Our daily roundup of retirement news your clients may be thinking about.
Retirees are urged to understand how Social Security works so as not to fall victim to these common misconceptions about the program, according to this article on Kiplinger. For instance, help clients understand how benefits are determined. They are not necessarily capped at $2,600. Rather, they are based on two variables: their highest earnings over 35 years and their age when they file for benefits. The maximum benefit for someone retiring at full retirement age (66 for people born in 1943 through 1954) in 2016 is $2,639 a month. The maximum benefit normally increases each year, but it can fall, too, as it did in 2016 from the 2015 level, according to the article. Also, Social Security is unlikely to go insolvent within the next two decades, and retirees may pay income taxes on up to 85% of their benefits depending on their taxable income.
Providing financial support to cash-strapped adult children at the expense of retirement is not a good idea, according to this article on Forbes. Helping adult children financially could make them dependent on their parents, which would give these children a heavy financial burden later on. Parents should assist their adult children to become independent, and not help and set them up for failure later in life. “Ever see how on an airplane they tell you to put your oxygen mask on and then help your kids fasten theirs? They tell you to do that because, if you can’t breathe, then you’ll probably have a rough time helping someone else get their mask on," says a financial adviser.
Clients should avoid making decisions based on what they think about the upcoming national elections, according to this article on MarketWatch. While data suggests that a strong market performance is correlated with victory of an incumbent party, it does not mean that the election result will cause a long-term positive effect on the markets. After all, after two terms in the White House, voters often will opt for the other party. Moreover, correlation does not equal cause. Plus, there are exceptions along the way. In a nutshell, if clients go big on the contrarian election-year theory, and an exception occurs, which is a distinct possibility, they’ll lose money.
Clients who receive a government pension outside Social Security may not be entitled to survivor benefit because of the government pension offset, according to this article on Los Angeles Times. The GPO is designed to prevent people from getting bigger benefits than other recipients by reducing their survivor benefits by two-thirds of their government pension. Clients will receive no survivor benefit if two-thirds of their pension is bigger than the benefit.
For seniors who have just retired, moving to Medicare from an employer health insurance plan poses as a challenge. Medicare offers many options, some of which are steep. And since there is often not help available in choosing the best options for their given situation, they may not afford the premiums, according to this article on Money. Couples should ensure each of them has coverage and know that Medicare pays 80% of covered health expenses, regardless of the amount of the covered costs. Retirees should plan carefully when to take certain medical procedures, make the most of Medicare's superior free wellness services, and shop around to save on drug costs.
