MONEY Ask the Expert

How to Max Out Social Security Benefits for Your Family

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q. Does the family maximum benefit (FMB) apply only to one spouse’s individual’s work history or to both spouses in a family? That is, assume two high-earning spouses both delay claiming a benefit till, say, 70. Would the FMB rules limit their overall family benefits? Or does the FMB include just the overall family benefits derived from the earnings record of one particular worker? —Steve

A: Kudos to Steve for not only knowing about the family maximum benefit but having the savvy to ask how it applies to two-earner households. The short answer here is that Social Security tends to favor, not penalize, two-earner households in terms of their FMBs.

To get everyone else up to speed, the FMB limits the amount of Social Security benefits that can be paid on a person’s earnings record to family members—a spouse, survivors, children, even parents. (Benefits paid to a divorced spouse do not fall under the FMB rules.) The amount may include your individual retirement benefit plus any auxiliary benefits (payouts to those family members) that are based on that earnings record.

Fair warning: the FMB is far from user-friendly. Few Social Security rules are as mind-bendingly complex as the FMB and its cousin, the combined family maximum (CFM). And Social Security has a lot of complex rules. Unfortunately, you need to do your homework to claim all the family benefits you are entitled to receive.

To address Steve’s question, these FMB calculations may be based on the combined earnings records of both spouses. More about this in a bit, but first, here are the basics for an individual beneficiary.

The ABCs of the FMB

The FMB usually ranges from 150% to 187% of what’s called the worker’s primary insurance amount (PIA). This is the retirement benefit a person would be entitled to receive at his or her full retirement age. Even if you wait until 70 to claim your benefit, it won’t increase the FMB based on your earnings record.

Now, I try to explain Social Security’s rules as simply as possible—but there are times when the system’s complexity needs to be seen to be believed. So, here is the four-part formula used in 2015 to determine the FMB for an individual worker:

(a) 150% of the first $1,056 of the worker’s PIA, plus

(b) 272% of the worker’s PIA over $1,056 through $1,524, plus

(c) 134% of the worker’s PIA over $1,524 through $1,987, plus

(d) 175% of the worker’s PIA over $1,987.

Let’s use these rules for determining the FMB of a worker with a PIA of $2,000. It will be $3,500, which equals (a) $1,584 plus (b) $1,273 plus (c) $620 plus (d) $23. The difference between $3,500 and $2,000 is $1,500—that’s the amount of auxiliary benefits that can go to your family. Got that?

And here’s a key point that trips up many people: Even if the worker claimed Social Security early, which means his benefits were lower than the value of his PIA, it would not change the $1,500 limit on auxiliary benefits. However, when the worker dies, the entire $3,500, which includes the PIA amount, becomes available in auxiliary benefits.

It’s quite common for family claims to exceed the FMB cap. When this happens, anyone claiming on his record (except the worker) would see their benefits proportionately reduced until the total no longer exceeded the FMB. If, say, those claimed auxiliary benefits actually totaled $3,000, or double the allowable $1,500, all auxiliary beneficiaries would see their benefits cut in half.

How CFM Can Boosts Benefits

Enter the combined family maximum (CFM). This formula can substantially increase auxiliary benefits to dependents of married couples who both have work records—typically multiple children of retired or deceased beneficiaries.

The children can be up to 19 years old if they are still in elementary or secondary school (and older if they are disabled and became so before age 22). Because each child is eligible for a benefit of 50% or even 75% percent of a parent’s work PIA, even having only two qualifying auxiliary beneficiaries—say a spouse and a child, or two children—can bring the FMB into play.

But with the CFM, the FMBs of each earner in the household can be combined to effectively raise the benefits to children that might otherwise would be limited by the FMB of just one parent. Under its rules, Social Security is charged with determining the claiming situation that produces the most cumulative benefits to all auxiliary beneficiaries.

Using our earlier example, let’s assume we now have two workers, each with PIAs of $2,000 and FMB’s of $3,500. A qualifying child would still be limited to a benefit linked to the FMB of a single parent. But the CFM used to determine the size of the family’s benefits “pool” has now doubled to $7,000 a month, permitting total auxiliary benefits of up to $3,000.

Well, they would have totaled this much—except there’s another Social Security rule that puts a cap on the CFM. For 2015, that cap is $4,912. Subtracting one of the $2,000 PIAs from this amount leaves us with up to $2,912 in auxiliary benefits for this family. That’s not $3,000 but almost.

So it’s quite possible that three, four, or possibly more children would get their full child benefits in this household. Even if they totaled 200% of one parent’s FMB, they would add up to a smaller percentage of the household’s CFM, and either wouldn’t trigger benefit reductions, or at least much small ones.

And if eligible children live in a household where one or both of their parents also has a divorced or deceased spouse, even more work records can come into play. This is complicated stuff, as borne out in some thought-twisting illustrations provided by the agency.

