I was backup executor on someone’s estate. He had an account in all 3 of our names, not TOD, but a joint account. I can’t remember how much it had in it - maybe 20K, or it may have been 100K. He wanted to make sure “everything was covered” and he “wasn’t a burden” to any of us.
That will only work if that account has survivorship rights. Otherwise, the deceased’s portion, i.e., 33% in your example, still belongs to his estate. (But in th meantime, the other 2/3rds could be spent to pay bills.)
The joint accounts are good if you need to access their money while they are still alive, but maybe hospitalized or otherwise unable to conduct their own business.
The TOD accounts are good if you can wait for the death certificate before accessing the money.
Speaking of which - why does the funeral home provide the death certificate? Isn’t that a county function? It was somehow an issue after MIL died in hospice and her body was transferred immediately to the cremation company. But maybe that’s because of which family member was in charge of things.
Must be a state-by-state thing. In CA, counties issue the official death cert (but that can take up to 6 weeks, so plan accordingly).
You can open up a MySocial Security account on line yourself and see where you stand in terms of social security. You can see your earnings and your projected benefits. The earliest you most likely can get your social security retirement is age 62 and it will be permanently reduced for early commencement if you take it then. Yes, you still have to pay Social security if you are working even as you get it. I am in that situation now. Your social security pension at your regular retirement date (varies by year of birth) may be adjusted by the additional work income.
If you do not take your Social security pension at retirement age, it will be increased by 8% a year until age 70 when it stays the same. If one caa as n hold off till then, it makes sense most of the time to take it at that time, and no later since you get no more actuarial increases for the delay. Your friend appears to be getting the maximum. As pointed out, Medicare premiums come out of the Social Security. They can be hefty if your overall income is over a certain amount.
Start researching social security do you can see how it can play into your future financial picture. It can get a bit complicated if you have a spouse or former spouses and what options you pursue can be more or less advantageous to you.
If you have savings and IRAs, pensions and 401k type plans, might be a good idea to start organizing the info. Should you be putting money into Roth or traditional IRAs if you can? When would be a good time to start withdrawing funds from qualified plans? Some of my clients feel tax rates are as low as they are going to be—only going to go up in 2025 Sgt this tax law runs out, and they are taking out what they can now and taking the tax hit now rather than later. It can depend upon what you expect your income to be when you do retire.
DH will work as long as he can, he says, and will delay his Social Security until age 70. We have been “back dooring” Roth IRAs with nondeductible IRA contributions for a while now. We refinanced our house to the maximum allowable deduction with low interest rates last year, and even with this crazy market and non radical investing we are doing a bit better having the money and paying and deducting the interest. I felt a lot better having that chunk in the bank and in secure investments rather than in the house. No telling when you can get it out of a house. Sold the house just recently, a surprise, just as we were resigned to take it off the market.
I took a seasonal job, and am now feasting off of the unemployment hog this year, an unexpected bonus. I’ll be paid through year end, it appears, though the bonus amount ends soon. I will owe a lot of taxes 2020 and am preparing to do quarterly estimated payments. Because I worked just over 1000 hours, I’m in a Roth plan from work. Also pt away max in HSA. Despite tax ramifications and that it is statistically more beneficial to delay Social security pension till DH takes his since I’d get more as half of his normal retirement amount than from my own earnings, I’m taking it now in a permanently reduced basis. No state tax on those earnings and 15% of the SS is not taxed.
In many states the funeral officiant both notifies SS and takes responsibility for the initial death certificate order. They are still issued by the county, but the funeral home submits the order for you in many cases.
@NHtrang, you don’t get SS benefits based on how much you’ve paid into the system. It’s not like a 401k where there’s a pot of $$ designated with your contributions and earnings.
SS benefits are based on high-35 years of earnings, indexed over the years. The benefit itself has multiple bend points and is geared to give a higher replacement ration of income to folks who make less. In addition, earnings above the Social Security Wage Base ($137,700 in 2020) aren’t included in eligible income for SS calculations.
There is no point in waiting past age 70 to take SS benefits. If you are still working and have income, it will be taken into consideration and your benefit adjust the following year if it increases your benefit. I have friends over 70 who are still working and take SS, and this is what happens for them.
This is a quick-and-dirty explanation. Used to be a pension/401k administrator.
I have met all self-imposed conditions for retirement, and have gone from “3 bad days” to “1 bad day” between me and retirement.
In reality, I will likely wait until at least next spring, but I feel another step closer. (Assuming the stock market doesn’t tank again, which I don’t believe is a safe assumption at this point).
Absolutely spot-on.
