How to Claim Social Security Survivor Benefits

The Social Security Administration sends survivor benefits to about 6 million Americans every month, directed to widows, widowers, and children who have experienced the loss of someone who has paid into the social security program. Read on to find out who is eligible to receive survivor benefits and how to collect them.

Who is Eligible to Receive Survivor Benefits?

If you were married to your spouse for at least nine months before their death, you are eligible for social security survivor benefits. (The one exception to this length-of-marriage stipulation is if you are caring for a child of the deceased who is under 16 years old). Children of the deceased who are under 18 years old may also receive survivor benefits, as can disabled children under the age of 22. Finally, parents, stepparents, or adoptive parents who are at least age 62 and were dependent upon the deceased could potentially qualify for survivor benefits.

When Can You Begin Social Security Survivor Benefits?

Surviving spouses can begin collecting survivor benefits as early as age 60, but this will result in only about 70% of the amount the survivor could get if they wait until their survivor full retirement age, which is 66 for people born between 1945-1956 and gradually increases to age 67 for those born in 1962 or later. There are some exceptions to this as well: if you are disabled, you may begin collecting survivor benefits at age 50; any surviving spouse can collect a one-time death benefit payment of $255 at any age; and as noted above, survivors who are caring for a child of the deceased who is under age 16 can collect at any age.

How to Claim Social Security Widow and Widower Benefits

First, the death needs to be reported, which is a task that most funeral homes include as part of their service as long as the social security number of the deceased is provided. Documents needed to apply for Social Security survivor benefits include:

  • Proof of death for the deceased in the form of a death certificate
  • Social Security number of the deceased
  • Social Security numbers of the survivor and any dependent children
  • Your birth certificate
  • Your marriage certificate
  • Most current W-2 forms of the deceased
  • Bank information for direct deposit

Once everything is submitted, you’ll be notified of your eligibility to receive survivor benefits.

How Much Will You Receive?

The amount you receive is determined by the deceased’s earnings and whether or not the deceased was collecting benefits (either full or reduced) at the time of death. The basic breakdown looks like this:

  • For couples who hadn’t started receiving benefits: it’s recommended for the highest earner of the two to wait until age 70 to begin Social Security benefits. This generates a larger monthly benefit amount that becomes the survivor benefit if and when the first spouse passes away.
  • If both spouses had already started claiming: the higher benefit amount becomes the survivor benefit while the lesser of the two benefit amounts will stop.
  • If the deceased spouse had already begun benefits, but the survivor had not:

The surviving spouse will need to decide when they will claim survivor benefits in a way that is likely to give them more lifetime income.

In addition to whether or not either spouse was already receiving Social Security benefits at the time of death, the actual dollar amount a survivor receives will depend on how much money the deceased spouse paid into Social Security over their lifetime.

How to Maximize a 529 Plan Amidst Increasing College Costs

Enrolling in a 529 plan is the first step toward conscious planning for your child’s college education, but don’t stop there. With college costs rising steadily — over 168 percent over the last 20 years, according to U.S. News — it’s important to maximize the value of your plan to ensure you reach your college savings goals.

First, it’s important to know the specifics of 529 plans. For instance, there are two different types of these state-sponsored plans available:

  • Probably the most well-known, the college savings plan allows your money to be invested in a variety of ways, such as mutual funds and the like, and it will compound interest over time. The account will go up or down in value based on the performance of the investment options.
  • A pre-paid tuition plan allows savers to purchase units on a credit-based system to put toward tuition and fees for campus living, excluding secondary expenses such as room and board. Because prepaid plans allow you to lock in current tuition prices, if budgeting is a priority, this plan might be the best fit. Just be sure to check which colleges and universities participate in the plan because not all do.

Start early

Because 529 plans compound tax-free over time, starting early gives you an advantage. The longer the money is in the account, the more time it has to grow.

