Senior Financial Estate Planning

One of the first components to consider when one faces senior financial estate planning is to know what Social Security will contribute to your estate.  Usually, this isn’t the largest contributor to the size of your estate, but is necessary to know so that you don’t lose money that should be coming to you.

If you’re about to turn 62 and plan to file for Social Security, you should apply at least 3 months before you want to start collecting.  You can sign up at, or call 1-800-772-1213.  The documents you’ll need to produce are: your Social Security card or a record of the number; your birth certificate; proof of US citizenship or lawful alien status; military discharge papers if you served before 1968, and last year’s W-2 tax form or tax return, if you’re self-employed.

As a component of your financial estate planning, your senior benefits are based on the amount of money you earned during your lifetime – with an emphasis on the 35 years in which you earned the most.  Plus, lower-paid workers get a bigger percentage of the pre-retirement income than higher-paid workers.  In 2010, the average monthly benefit for retirees was $1,172.

For senior financial estate planning you should know that your contributions never went into a personal retirement account for you to earn interest.  Although many people think so, Social Security operates under a pay-as-you go system, which means that today’s workers pay for current retirees and other beneficiaries.  Workers pay 6.2 percent of their wages up to a cap of $106,800; employers pay the same.  The money that younger people contribute will pay for our benefits when we become seniors and retire.

Wondering if there will be enough money in the Social Security trust fund?  To prepare for the retirement of the baby boom generation, Social Security has collected more in taxes than it pays in benefits.  Surplus funds go into the trust fund and are invested in US guaranteed Treasury bonds.  In 2009, the trust fund held $2.5 trillion in bonds and earned 4.9 percent in interest.  These bonds are just as real as US Treasury bonds held by mutual funds or foreign banks.  Ultimately, it’s up to the American people to ensure the government keeps it’s promise to retirees, just as it would to other investors.

There are no people collecting Social Security benefits who never paid into the system.  Social Security is an earned benefit.  In order to collect a retirement benefit, a worker must pay into the system for at least 10 years.  In some cases, non-working family members, such as a spouse, may be eligible for benefits based on the worker’s record.  Tough rules in place assure that only legal residents can collect Social Security benefits, good news for those seniors doing their financial estate planning now!

Have you heard pundits talk about why any changes in Social Security should be considered as a way to help balance the federal budget?  Some policymakers say all spending, including Social Security, should be cut.  Social Security has not contributed to the deficit.  In fact, the trust fund is projected to reach $4.3 trillion by 2023.  Social Security benefits should not be targeted to reduce the deficit.

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