The Widow or Widower’s Guide to Social Security Benefits

A high credit score helps you in many ways, including by potentially lowering your monthly bills.

The loss of a spouse is devastating, and in that situation, the last thing you want to worry about is money. Unfortunately, as a widow or widower, money is often one of the most important things to think about. And Social Security benefits are usually one of the first—and trickiest—financial resources to navigate. To help you wade through these waters, we’ve put together a comprehensive guide to Social Security survivors benefits.

The Breakdown of Social Security Benefits

If you’re an eligible age and meet other qualifications, Social Security benefits are available to you after your spouse passes away. But it can be tough figuring out if you can receive these benefits and when you should start. Here are some of the main factors that impact how much survivors benefits you’re entitled to:

  • The length of the marriage
  • Your age and your spouse’s age
  • When you want to start receiving benefits

Understanding these factors and the rules to which they apply can help you make informed decisions and maximize your benefits payments.

The Length of the Marriage Matters

In nearly every case, you need to have been married for at least nine months to claim Social Security survivors benefits. However, there are a few exceptions:

  • You share a child. If you were married fewer than nine months but your spouse was the parent of your child, you can claim survivors benefits.
  • It was an accident. Accidental death can waive the nine-month requirement for Social Security benefits.
  • Military service. If your spouse dies in the line of active duty for the military, you are entitled to survivors benefits.

What if you were married more than nine months and later divorced? Surprisingly, you can receive survivors benefits from an ex-spouse if you were married for at least 10 years. In fact, if you were married for at least 10 years to more than one ex-spouse who is now deceased, you can choose the biggest benefit. But if you remarried before the age of 60 and are still married, you cannot receive these benefits.

Also, any amount you do receive may be shared with other family members who are also entitled to survivors benefits.

The Impact of Age

We all know that there are age requirements for collecting Social Security benefits, and those rules remain intact for survivors benefits. Survivors benefits are first available when you turn 60, but you stand to collect more benefits if you wait until full retirement age at 66 (if you were born before 1957) or 67 (if you were born in 1957 or later). Here’s a look at how age affects your Social Security survivors benefits:

  • Receiving benefits at age 60. If you start collecting Social Security benefits at age 60, you will receive only 60% of the full benefit.
  • Receiving benefits at full retirement age. If you can afford to wait until you’re 66 or 67, you can collect 100% of the benefits available.
  • Deferring benefits until age 70. After you reach full retirement age, you can elect to defer your benefits until age 70. This lets you accrue delayed retirement credits, which could increase your benefits payments.
  • Receiving benefits with a disability. If you are disabled, you can start collecting benefits at age 50. But the disability must have started before or within seven years of your spouse’s passing.

If you don’t need Social Security benefits right away to stay financially sound during retirement, consider waiting as long as possible for the most benefits.

The Decision of When to Start Collecting Benefits

Because the benefits payment increases with time, it’s smart to look at your budget and determine if you need to start collecting benefits immediately. Another important thing to note is that you can only collect one Social Security benefit—your spouse’s or your own. But you can switch from one to the other.

If you are still working, or plan to work until full retirement age, consider taking your spouse’s survivors benefits when they are available and then switching to your full benefits when you retire. This can get tricky, though, so it’s important to pay attention to a few financial areas:

  • Watch your paycheck. If you have yet to retire and are working and collecting survivors benefits, pay attention to your annual income. If you earn over a certain level, Social Security will withhold part of your benefits.
  • Keep taxes in mind. You may end up paying taxes on a much larger portion of your benefits if you work while collecting Social Security benefits.
  • Note who was the higher earner. Because the higher earner will have the larger Social Security benefit payout, determine which benefits will ultimately pay you more over the remainder of your life. If you are the higher earner, it’s smart to tap into survivors benefits as soon as possible and make the switch when you’re eligible for your own benefits at full retirement age. If your spouse earned more, think about collecting your benefits (even at a reduced rate), and then switching to survivors benefits when you reach full retirement age.

Sorting through the ins and outs of Social Security survivors benefits isn’t easy, especially after suffering the loss of your spouse. But a solid understanding of what you can receive and how to maximize those benefits can make your transition to single living somewhat easier. Before making any decisions, you should consult an expert—either a Social Security representative or a financial planner you trust. They can guide you through all the regulations and paperwork to make sure you’re taken care of.

