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Should seniors retire early under the coronavirus crisis?

Should Seniors Who Lose Their Job During the Coronavirus Pandemic Claim Social Security Benefits Early?

In the wake of the coronavirus pandemic, unemployment is skyrocketing. Seniors who lose their jobs may be tempted to claim Social Security benefits early, but should they, given the resulting reduction in future benefits? The answer depends on your situation, but you may be able to claim and not sacrifice much in terms of future benefits.  

While you can claim Social Security benefits as early as age 62, the better financial decision is usually to wait to take benefits as long as you are able. If you take Social Security between age 62 and your full retirement age, your benefits will be permanently reduced to account for the longer period you will be paid. Individuals who file at age 62 this year will receive 72 percent of their full benefit. On the other hand, if you delay taking retirement beyond your full retirement age, depending on when you were born, your benefit will increase by 6 to 8 percent for every year that you delay, in addition to any cost of living increases. This extra income could be very welcome, especially if you live into your 80s or beyond.

Unfortunately, many seniors who lose their job due to the coronavirus pandemic may find it necessary to apply for benefits early, potentially losing hundreds of thousands in future benefits. Before rushing to apply for early retirement benefits, you should consider all of your options. If you are lucky enough to have substantial savings, it may make sense to spend your savings rather than take benefits early. You may also be able to apply for unemployment benefits to allow you to further delay taking benefits. 

If you do not have any savings or unemployment benefits to fall back on, your only option may be to claim benefits. However, if you do claim early and then go back to work, you may have the ability to increase those benefits. If you are able to stop the benefits within 12 months of starting, you can withdraw the application, repay the benefits collected, and then still be eligible for the higher benefit amount at full retirement age or older. It is essentially a one-year interest-free loan.

If you take benefits early but are not able to stop the benefits within 12 months of starting, you can still suspend your benefits in order to earn higher benefits. For example, if you start collecting at age 62 but no longer need the income once you reach your full retirement age, you could suspend benefits until age 70. You won't get a complete do-over, but between your full retirement age and 70 you would earn delayed retirement credits, which would increase your ultimate benefit amount when you collect at age 70. 

Whatever you decide, consider all of your options carefully and talk things over with your attorney before making any rash decisions. 

For a New York Times article about taking benefits early, click here.

Make Sure You Are Counted in the 2020 Census

The 2020 census is starting soon, and seniors need to be counted. This may be more of a challenge this year because for the first time, the census will be completed largely online.

The U.S Constitution mandates that the federal government conduct a census every 10 years. Information from the census is used to determine how many representatives each state sends to Congress as well as where hundreds of billions of dollars from federal programs, such as Medicare, Medicaid, nutrition assistance and supportive housing, is allocated. In addition, communities rely on census data to apportion services like new roads, schools, libraries and emergency services.  Think of it as America’s 10-year checkup.

While the census is being conducted largely online, you do not need to fill out the form online if you don’t want to. Beginning in March 2020, the census will mail out postcards to each household, giving instructions on how to respond. You will have the option of responding online, by mail, or via the phone. If you don’t respond, a census worker will visit your home to collect the data. 

If someone visits your home to collect information for the 2020 Census, check to make sure that they have a valid ID badge, with their photograph, a U.S. Department of Commerce watermark, and an expiration date. Census workers will not ask for donations or for your Social Security or bank account information. 

For more information about the 2020 census, click here.

Free Tax Preparation Help Is Available to Seniors

Seniors and retirees should know that they may be able to use online tax preparation software free of charge. Most low- and middle-income Americans qualify for the free help, but do not take advantage of it. And all seniors are eligible for free counseling assistance from the IRS.

The tax preparation software industry has had a decades-long deal with the Internal Revenue Service (IRS) to make free versions of its software available to low- and middle-income individuals. However, a report by ProPublica in April 2019 revealed that the software companies were making it difficult for customers to find the free tax filing software, including going so far as to hide it from a Google search. According to the IRS’s Taxpayer Advocate Service, around 70 percent of taxpayers qualified for free filing, but only 1.6 percent used the free software in 2018. The IRS has now amended its agreement with the software industry to bar the companies from hiding the free products. 

The IRS Free File website links to the available free products. Each company sets its own eligibility standards based on income, age, and state residency. As long as your adjusted gross income was $69,000 or less, you will find at least one free product to use. There are also two products that are in Spanish.

If you would rather not prepare your own tax return, seniors can use the IRS’s Tax Counseling for the Elderly (TCE) program. The TCE program is available to taxpayers who are 60 years old or older and specializes in answering questions about pensions and retirement plans. 

Should You Sell Your Life Insurance Policy?

