirement is crucial for your future. At the Law Office of Michael T. Huguelet, P.C. we have an experienced group of attorneys who can assist you with your retirement to avoid making such mistakes. If you are nearing your retirement or trying to make arrangement for your future, contact our Lemont, IL estate planning attorneys at 708-852-0733 for a free consultation.

Reference: CNBC.com (March 5, 2019) “Here are 8 costly retirement mistakes to avoid.”

Figuring Out A Parent’s Financial Life, When They Cannot

Imagine that your perfectly fine, well-aging parent has had a minor stroke and is no longer able to manage their financial or legal affairs. Your parent has been living independently, waiving off offers of help or even having someone come in to clean for years. It seemed as if it would go on that way forever. What happens, asks the Daily Times, when you are confronted with this scenario in the aptly-titled article “Senior Life: What a nightmare! Untangling a loved one’s finances”?

After the health crisis is over, it’s time to get busy. Open the door to the home and start looking. Where’s the will, where are the bank statements and where’s the information about Social Security benefits? When you start making calls or going online, you run into a bigger problem than figuring out where the papers are kept, no one will talk with you. You are not legally authorized, even though you are a direct descendant.

This happens all the time.

Statistically speaking, it is extremely likely that your parent will end up, at some point, in a nursing home or a rehabilitation center for an extended period of time. Most people have no idea what their parent’s financial situation is, where and how they keep their financial and legal records and what they would need to do in an emergency.

It’s not that difficult to fix, but you and your hopefully healthy parent or parents need to start by planning for the future. That means sitting down with an estate planning attorney and making sure to have some key documents, most importantly, a Power of Attorney.

A Power of Attorney (POA) is a legal document that gives you permission to act on another person’s behalf as their agent if they are unable to do so. It must be properly prepared for your state’s laws.  It allows you to pay bills and make decisions on behalf of a loved one, while they are alive. Without it, you’ll need to go to court to be appointed as legal guardian. That takes time and is more expensive, than having a POA created and properly executed.

If you have downloaded a Power of Attorney and are hoping it works, be warned: chances are good it won’t. Many financial institutions insist that the only POA they will accept, are the ones that they issue.

Once you have a POA in place, assuming that your parent is able to sign it, then it’s time to get organized. You’ll need to go through all the important papers, setting up a system so you can see what bills need to be paid, how many bank accounts or investment accounts exist and review her financial status.

Next, it’s time to consolidate. If your parent was a child of the Depression, chances are they have money in many different places. This gave them a sense of security and gives you a headache. Consolidate four different checking accounts into one. The same should be done for any CDs, investment accounts and credit cards. Have her Social Security and any pension checks deposited into one account.

If you need help, and you might, don’t hesitate to ask for it. The stress of organizing decades of a loved one’s home, plus caring for them and managing the winding down of a home can be overwhelming. Our experienced Evergreen Park estate planning attorneys will be able to connect you with a number of resources in your area.  The attorneys at Michael T. Huguelet, P.C. are available to help your family.  May we help your family?

Reference: Daily Times (April 9, 2019) “Senior Life: What a nightmare! Untangling a loved one’s finances”

Are You Retiring in 2019? Here’s What You Need to Know

Estate Planning for Peak Earning YearsThere are more than a few steps you’ll need to complete, before packing up your desk, cubicle or locker and saying goodbye to your work family. Even if your 401(k) and IRA is in order, there are things you need to do during the last few months before retirement, says Next Avenue in the article “Tips to Prepare for Retiring This Spring or Summer.”

There’s detailed planning, organization of documents, and additional financial details that need attending. You may also want to start creating your “bucket list” — a list of things you’ve always wanted to do, but never had the time to do while you were working. Getting all of this in order, will speed your waiting time and prepare you better when the last day of your working life does finally arrive.

Whether you are three months or six months from retirement, here are some tips for your to-do list:

Social Security. Figure out when the best time for you to take Social Security benefits will be. Can you delay it until age 70? That’s when you’ll get the biggest payout. The earlier you start collecting benefits, the smaller your monthly check will be. Take it early, and you are locked into this lower rate.

Health Care. Figuring out how to manage health care costs, is the single biggest worry of retirement for most Americans. An injury that puts you in a nursing care facility can make a huge dent in your retirement funds, even if it’s just for a short while. This is the time of your life, when focusing on your health is most important, even if you’ve been careless in earlier decades. Evaluate your health status and get check-ups with your regular physician and your dentist.