“Yes, for simple estates (eg, all stuff goes to kids), ToD and PoD is the way to go for nearly all” - I probably need to understand ToD vs PoD (same as devined beneficiary?) vs joint account (which for is the setup for some of my mother’s accounts… and she is now in hospice). Help or helpful link?
@CountingDown
Thanks for the explanation. I just found down recently from @UCB that there is a cap in SS tax. I never paid attention. Is it me or do you think it is a bit unfair that someone who makes $137,700 a year pays the same net SS tax as someone who makes $1000,000 ?
You don’t receive higher benefits for earning $1mil, so why should you pay SS tax on the extra earnings?
Unless you want to give up the fiction that SS is some sort of earned benefit, and not just a straight transfer of money from workers to retired people.
I hear what you are saying, but if there is no cap, we would have enough money in the national funds to support all retirement age people and we wouldn’t have to worry about running out of money. I mean there is no cap on taxes (cap on the percentage but not the amount earned), and I am sure the money goes to good uses but it isn’t used to directly PAY people to live off of.
And question, do you get SS if you never worked a day in your life ?
Pay-on-death or transfer-on-death means that if/when the account owner dies, the beneficiary gets the account. The beneficiary has no rights to the account while the account owner is alive, unlike in a joint account.
Pay-on-death appears to be more commonly used terminology for bank accounts, while transfer-on-death appears to be more commonly used terminology for other accounts (401k, IRA, brokerage, etc.). Some states also allow vehicle titles or real estate deeds to have transfer-on-death.
https://www.investopedia.com/terms/p/payableondeath.asp
https://www.investopedia.com/terms/t/transferondeath.asp
https://www.nolo.com/legal-encyclopedia/free-books/avoid-probate-book/chapter1-1.html
https://www.nolo.com/legal-encyclopedia/avoid-probate-transfer-on-death-accounts-29544.html
DH is kind of targeting his 40 year work anniversary for retirement, but has also mentioned the “one bad meeting” criteria.
I’m not sure what you mean by this.
Not generally. You must work at least 40 quarters (10 years total) with earnings above a small minimum to be eligible for benefits on your own record. There are other ways such as the spousal benefit where you can get half the amount your spouse gets just for being married.
@MomofJandL, as a federal employee under the FERS retirement system, if I stay til 62/my 40th anniversary (May of 2024), I will get 4% extra in my pension each year, plus an additional percentage for each year I stay, but I don’t plan to stay that long. Sometimes I think I shouldn’t “leave money on the table,” but my family doesn’t seem to be living that long, and I am no longer enjoying working. I can change my mind up until the day I retire, but I hope I don’t turn out to be one of those people who keep saying “one more year…”
My husband’s grandmother never worked outside the home a day in her life. I do not know the history of SS, but, one must remember that when it came about many married women did not work outside the home. So, there would have been no safety net for widows without the spousal provision. I assume that was the thinking?
I believe (please, anyone, correct me if I am mistaken) one can choose the higher benefit after a spouse has died - one’s own earned benefit or the spousal benefit. Though I certainly worked long enough to have my own benefit, once ds was born, I only worked full-time for a couple more years. Thus, half of dh’s benefit would be far greater than mine should he predecease me. I’m sure there are situations where that cuts in the other direction and the wife makes more money over the course of her career. That was likely not the case however many years ago.
There are also provisions (I do not know the criteria) for divorced women to claim a spousal benefit if they were married long enough and do not remarry. I’ve had at least one friend who factored this into deciding whether or not to remarry. She did choose to remarry and forego that future benefit. I’m not sure it was the better choice…
Thank you for your list. I worked for some years as a tax consultant and later as an insurance agent. The question of saving for retirement was frequently asked, but popular answers were difficult to find.
Deferred consumption seems to be a universally unpopular rule. I almost left college when an economics professor raised the issue of deferred compensation while I was still searching for laundromat money and paying for the “personal economics” course.
Years later I stopped at a traffic light behind a big, very old nag of a car which many socially conscious consumers would never park in their yards. In the middle of the rear window a large sticker proclaimed “MIT.” Their money was going elsewhere!
Overruling immediate gratification is the hardest part. Just insuring and registering your $50,000 plus vehicle swallows a good piece of one’s retirement. I offered both products to my customers, but fancy vehicles seemed to win out over retirement accounts.
I would add: 11. Better plan your consumption.
The other key about PoD/ToD is that the account automatically transfers to the beneficiary. A will/trust not needed (much to the chagrin of estate attorneys). Probate for such accounts is avoided in nearly all states. If the account is a taxable brokerage account, benie gets full step up in basis.
However, as ucb notes, the benie has no interest in the account while the owner is alive, so one can’t access the funds without a death cert. (if the funds might be needed to pay bills, for example)