May 7, 2019

Social Security Benefits Stump Workers

A majority of workers do not know a crucial piece of information about their retirement: how much married couples can expect to receive from Social Security.

The program will one day be the most important source of income for millions of Americans. But they showed their lack of understanding of how benefits work in a recent survey by researchers at RAND.

A previous blog covering the same survey reported on workers’ poor knowledge of the survivor benefit for widows. This blog focuses on the other benefit for couples: the spousal benefit.

Social Security works a little differently for a married couple than for a single worker, whose future benefit check will simply be determined by his or her earnings history.

For the highest-earning spouse in a working couple – usually the husband – the size of his monthly check is also based on his past earnings. But his wife’s benefit is complicated. If she didn’t work, the rules entitle her to a spousal benefit equal to half of her retired husband’s benefit. If she did work, her benefit is based on her work history – with an exception. If her benefit is less than half of her husband’s, Social Security increases her monthly check to half of his check.

Only one in three of the people surveyed understood how this works, probably partly because of the complexity.

Most workers also had misconceptions about other aspects of the program. For example, only about one in four knew that a couple must be married for more than a year for the lower-paid person to receive the spousal benefit. If a couple has divorced, the lower-earning ex-spouse gets the spousal benefit only if the marriage lasted more than 10 years. Again, just one in four workers knew this important rule.

Couples of all ages should know the rules about a program they will rely on – no retirement plan is complete without this information. …Learn More

April 25, 2019

Do Couples Save Enough for Two?

Since only about half of all private sector workers currently have access to an employer 401(k) plan, it’s not at all unusual for spouses who are both working to have only one saver in the family.

When that’s the case, is the person who is contributing to the employer retirement plan saving for two?  The answer is definitely not, concludes a new study by the Center for Retirement Research.

The challenge for couples living on two paychecks is that they have to save more money to maintain their current lifestyle after they retire. But households with two earners and only one saver end up saving less than others – only about 5 percent of the couple’s combined incomes, compared with more than 9 percent when both spouses are working and saving, the study found.

Couples who rely on a lone saver need that person to pick up the slack. Employers could help them if they considered the employee’s family situation when setting a 401(k) contribution rate in plans that automatically enroll workers. …Learn More

April 18, 2019

Know the Social Security Survivor Benefit

My divorced aunt did not work while she was raising eight children. After her former husband died, she was pleasantly surprised to learn she could start collecting his Social Security.

She has a lot of company. Nearly two out of three men and women in a new survey by RAND were unaware of this rule: a divorced person who was married for at least 10 years is entitled to the deceased spouses’s survivor benefit. In fact, she would even get the benefit if he remarried.

In the case of couples who were still married when the spouse died, the marriage had to last only nine months for the survivor to get the benefit. Fewer than half of the people surveyed by the RAND researchers were aware of this rule.

The responses were no more impressive for some of the other questions about Social Security’s survivor benefit. This benefit is based on the higher-earning spouse’s work record – typically the husband. Even a wife who used to work and is collecting Social Security based on her work record is eligible to switch to her husband’s benefit after he dies – if his check is larger than hers.

To make the switch in this particular case, the widow must file with the Social Security Administration either online or at a local office. (However, if the wife never worked and is at retirement age, she will automatically start receiving her late-husband’s check.)

Unmarried partners sometimes operate under a misconception too: three out of four think, incorrectly, either that unmarried people can get the survivor benefit, or they don’t know.

One thing to note about this study is that Americans of all ages were surveyed, and it is not surprising that young adults would have little knowledge of program benefits intended for widows.  But age doesn’t seem to bring wisdom: the results were equally dismal in a similar earlier survey of individuals who were at least 50 years old.

April is National Social Security Month. Couples should celebrate by learning more about how Social Security works – it’s critical to a widow’s standard of living. …Learn More

November 15, 2018

Why Couples Retire Together – or Don’t

Married couples don’t necessarily know what the other spouse is thinking about retirement.

This insight came out of a new Fidelity Investments survey that asked some 1,600 people if they knew when their significant other planned to retire. Only 43 percent answered the question correctly. This disconnect reveals just how few couples are talking about retirement, said Fidelity spokesman Ted Mitchell, who worked on the survey.

Fidelity’s survey went out to adults of all ages, so the younger ones no doubt felt they’re too young to be thinking – much less talking – about what their lives will be like decades from now.

But things change as couples age. When retirement comes into sharper focus, it’s natural to start talking through the options – mine, yours, and ours.

One option is to retire around the same time, and prior research has shown that roughly half of older couples do so.

New research takes a more nuanced look at how couples retire and finds a more complicated picture.  Mixed arrangements are common in the pre-retirement years. Perhaps one spouse continues working full-time, even though their partner has retired, or one spouse might shift down to part-time work while the other is either still in a full-time job or has already retired.

Two sentiments are usually in conflict when older workers are trying to decide whether to retire: a longing for more leisure time and a need to bank more in savings, Social Security, and pensions.

Spouses often influence one another’s retirements for a variety of reasons, including their health, their relative ages, and how much each one likes their job. But financial security is usually a major consideration. …Learn More