Investments. Check with your HR department about when you’ll need to roll over your 401(k) plan. If you transfer the funds into a low-cost IRA, you may save in fees. Work with your financial advisor to determine what your withdrawal rate will be. You may need to reevaluate some of your retirement goals or consider working part-time during retirement for a few years.

Medicare. If you’re almost 65, you can start enrolling in Medicare now. The government lets you start the process within three months of your 65th birthday. Start this process, so you are covered, once you are not on the company’s health care plan.

Expectations. The first six months to a year of retirement can be both wonderful and terrible. While enjoying freedom, many people find it hard to withdraw money from the same accounts they spent so many years building. What if they don’t have enough for a long life? Take a realistic look at your lifestyle, budget, and spending habits, before you retire to make sure you are financially ready to do so. If you think you might work part-time, look into the positions that are available in your area and what they pay.

Lifestyle. Often, we are so busy planning for the financial side of retirement, we forget to plan for the “soft” side: what will you do in retirement? Will you volunteer with an organization that has meaning for you? Write the novel you’ve started on a dozen times? Spend more time with your grandchildren? Travel? What will make you feel like your time is being well-spent, and what will make you fulfilled?

Don’t forget the legal plan. Retired or not, you need to have a will, power of attorney, and health care power of attorney to protect your family, whether you are preparing for retirement or in the middle of your career. Speak with a New Lenox estate planning attorney to ensure that these important documents are in place.  The Attorneys at Michael T. Huguelet, P.C. are available to help.  May we help you?

Reference: Next Avenue (March 6, 2019) “Tips to Prepare for Retiring This Spring or Summer”

What Happens to Social Security when Your Spouse Dies?

Planning When Divorced or Single AgainMary is right to be concerned. She is worried about what will happen with their Social Security checks, who she needs to notify at their bank, how to obtain death certificates and how complicated it will be for her to obtain widow’s benefits. Many answers are provided in the article “Social Security and You: What to do when a loved one dies” from Tuscon.com.

First, what happens to Social Security monthly benefits? Social Security benefits are always one month behind. The check you receive in March, for example, is the benefit payment for February.

Second, Social Security benefits are not prorated. If you took benefits at age 66 and then turned 66 on September 28, you would get a check for the whole month of September, even though you were only 66 for three days of the month.

If your spouse dies on January 28, you would not be due the proceeds of that January Social Security check, even though he or she was alive for 28 days of the month.

Therefore, when a spouse dies, the monies for that month might have to be returned. The computer-matching systems linking the government agencies and banks may make this unnecessary if the benefits are not issued. Or, if the benefits were issued, the Treasury Department may simply interrupt the payment and return it to the government, before it reaches a bank account.

There may be a twist, depending upon the date of the decedent’s passing. Let’s say that Henry dies on April 3. Because he lived throughout the entire month of March, that means the benefits for March are due, and that is paid in April. Once again, it depends upon the date and it is likely that even if the check is not issued or sent back, it will eventually be reissued. More on that later.

Obtaining death certificates is usually handled by the funeral director or the city, county or state bureaus of vital statistics. You will need more than one original death certificate for use with banks, investments, etc. The Social Security office may or may not need one, as they may receive proof of death from other sources, including the funeral home.

A claim for widow’s or widower’s benefits must be made in person. You can call the Social Security Administrator’s 800 number or contact your local Social Security office to make an appointment. What you need to do, will depend upon the kind of benefits you had received before your spouse died.

If you had only received a spousal benefit as a non-working spouse and you are over full retirement age, then you receive whatever your spouse was receiving at the time of his or her death. If you were getting your own retirement benefits, then you have to file for widow’s benefits. It’s not too complicated, but you’ll need a copy of your marriage certificate.

Widow’s benefits will begin effective on the month of your spouse’s death. If your spouse dies on June 28, then you will be due widow’s benefits for the entire month of June, even if you were only a widow for three days of the month. Following the example above, where the proceeds of a check were withdrawn, those proceeds will be sent to your account. Finally, no matter what type of claim you file, you will also receive a one-time $255 death benefit. If your spouse has recently passed, contact our experienced Hickory Hills, IL lawyers at 708-852-0733 for help.

Reference: Tuscon.com (March 13, 2019) “Social Security and You: What to do when a loved one dies”