Dear Liz: I am very overwhelmed with life so I’ll try to stick to where I need your help. My 68-year-old husband has been diagnosed with dementia. I thought we were responsible, having a nice nest egg of over $2 million, a house that is paid off and no debts. However, finding out long-term care costs, I am now terrified that it will all be depleted. Per your advice, I found a fee-only financial planner. I wanted his opinion about long-term care insurance for myself (my husband no longer qualifies). Turns out the planner will be the one to get the policy for me, should I decide to go forward. He’s recommending a hybrid policy with a death benefit, which means if I end up not using the long-term care coverage, the value will go to our children. I’m uncomfortable with the fact that this planner has an obvious stake with this long-term care policy and therefore might be biased with his advice.
Answer: If your advisor has an “obvious stake” in the policy you buy, implying that he will be paid a commission, then by definition he is not a fee-only financial planner. Fee-only financial planners are compensated solely by the fees they charge their clients.
What you may have encountered is a fee-based advisor, who collects fees from clients but also accepts commissions.
You want to be able to trust that the advice you get is in your best interests. That means you need a fiduciary advisor: someone who is obligated to put your interests ahead of their own and who is willing to put that promise in writing. If your advisor isn’t a fiduciary, you can find one who is through one of several organizations that represent true fee-only advisors, such as the National Assn. of Personal Financial Advisors, the Garrett Planning Network, the XY Planning Network or the Alliance of Comprehensive Planners.
The advisor also should be able to refer you to an elder law attorney who can discuss ways to protect your finances from being devastated by long-term care costs, or you can seek referrals directly from the National Academy of Elder Law Attorneys.
Dear Liz: I’ll be 62 next year. I planned to start taking my Social Security of about $2,600 a month and just put that check into an investment account until I retire. However, if I’m going to be taxed $1 for every $2 over $23,000 that I make, then my plan needs to change. Maybe I should wait until 67. I make around $180,000 a year and that should continue until I retire. I loved my plan and am really disappointed that I cannot put it into play.
Answer: Sometimes the things we love aren’t good for us. Your plan would have shortchanged you and possibly your spouse.
You wouldn’t actually pay a 50% tax on your Social Security if you applied at age 62. What you would face is the earnings test, which withholds $1 for every $2 you earn over a certain amount, which is $24,480 in 2026. Given your income, your entire benefit would be withheld.
The earnings test would apply until you reached your full retirement age of 67. At that point, any money that was withheld would be added back into your benefit.
What isn’t added back is the additional money you would have received simply by postponing your application. If you wait, your benefit would grow about 30% between age 62 and 67. After 67, delayed retirement credits boost your benefit by 8% each year you delay until age 70, when your benefit maxes out. In addition, your benefit gets cost-of-living increases beginning at age 62, whether or not you’ve applied.
Those are guaranteed returns, by the way. Other investment returns are not. You could make more in the stock market, but you also could make less or lose money.
If you’re married and the higher earner, an early start would also stunt the survivor’s benefit. The effect can be so dramatic on the survivor’s finances that financial planners typically advise the higher earner to wait as long as possible to apply.
Liz Weston, Certified Financial Planner, is a personal finance columnist. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.
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