Retirement Benefits, Your Spouse, And Estate Planning

As you plan your estate, you and your spouse will need to consider your retirement accounts and social security benefits to make better decisions. For example, if you knew your spouse would receive enough to live on comfortably, you might feel freer to leave some of your other assets to your children or other heirs or conversely, you may decide to leave more assets to your spouse if they would need them. Here is some helpful information about retirement benefits that you should be aware of.

Social Security Benefits

To get an estimate of the monthly payment amount you can expect to receive you can use the Social Security Administration's calculators found here, or you can call your local office. They don't have a calculator to see what you would receive as a beneficiary to someone else's account but you can call them for that information, and the website gives the percentages of what you might receive based on your circumstances and time you apply for benefits.

Depending on your age and the year you apply for benefits, you may be entitled to a 100% payment amount if you retire when you reach the retirement age of 65 to 67. You will get a smaller percentage if you retire at before that age, and if you make additional income of more than $15,720 a year, your payment would be reduced $1 for every $2 you earn. If you died before reaching retirement age, your spouse may be able to get a payment at age 60 but it could be reduced percentage and lowered if they make extra income unless the spouse waits until the regular retirement age to apply for benefits.

Pension Benefits

The Employee Retirement Security Act (ERISA) makes it mandatory for an employer to give employees a summary description of the plan, and a annual report of your plan's financial condition. You can request a statement spelling out what your surviving spouse would receive should you die.

Pension plans are determined by the employer so they aren't uniform across the board but ERISA does require that employers not discriminate by age or job description. A spouse may be required to pay taxes on pension plan payments or lump sum distributions  if the account was funded by untaxed income.  To prevent an overpayment that must be repaid if you and your spouse are already receiving payments, a widow/widower should notify the plan administrator promptly when you become deceased.

 IRAs and 401K Accounts

Individual retirement accounts are self-funded and if you are self employed you may invest in one called  a SEP-IRA (Simplified Employee Pension IRA). Some employers help you set up an 40lK account and match your contributions to it. Since it is tax deductible until you start withdrawing from it, you or your mate may have to pay taxes on distribution payments.

Additionally, you or your mate may be required to take distribution payments in lump sums or in regular payments at certain ages. If your mate is more than ten years younger than you, the required payments could be smaller.

Roth IRAs are funded by income that has already been taxed so you or your spouse may not be taxed for a second time when you take payments or lump sums out, unless you withdraw funds before the age of 59 1/2 and you are not disabled. However, you can take the money out early for certain reasons such as becoming a first time homebuyer, or to pay educational expenses for yourself, spouse or children. If your beneficiary, your spouse, receives money from the account after your death, they will not have to pay taxes on it.

The good thing about retirement accounts and pension plans is that your spouse or named beneficiary can receive them without having to go through a probate process.

Professional Consultation

To make sure you benefit the most from your retirement assets and to see that your spouse is provided for adequately after you become deceased, you will want to consult an estate planning attorney like Donald B Linsky & Associate Pa for specific advice on your particular situation.