Page 45 - Investment Advisor May 2021

Medicare has its own set of tax brack- How about homemakers who didn’t planned for a reduction in household
ets — so you can be sure that widows work outside the home? Do they quality income. The woman’s benefits can be
don’t know about this too. The first shock for a Social Security spousal benefit? cut between one-third and one-half
is that you have to pay your Medicare At-home moms think they won’t get a Social depending on the career she had.
Part B premiums: Social Security auto- Security benefit. They assume that because
matically reduces your benefit for that. they didn’t work [in the labor force], why What’s an eye-opener for many women
And when a woman goes from filing a would they get Social Security? But they’re who are divorced and remarried?
married joint tax return to a single filing entitled to half their husband’s benefits. This is a big one: Divorced women —
[after being widowed], her Part B premi- The spousal benefit was designed specifi- who were previously married 10 con-
um could jump from, perhaps, $148.50 cally for at-home moms and homemakers. secutive years or longer and meet all the
to $386. This is a big [deal] for widows. It [now] applies to same-sex couples, too. other Social Security rules for a divorced
They get hit on all fronts. Gender is out of Social Security now — person — who remarry want to be in the
you’re [just] either legally married or not. driver’s seat. They say, “My first hus-
Does paying estimated taxes figure into band made lots of money; my current
Social Security taxes? Suppose a couple with a homemaker husband doesn’t. So I want to choose my
Retirees — certainly women — don’t wife who’s younger than full retirement first husband’s Social Security.”
know how often they have to pay quar- age decides to retire. What’s the Social You can’t choose between your ex and
terly estimates on their “income” in Security impact on them? your current spouse until they’re both
retirement. You’re creating income, Her spousal reduction factor — I call it dead and you’re the remaining spouse of
whether from IRAs, investments the penalty — is higher than that of the the three. At that point, Social Security
or Social Security. So women can get spouse who was the worker. Both spous- looks at all the benefits: yours, if you
nabbed with penalties and interest when es get penalized for claiming early, but have your own; your first husband’s; and
they don’t make the correct payment the reduction for the younger one, who your [second] husband’s.
within the correct time. It’s hard for hasn’t reached FRA, is more aggressive. You get the benefits that are highest,
women who are newly retired to figure So there are two different reduction fac- but you don’t get to add your own. It’s
out the tax code because it’s not the first tors. Women have no idea about that, so disappointing for these women when
thing on their to-do list when they retire! and the woman’s is worse. the light bulb goes on and they realize:
“Gosh, I don’t get mine and his!”
What’s a pitfall for women who claim Do a widow’s benefits start as soon as
Social Security early? her husband dies? Please talk about the Windfall Elimination
When they claim at 62, they think they’ll Often women who are between 52 and Provision of the Social Security laws.
get increased Social Security payments, 60, whose kids are grown and gone, who If you have a hybrid career, where you
a big bump-up automatic adjustment become widowed think that’s [the case]. work [or worked] partly for the govern-
when they reach full retirement age. They don’t realize they have to wait till ment — which doesn’t withhold Social
The mistake is thinking that their ben- they’re 60 to get their benefits. For some, Security taxes — and partly in corpo-
efits will change. They do not. As soon that’s an impossible situation because they rate America, which does, your Social
as you claim at 62, you’ve locked in your didn’t plan early enough for the possibility Security benefit pays second to the pen-
permanent reductions. that their husband might die [before they sion — and those benefits will be reduced.
do] and that they’d be left with no income. Let’s say a woman has been getting a
What are homemakers’ typical The mistake is thinking they can start $3,000-a-month pension and her husband
misconceptions about Social Security? taking Social Security widow’s benefits has been receiving $1,800 in Social Security.
The big mistake is made by women who as soon as they become widowed. But the When the husband dies, that $1,800 check
have had what I call “popcorn careers.” gap might be six months — or six years. stops — literally overnight. How do you
They pop in and out of a career over 40 make up for that? Lots of widows can’t.
years and think they don’t qualify for What’s another rude awakening for widows?
Social Security because they didn’t have They don’t know that one of their Social Jane Wollman Rusoff is a contributing
10 consecutive years of earnings. The Security checks is going away — imme- editor who specializes in interviews with
Adobe Stock consecutive years — it’s whatever your both checks will continue even though thought leaders. An author and prolific
diately. The mistake is thinking that
requirement for Social Security is not 10
journalist, Jane is founder of www.
the husband has died. So they haven’t
earnings are over your lifetime.
FamilyStarProductions.com.
MAY 2021 INVESTMENT ADVISOR 43