Older Americans with a life insurance policy that they no longer need have the option to sell the policy to investors. These transactions, called "life settlements," can bring in needed cash, but are they a good idea? 

If your children are grown and your mortgage paid off, you may decide that there is no longer a reason to be paying premiums every month for a life insurance policy, or you may reach a time when you can no longer afford to keep up with the premiums. If this happens, you may be tempted to let the policy lapse and get nothing from it or to surrender the policy for its cash value, which usually is a fraction of its death benefit. Another option is a life settlement. This allows you to sell your policy to an investor for an amount that is greater than the cash value, but less than the death benefit. The buyer pays all future premiums and receives the death benefit when you die. 

Life settlements offer seniors a way to get cash to supplement retirement income and help pay for living expenses, health care, or other needed items. They can be a good alternative to surrendering a policy or letting it lapse. But as with any financial transaction, you need to exercise caution. 

The amount you receive from a life settlement depends on your age, your health, and the terms and conditions of the policy. It is hard to determine if you are getting a fair price for the policy because there are no standard guidelines for life settlements. Before selling you should shop around to several life settlement companies. You should also note that the amount you receive will be reduced by transaction fees, which can eat up a good chunk of the proceeds of the sale. In addition, you may have to pay taxes on the lump sum you receive. Finally, the beneficiaries of your policy may not be pleased with the sale, which is why some life settlement companies require beneficiaries to sign off on the transaction.

Before choosing a life settlement, you should consider other options. If you need cash right away, you can borrow against your policy. If the premiums are too much, you may be able to stop premiums and receive a smaller death benefit. In some cases of terminal illness, you can receive an accelerated death benefit (this allows you to receive a portion of your death benefit while you are still alive). If you don't need the cash but no longer want the policy, another possibility is to donate the policy to charity and get a tax write-off. 

To find out the right solution for you, talk to your elder law attorney.

The Dark Side of Reverse Mortgages for Seniors

“Also known as home equity conversion mortgages or HECMs, the most popular form of reverse mortgage allows eligible seniors age 62 and older to borrow up to 60% of their equity in their primary residences to pay for any expenses.”

It sounds great, even if you know that the reverse mortgages are known to be a little on the pricey side. However, unexpected circumstances can make this last-chance-to-save-your-retirement strategy backfire in a big way. Just ask Evelyn Boice, who is still wearing the same clothing that she brought to babysit her grandchildren last February. The Union Leader shares her story in the article “Silver Linings: Reverse mortgages for seniors–Lifestyle Maintenance or money pit?”

It seems that a flood at Evelyn’s retirement home caused by burst pipes led to a financial disaster. She’s 83 and didn’t expect to spend her last years living in an apartment attached to her daughter’s home. She’s got a chair, a TV, a bed and a kitchen stool. Everything she owned was destroyed in the flood.

She does have a lot of notebooks—stacks of confusing and incomplete financial statements loaded with indecipherable charges, including a $35 charge every time she calls the reverse mortgage company for help. She’s got threatening letters about being in default, while she waits for the mortgage lender to release an insurance check for $48,651 that she would use to salvage what’s left of her home.

When she called the insurance company, she heard an awful comment from someone at the office: “Why doesn’t she just hurry up and die?”

Boice took out a reverse mortgage in 2007 and used $50,000 of a $200,000 loan to make emergency repairs after Hurricane Wilma struck her home, blowing out windows and doors. However, the danger comes, when homeowners don’t have enough money to live on and maintain their homes, make essential repairs or pay for insurance and property taxes. That’s non-negotiable with a reverse mortgage. Any kind of default can lead to a cascade of new expenses for appraisals, property inspections and legal work to protect the lender. The lender has all the power and all the fine print.

Her case is an extreme example of what can go wrong. In 12 years, an unbelievable amount of paperwork has accumulated. One document shows that she owes $265,000, a number that keeps increasing. The monthly interest charges range from $100 to more than $1,000, and lump sums of more than $2,500, reflecting property taxes.

Boice is getting some help from the Claremont office of New Hampshire Legal Assistance. They are helping her work through the issue, but it may only come in the form of tax deferment or reductions.

Before taking out a reverse mortgage, seniors should look at all available options. They should also have an attorney review the contract from the reverse mortgage company. One small mistake can end up costing hundreds of thousands of dollars.

Reference: Union Leader (Feb. 2, 2019) “Silver Linings: Reverse mortgages for seniors–Lifestyle Maintenance or money pit?”

