March 17, 2019
This Spring, Simply Money Advisors is becoming Allworth Financial. As we expand our services to better meet your retirement planning needs, we needed a name that encompasses all that we are. Don’t worry. We’ll still deliver our same no-nonsense money advice every week in the Simply Money column, presented by Allworth Financial.
C.S. in Clermont County: I’m 63, claiming Social Security ($1,000 a month), and have legal custody of my granddaughter (who is 5 years old). If something were to happen to me, can she get any of my Social Security?
Answer: One type of Social Security benefit is called a ‘survivor’ benefit, and while this usually refers to a surviving spouse, there are circumstances in which a grandchild can receive this money. But certain criteria must be met.
The first criteria, according to the Social Security Administration, is that the grandchild’s biological parents must be deceased or disabled, or the grandparent must have legally adopted the grandchild. The second is that the grandchild also must have started living with the grandparent before age 18. The third criteria revolves around timing (like so many things related to Social Security), so we’re going to quote this directly from the Social Security’s website: “The grandchild must have […] received at least one half of his or her support from the grandparent for the year before the month the grandparent became entitled to retirement or disability insurance benefits, or died.” And finally, the biological parents can’t be making any regular financial contributions to the child.
If all these qualifications are met, a grandchild can usually collect the survivor benefit until either age 18 or 19. This is typically about 75 percent of the grandparent’s full benefit (though restrictions can apply).
In regard to your particular circumstance, it sounds like a lot hinges on the first criteria: are your granddaughter’s biological parents disabled or deceased? If not, you’ll have to legally adopt your granddaughter for her to claim a survivor benefit once you’ve passed (assuming you meet all the other qualifications as well).
Here’s The Simply Money Point: Given your unique situation, we highly recommend consulting with the Social Security Administration (they’ll be able to go into more detail with you). Visit ssa.gov or call 1-800-772-1213.
Jeremy from Cincinnati: My wife is a stay-at-home mom. Is there any way for her to still contribute to an IRA to lower our taxable income?
Answer: Yes. Your wife can contribute to something called a ‘spousal IRA,’ though it’s technically not an actual type of account.
What we’re referring to is a regular, old IRA (either a traditional IRA or Roth IRA) that would be opened in your wife’s name (it is not a joint account). Then, as long as the two of you file your taxes jointly, you can contribute to her IRA up to the annual contribution limit ($6,000 for 2019 if you’re younger than 50). You can still contribute to your own IRA as well. Just make sure you have ‘earned income’ that is at least equal to the total amount you’re contributing to both IRAs.
In your case, if you’re looking to lower your taxable income, you’ll want to set up a traditional IRA in your wife’s name. However, understand that traditional IRAs come with rules that can impact how much of your contributions can actually be deducted.
For instance, if you (as the working spouse) don’t participate in an employer-sponsored plan (such as a 401(k)), your full spousal IRA contribution is deductible. If you do participate, the deduction could be reduced, phased out, or eliminated completely. Plus, there are income eligibility rules. Properly navigating these rules is why working with a credentialed financial advisor can be beneficial.
The Simply Money Point is that opening a spousal IRA is a great way to help increase the amount of money the two of you set aside for retirement. And every little bit helps.
Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses are suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing, including a tax advisor and/or attorney. Nathan Bachrach and his team offer financial planning services through Simply Money Advisors, a SEC Registered Investment Advisor. Call (513) 469-7500 or email email@example.com.