Take Advantage of Automatic Contributions

Automatic contributions to 529 plans can commonly be withdrawn from a linked checking or savings account. This makes it easier to stay on track to reach your goal. If financial situations change, account holders can adjust this setting in their account and continue to make contributions when it’s practical.

Be Mindful of Rules and Fees

Like IRAs, you make yourself vulnerable to penalty fees if you withdraw earnings from a 529 plan too soon, like withdrawing funds before the beneficiary’s tuition bill is due, which could incur a 10% penalty fee. Likewise, withdrawing more than allotted for qualifying expenses that year will prompt a fee. Though non-qualifying expenses, like medical bills, will provoke a penalty fee, there are some exceptions to this rule, such as if the beneficiary receives a scholarship or another type of educational assistance.

Both prepaid and college savings plans typically include enrollment and administrative fees when you withdrawal funds, but college savings plans may also add an assessment management fee.

Cut the Middle Man—You

An effective way to use your 529 funds to ensure that you’re not taking out more than your expenses, and thereby causing a tax liability, is to have the plan pay the costs directly to the school with direct payment.

Know How Your State Operates

Individual states make their own rules for 529 plans, so in whichever state you set up your 529 plan, it’s important to understand that state’s benefits, drawbacks, rules, and fees. State income tax deductions will also vary by state.

Withdraw from the Correct Fund

If you have more than one 529 plan, be sure you’re not just randomly withdrawing from any of them, or simply withdrawing from the account with the highest balance. Gauge each plan’s growth potential to determine which one has the best investment growth rate, and tap into those savings to receive the best tax breaks.

Involve Extended Family

Relatives have the ability to contribute to or open a 529 plan to help alleviate the burden for parents and students, and the contributor is eligible to take a deduction as long as it’s offered by that state.

Knowing the ins and outs of a 529 plan can be complex, but the simplest way to maximize your plan is to start early, allowing the funds to accumulate over time.

How to Estimate Retirement Income Needs

Depending on where you are in life, trying to anticipate your financial needs in retirement and determining how exactly to get to that point could feel like a daunting task, or even a task that doesn’t need tackling yet. In fact, according to a study completed by The Alliance for Lifetime Income, only 28% of non-retired Americans have attempted to estimate their retirement income. Not as intimidating as it sounds, read on to learn how to estimate those needs.

Start with Your Current Income

If you’re living within your means and not depending on credit cards to maintain your lifestyle, using your paycheck as a benchmark is a sufficient starting point. This, of course, excludes contributions to a traditional 401(k) account as well as health insurance premiums that are deducted from your gross pay. A common and simple approach, then, is to set your desired annual retirement income at 60% to 90% of your current income. However, it doesn’t take a financial expert to note potential flaws with this approach. What if, for example, you plan to travel extensively during retirement? Planning for 60% to 90% of your current income might not be enough to fulfill your jet setting goals.

Forecast Retirement Expenses

Your annual retirement income should be more than enough to meet your daily living expenses. Keep in mind that the cost of living will increase over time, and insurance and health care could fluctuate. Having said that, some common retirement expenses to estimate include:

  • Food and clothing
  • Housing (mortgage, homeowners insurance, rent, property updates, repairs, etc.)
  • Utilities
  • Transportation (car payments, insurance, maintenance, gas, repairs, public transportation)
  • Insurance (medical, dental, life, etc.)
  • Health care costs not covered by insurance (deductibles, copayments, etc.)
  • Taxes
  • Debts and loans
  • Recreation such as travel, hobbies, and dining out

What to Do with Your Projected Retirement Income Needs?

A standard rule of thumb when talking about estimating retirement income needs is to have 25 times your anticipated annual expenses saved up by the time you retire. This is assuming you’re planning for a 30-year retirement. Theoretically, you could then withdraw 3% to 4% of your nest egg each year.

If you’re lacking additional sources of protected lifetime income, such as pensions or annuities, you may need to tap into savings in order to bridge the gap between social security checks and what you’ll need to live on. You could also buy a simple income annuity to cover part of that funding gap. These payments continue for life, thereby removing some of the guesswork of estimating retirement income needs and providing peace of mind.