Shades of Grey Make Some Elder Financial Abuse Matters Difficult to Determine 灰色地帶使老人財務虐待難以確定 (中英對照)

“It’s a tough situation for people in financial services.  However, these circumstances can pull the curtain back on elder financial abuse. That’s because banks and other financial institutions can sometimes spot potential problems early.”

A man who makes loans in a company, that is not quite a bank and not quite a payday lending company, remembers when a young man came in for a loan to buy a truck. According to wbhm.com’s report “Uncovering Elder Financial Abuse? It’s Tricky,” the 19-year-old did not have any credit history and had only been employed for a few weeks, so he brought his grandfather with him to co-sign the loan application.

The grandfather told him, “I don’t really want to, but they’re saying it’s the only way he can get it.” This raised a red flag for the man as a possible instance of elder financial abuse, but it presented a difficult situation. He wanted to make the loan and avoid negative reviews on social media. What should he do?

Some financial institutions are now training their employees for signs of exploitation, keeping an eye out for things that appear out of the ordinary. Examples are a customer at a branch accompanied by someone who isn’t known to the bank, who does all the talking or withdraws large sums of money from a senior’s account.

If a client is in their eighties and the bank account suddenly shows a lot of nightlife spending, it’s a sign that something’s wrong.

One bank has an internal hotline that employees can call. The bank then turns over the report to authorities. There are also government agencies that protect seniors from financial abuse. Alabama’s Department of Human Resources has an Adult Protective Services Division, where one employee says about half of the cases are straightforward and the other half are challenging.

One woman was sending money overseas, thinking she was in a relationship that would end in marriage. She had all her faculties and that’s the key. Since she understood what she was doing, even if she was making poor decisions, there wasn’t much the department could do.

Just because the Department of Human Resources can’t help, that does not mean a crime had not been committed.

Alabama assistant attorney general Diane Dunning says the state has recently passed laws to better combat elder financial exploitation. One such law allows brokers to delay a payout, if they suspect elder abuse.

The law also protects financial professionals from liability, if they make a good faith report of possible abuse.

What about the man who was asked to make a loan with the grandfather as co-signer? He was denied the loan for other reasons.

Resource: wbhm.com (Aug. 7, 2018) “Uncovering Elder Financial Abuse? It’s Tricky.”

“對金融服務人員來說，這是一個艱難的局面。但是，這些情況可以阻止老年人金融诈骗。因為銀行和其他金融機構有時可以及早發現潛在的問題。”

根據 wbhm.com 的報告，“Uncovering Elder Financial Abuse? It’s Tricky,”(揭露老年人金融诈骗？這很棘手) 一位19歲的年青人沒有任何信用記錄, 只被雇用了幾個星期, 所以他帶他的祖父和他一起簽署貸款申請。一個在公司裡面負責貸款的職員，那不是一家銀行，也不是一個發薪的貸款公司，職員記得當這個年青人來貸款買卡車的情景。

祖父告訴職員，"我真的不想這樣做，但他們說這是他孫子唯一能得到貸款的方法”。祖父這番話是一個警號，顯示出可能是老年人金融诈骗的可能事例，但它也是一個兩難的情況。職員想批出貸款, 避免社交媒體留下負面評論。他該怎麼辦？

一些金融機構現在正在培訓他們的員工，學習偵察诈骗的跡象，留意那些看似平凡的事情。例如，的客戶由銀行​​不知道的人陪同，這些人主導整個面談或從老人賬戶中提取大筆資金。

如果一個客戶已經80多歲了，銀行賬戶突然顯示了大量的夜生活消費，這就是一個警號。

一家銀行有一條內部熱線，員工可以撥打電話。然後銀行將報告交給當局。有政府機構會保護老人免受經濟诈骗。阿拉巴馬州人力資源部設有成人保護服務部門，其中一名員工表示，大約一半的案件很簡單，另一半則具有挑戰性。

一名婦女向海外匯錢，她認為她是在一段感情關係中並且將來會結婚。她很清楚自己在做什麼，這是關鍵。既然她明白自己在做什麼，即使她做出了錯誤的決定，這個部門也做不了什麼。

即使人力資源部無法處理，這並不意味著犯罪沒有發生。

阿拉巴馬州助理檢察長黛安·鄧寧說，該州最近通過了法律，以更好地打擊老人的金融诈骗。這項法律允許經紀人推遲支付，如果他們懷疑老人金融诈骗。

法律也保護金融專業人員免於承擔責任，如果他們舉報可能的濫用行為。

那個被要求與祖父作為共同簽名者貸款的人怎麼樣？由於其他原因，他被拒絕了貸款。

參考: wbhm.com (Aug. 7, 2018) “Uncovering Elder Financial Abuse? It’s Tricky.”