Image: sturti

The post The Widow or Widower’s Guide to Social Security Benefits appeared first on Credit.com.

How to Delay Taking Social Security Benefits Until You Absolutely Have To

early_retirement

I recently heard about a man who was retired longer than he worked, retiring at 52 and living well into his 90’s. There’s a life worth living.

And it’s not that far-fetched. Life expectancies continue to inch upward, particularly for those who make it to retirement. For those who reach age 65, life expectancy stretches to 82 for men and 85 for women. For married couples who reach 65 together, the news is even better. Odds are 45% that at least one of the partners will live to 90, giving them a full 25 years of traditional “retirement” time.

How Will They Pay for That?

Reminder: This is a good problem to have — far better than the alternative. It’s important to have a long-lasting plan for the golden years so you can enjoy them as long as possible.

Like everything else that has to do with money, time can be your friend or your enemy. It’s critical to start thinking about life in your 70s, 80s and 90s as soon as possible. Yes, that means doing so in your 50s and 60s, and perhaps even earlier. You likely don’t want to get to your golden years and rack up a lot of credit card debt to pay for the essentials.

Factoring in Social Security

For many, the most crucial variable in this equation revolves around when to start collecting Social Security benefits. The simple answer is to take it as late as possible, which is currently at age 70, though every individual situation is different. The earliest you can make this decision is at age 62, so you can plan accordingly, which begins with giving yourself options by planning years before retirement arrives.

Americans who paid into Social Security can begin receiving benefits as early as age 62 — before the traditional 65-year-old retirement age — but that comes at a price. Younger recipients receive smaller benefits to account for the added years of payout. On the other hand, recipients can chose to postpone benefits until age 70, which results in a “bonus” that lasts the remainder of the person’s life. The difference is dramatic — an extra 8% per year for those who wait past retirement age. An example from the Social Security administration shows that a recipient who takes payments as early as possible and deserves $1,000 per month at retirement would instead receive $750. If that same person waited until 70, they would get a monthly check of $1,320.

If you opt to wait to collect Social Security, you’ll be expected to use your own money, which can come from a combination of private retirement savings and continued income. Because it’s to your benefit to preserve your retirement savings as long as possible, continuing to earn income through your 60’s is an optimal option.

Older Americans in the Workforce

In many ways, things are getting harder for older workers. Studies (like this one) show older workers have a harder time even getting through the door for job interviews as many employers are hiring those from younger generations because they’re less-expensive and have more experience with technology. Plus, when layoffs and buyouts roll around, more expensive (often older employees who have spent many years with the company) are typically targeted.

But there are bright spots in the digital economy that can help older workers keep the money coming in as they work to reach the 70-year-old finish line — particularly in the sharing economy.

Whatever you call it — part-time work, contingent work, gig economy work — some only-in-the-digital age income streams are ideal for older workers who need some income but don’t want to be tied down to a full-time job. Some of these positions are challenging for those who need to support a family, like driving for companies like Uber or selling homemade crafts on sites like Etsy. But these can be ideal roles for folks who are simply looking for supplemental income. For example, Uber announced a partnership with AARP last year, hoping to recruit senior drivers.

What’s more, the sharing economy also creates new ways to earn income from assets you’ve acquired. It’s easier than ever to turn your summer cabin into a part-time vacation rental, for example, thanks to services like Airbnb. One extreme, but potentially lucrative, step is to downsize to a smaller home in a less expensive area while renting out a paid-off home in an pricey neighborhood for a few years. Newer sharing economy services even let people rent out their cars or other personal items.

Many older workers may fail to realize the value of their accumulated knowledge. In the past, some made small consulting agencies and, while that’s still an option, the proliferation of online course tools now make it relatively easy to teach digital classes in everything from cooking to coding that consumers can (and do) pay for. Many folks are learning how to turn their hobbies into small-time entrepreneurial adventures this way. For example, Angela Fehr, a self-taught artist in Vancouver, Canada, offers classes in watercolor painting and they range in price from free to $99.

The key to this is nurturing hobbies, and the entrepreneurial skills needed to monetize them, before staring at a big income hole in your early 60s. Play around with online course software, ask questions and pay attention to other sharing economy developments.