The Best Apps and Platforms for Controlling Business Expenses

As a small business owner, the more you can stay organized, improve daily operations, control business expenses, and generally make life as an entrepreneur run a little more smoothly, the more proficient and prolific your business will become. Below are some top-rated apps and programs available to help you manage your business’s financial situation.

Mint

Though it’s intended mainly for individual users, this financial tracking app is effective for businesses too. Aside from tracking bills and cash flow, Mint also has Quicken MyBusiness, a tool for small businesses that helps categorize expenses, and gives you up-front information for tax filing.

QuickBooks

With the ability to connect to your bank account, PayPal, Square, credit cards, and more, you can use QuickBooks to track sales and expenses, view financial statements, pay employees and vendors, track unpaid invoices, maximize tax deductions, and more. With QuickBooks Online, you can access QuickBooks on both iOS and Android phones and tablets.

FreshBooks

For businesses and freelancers alike, cloud-based FreshBooks helps you create personalized invoices, with an option to automatically bill clients for recurring invoices, and generate customizable business reports, such as profit and loss statements. You can also automate tasks like organizing expenses and receipts, tracking your time, and following up with clients.

Wave

Created for businesses with nine or fewer employees, Wave is an accounting software platform that has the ability to track sales and expenses; manage invoices, customer payments, and payroll; scan receipts; and generate accounting reports. With Wave’s free apps for iOS and Android, you can send invoices on the go, and get notified when an invoice is viewed, becomes due, or gets paid. Also available through the platform is a free personal finance software to help small-business owners manage their finances in one place.

Truebill

Once you connect your accounts to the Truebill app, it will generate a report of where your money is going, categorizing and charting subscriptions and expenses. An added bonus with Truebill is a feature that compares your bills and subscriptions to average service levels, and with your initiation, will call providers and negotiate on your behalf.

Xero

Intended for small and mid-sized businesses, this accounting app (accessible by both desktop and mobile platforms) can handle payments and expenses, asset management, bank account reconciliation, invoicing and purchase orders, sales tax calculations, and multi-currency accounting.

PlanGuru

If you’re looking for a forecasting program to help with strategic planning and analysis, PlanGuru might be a good fit. It’s pricey, with business plans starting at $99 per month, but with an analytics dashboard, Excel add-on, a budget and forecasting platform, and training, it might be worth the cost to keep business spending in check.

Expensify

This simple expense tracker uses multiple platforms to keep tabs on expenses and mileage by reading and importing expenses from linked bank accounts and credit cards. And with the ability to scan and upload receipts, expenses can easily be submitted to employers.

InDinero

This bookkeeping service halts the need to invest in big bookkeepers and implements tax services for small businesses. It also helps with forecasting by syncing with bank accounts and credit cards to predict future cash flow determined by current trends and previous expenses.

How Your Small Business Could Be Wasting Money

Most small businesses have limited financial resources, so managing funds wisely and intentionally is crucial to the success of the business. Below are ways in which your small business may be throwing away money that could be needed elsewhere.

Having Overheads that Exceed Profit

It might be common sense, but if you’re not making enough profit to cover your expenses, trouble is on the horizon. Even entrepreneurs can be financially-challenged, so it might be worth it to enlist the help of an accounting professional. Additionally, you should identify the most profitable aspects of your business as well as the ones that are draining resources, and make adjustments however needed.

Staffing Issues

Consider whether your full-time staff is absolutely needed. Could some positions be just as effective in part-time, seasonal, or freelance roles? Too, make sure you’re tapping into your employees’ full potentials. Get to know their interests and individual areas of expertise in order to increase productivity, propel your business forward, and offer new ways to motivate employees to take a vested interest in the success of your business.