Taken collectively, I call all these revenue-generating opportunities “21st-Century moonlighting.” It’s not for everyone, of course. Plenty of folks are busy enough trying to hang onto their full-time jobs in competitive environments. But mastering the “gig economy” and supplementing a full-time income may make it easier to postpone reliance on Social Security. And maybe even avoiding any boredom that sometimes comes with retirement, too.

Deciding when to start receiving Social Security is a personal and complex subject, made even more complicated when a partner’s benefits are part of the decision. It should be made carefully, possibly even with the advisement of an expert. To start, you can read this article to see if you are financially ready for retirement or use online tools to get an idea of when it makes sense to start receiving benefits before age 70.

In the meantime, you can see how your money habits are affecting your financial goals, like building a good credit score, by viewing your for credit report card for free each month on Credit.com.

More Money-Saving Reads:

Image: monkeybusinessimages

The post How to Delay Taking Social Security Benefits Until You Absolutely Have To appeared first on Credit.com.

What to Do If Your Social Security Check Just Isn’t Enough

happy_older_couple

The U.S. government recently announced there will be no Cost of Living Adjustment (COLA) for Social Security benefits in 2016. The decision, tied to a flat year over year for the Consumer Price Index, could make budgeting difficult for Americans who rely on Social Security as a major source of income.

Fortunately, the Bureau of Labor Statistics also recently released its Consumer Expenditure Survey, which highlights consumers’ average annual spending habits — and, more pointedly, provides some direction for what to do if your Social Security check isn’t covering your bills. According to the survey, housing, transportation and food constitute most Americans’ major expenses. Cutting back in these areas could help you stretch your Social Security or other pension benefits. Here are some tips on how to do so.

1. How to Limit Your Housing Costs

Housing is, on average, our most expensive expenditure, according to the survey. So how can we limit related expenses? You can start by asking yourself “do my current housing costs cover what I want or what I need?” Homeownership is part of the American dream — and paying off your mortgage is a wonderful goal and accomplishment. But property taxes, homeowners association fees and other fixed costs do not go away when the mortgage is paid off, and generally, the larger the home, the greater the cost.

It may be excruciating to think of downsizing, but the advantages, ease of stress and extra money at the end of the month might possibly make it all worth it. Renting may also be a great way for homeowners to lower their expenses, if you decide your current housing costs are putting too much of a strain on your budget.

Current renters may be able to take advantage of the following:

  • Renting may allow for more freedom to downsize and easier relocation.
  • Relocation options may allow for total expense reduction.
  • Rents for lower incomes may be subsidized in certain cases.
  • Renting in age-restricted areas may provide expense reductions.

If you decide to move, you may want to check your credit before searching for a new place. Good credit scores generally entitle consumers to the best terms and conditions on a mortgage and landlords are in the habit of pulling a version of your credit report when you fill out a lease application. (You can check your credit by pulling your credit reports for free each year at AnnualCreditReport.com and viewing your credit scores for free each month on Credit.com.)

2. Trimming Your Transportation Budget

To potentially cut back on transportation costs, you may want to ask, “Do I really need a car?” With the popularity of mass transit, and even new ride-sharing options, owning a car may not be the necessity it once was. If you do need a car, you still may be able to cut the costs associated with it by…

  • Owning what you need, not necessarily what you want. Expensive cars, just like expensive houses, will likely have greater insurance and operating costs.
  • Carrying a higher deductible in order to lower your monthly insurance costs. (Just be sure to review any new policies carefully to be sure you have the coverage you need.)
  • Driving that car forever. If you buy a new car every couple of years, depreciation is your enemy and most likely hurting your pocketbook.
  • Taking care of your car via regular maintenance. Do this and that car may take care of you, allowing for continued use.

3. Reducing Your Food Expenses

According to the 2014 BLS report, around 41% of our total food costs are incurred away from home. That’s a stunning number. Eating out is fun, but rarely a healthy or a cost effective way to spend your monthly income. Staying at home, planning in advance, eating healthy and spending time at family members’ or friends’ houses may be a great way to lower a bulging food budget. We will all go out once in a while, but limiting the high price associated with those visits (along with the frequency) may really add up by the end of the month.

Now you know the average American’s big three expenses. While you may not be able to directly attack each area, with planning and a little focus, you may be able to save enough to help your Social Security or other pension plan last a little longer.

More Money-Saving Reads:

Image: KatarzynaBialasiewicz

The post What to Do If Your Social Security Check Just Isn’t Enough appeared first on Credit.com.