Advertising and Marketing Expenses

As a small business owner, you likely don’t have money to waste on untargeted marketing or costly advertising campaigns. Your best bet is probably content marketing, a.k.a. blogging on your website. Brush up on SEO – or tap into the unidentified skills of your employees – to make sure your posts are keyword-optimized and pop up in search engines. Not a writer? Again, tap into the skillset of your employees, or hire a freelance writer. Lastly, think about finding someone to manage your company’s social media accounts and Google ad campaigns.

Trade Shows and Conferences

Though they’re a great way to network while promoting your products or services, they’re often expensive. When funds are tight it’s wise to be choosy about which ones you attend. If one or two specific trade shows or conferences have proven to produce sales and benefit business, just concentrate on having a presence at those venues and forgo the ones that might not be worth the cost.

The Latest Technology

In most instances you really don’t need the latest and greatest that technology has to offer. For example, if you buy a sophisticated software program that requires outsourced labor at a significant cost just to maintain simple records, you might want to rethink whether such a costly program is worth it. Cloud-based services are available to small businesses at low to no cost.

Weak Expense Tracking

If your love as an entrepreneur is building new products, or networking and finding new clients, tracking expenses is likely something that falls on the back burner. Finding a detail-oriented and trustworthy employee to handle this task will benefit your company’s bottom line – and free you up to focus on your strengths. And on your employees’ end, if they know someone is keeping tabs on their spending, they’re likely to be more frugal with company expenses.

Credit Cards and Insurance

Routinely keeping credit card balances in check might seem like a menial housekeeping task, but with interest rates almost always greater than 20 percent, failing to pay your credit cards in full each month is a costly mistake for a small business. Likewise, be sure you’re getting the lowest possible insurance rate for your company to avoid excessive costs. You might also benefit from an independent insurance agent who can go to bat for you when you’re hit with a claim.

How the SECURE Act Could Affect Your Retirement

The House of Representatives recently voted to approve the Setting Every Community Up for Retirement Enhancement or SECURE Act, which would expand access to retirement savings programs for part-time workers and people employed by small business owners.

If the SECURE Act Passes…

If the bill passes the Senate, which it’s expected to do, it will be placed on President Trump’s desk. If signed into law, the SECURE Act would implement the most significant changes to retirement plans since 2006.

The bill aims to entice non-savers to participate in workplace retirement programs, such as a 401(k), so some of the provisions include:

  • Raising the age that American workers must start withdrawing from retirement savings, known as the required minimum distribution age, from 70 ½ to 72. This is to reflect the fact that more Americans are working longer, and in this vein, the bill also stipulates more years for people to contribute to retirement accounts.
  • Increasing tax incentives for small business employers to offer retirement plans by increasing the tax credit for new plans from the current cap of $500 to $5,000, or $5,500 for plans that automatically enroll new workers.
  • Allowing part-time workers to participate in 401(k) plans. The current minimum requirement for part-time employees is 1,000 hours in a 12-month period, but the SECURE Act would amend this requirement to 500 hours, effective January 2021. However, this isn’t mandatory, so it would be at the discretion of the employer.

The SECURE Act would also permit parents to withdraw up to $5,000 from retirement accounts penalty-free within a year of birth or adoption for qualified expenses. Parents could also withdraw up to $10,000 from 529 plans to repay student loans.

What Does the Federal Reserve Say?

According to the Federal Reserve’s annual study, only 36% of Americans feel that their retirement savings are on track, while 25% of Americans have no retirement savings to speak of. Part of this is due to the fact that, because of the cost and complexity of putting retirement savings plans in place, many small businesses don’t offer such plans to their employees. The SECURE Act aims to incentivize small business owners to offer retirement plans by making it easier for small businesses to implement multi-employer retirement plans—where two or more employers join together to offer a plan. This would potentially give small businesses access to lower cost plans with better investment options, thereby possibly giving millions more workers an opportunity to save at work.

In short, this legislation is important because it would remove some barriers that have kept American workers from saving for retirement, specifically through employer-provided plans and incentives. If you have questions or would like to talk about how the information in this article may impact you personally, please reach out to me at sreed@mkrcpas.com and we’ll schedule a time to talk.