Before moving ahead with family benefit claims, I recommend making a face-to-face appointment at your local Social Security office. Bring printouts of your own earnings records, which you can obtain by opening an online account for each person whose earnings record is involved. I’d also print out the contents of the Social Security rules, which are linked in today’s answer, or at the very least, write down their web addresses so the Social Security representative can access them.

Good luck!

Philip Moeller is an expert on retirement, aging, and health. He is co-author of The New York Times bestseller, “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” and a research fellow at the Center for Aging & Work at Boston College. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: Why Social Security Rules Are Making Inequality Worse

MONEY Ask the Expert

The Surefire Way Not to Lose Money on Your Bond Investments

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: I am leaning toward buying individual bonds and creating a bond ladder instead of a bond fund for my retirement portfolio. What are the pros and cons?—Roy Johnson, Troy, N.Y.

A: If you’re worried about interest rates rising—and many people are—buying individual bonds instead of putting some of your retirement money into a bond fund has some definite advantages, says Ryan Wibberley, CEO of CIC Wealth in Gaithersburg, Maryland. There are also some drawbacks, which we’ll get to in a moment.

First, some bond background. Rising interest rates are bad for fixed-income investments. That’s because when rates rise, the prices of bonds fall. That can cause short-term damage to bond funds. If rates spike and investors start pulling their money out of the fund, the manager may need to sell bonds at lower prices to raise cash. That would cause the net asset value of the fund to drop and erode returns.

By contrast, if you buy individual bonds and hold them to maturity, you won’t see those daily price moves. And you’ll collect your interest payments and get the bond’s face value when it comes due (assuming no credit problems), even if rates go up. So you never lose your principal. “You are guaranteed to get your money back,” says Wibberley. But with individual bonds, you will need to figure out how to reinvest that money.

One solution is to create a laddered portfolio. With this strategy, you simply buy bonds of different maturities. As each one matures, you can reinvest in a bond with a similar maturity and capture the higher yield if interest rates are rising (or accept lower yield if rates fall). All in all, it’s a sound option for retirees who seek steady income and want to protect their bond investments from higher rates.

The simplest and cheapest way to create a bond ladder is through government bonds. You can buy Treasury securities for free at TreasuryDirect.gov. You can also buy Treasuries through your bank or broker, but you’ll likely be charged fees for the transaction.

Now for the downside of bond ladders: To get the diversification you need, you should hold a mix of not only Treasuries but corporate bonds, which can be more costly to buy as a retail investor. Generally you must purchase bonds in minimum denominations, often $1,000. So to make this strategy cost-effective, you should have a portfolio of $100,000 or more.

With corporates, however, you’ll find higher yields than Treasuries offer. For safety, stick with corporate bonds that carry the highest ratings. And don’t chase yields. “Bonds with very high yields are often a sign of trouble,” says Jay Sommariva, senior portfolio manager at Fort Pitt Capital Group in Pittsburgh.

An easier option, and one that requires less cash, may be to build a bond ladder with exchange-traded bond funds. Two big ETF providers, Guggenheim and BlackRock’s iShares, now offer so-called defined-maturity or target-maturity ETFs that can be used to build a bond ladder using Treasury, corporate, high-yield or municipal bonds.

Of course, bond funds have advantages too. You don’t need a big sum to invest. And a bond fund gives you professional management and instant diversification, since it holds hundreds of different securities that mature at different dates.

Funds also provide liquidity because you can redeem shares at any time. With individual bonds, you also can sell when you want, but if you do it before maturity, you may get not get back the full value of your original investment.

There’s no one-size-fits all strategy for bond investing in retirement. A low-cost bond fund is a good option for those who prefer to avoid the hassle of managing individual bonds and who may not have a large sum to invest. “But if you want a predictable income stream and protection from rising rates, a bond ladder is a more prudent choice,” Sommariva says.

Do you have a personal finance question for our experts? Write to AskTheExpert@moneymail.com.

Read next: Here’s the Retirement Income Mistake Most Americans Are Making

MONEY Ask the Expert

How to Pick an Appraiser to Value Your Heirlooms or Collectibles

Ask the Expert - Family Finance illustration
Robert A. Di Ieso, Jr.

Q: “I inherited quite a large stamp collection. I am sure there are a few valuable ones in there, but aside from quitting my job to spend eight hours a day sorting through them one at a time, what are my options for getting it appraised?” — Russell, Melbourne, Fla.

A: The key thing you need to beware of when seeking out an expert to value an heirloom is conflict of interest: You don’t want the person evaluating your property to have an active interest in purchasing it.

So rather than simply walking into any antique shop or auction house and asking for an appraisal, instead hire a certified appraiser. You’re more likely to get a fair judgement from such an individual because it’s a violation of his or her professional ethics to offer to buy an item he has been hired to appraise.

You can find a certified appraiser in your area specializing in stamps—or any other type of collectible, antique or valuable—via the websites of the three major appraiser organizations: International Society of Appraisers, American Society of Appraisers, or Appraiser Association of America. Each member’s profile should list his or her certification level and background in appraising property similar to yours.

Appraisers might charge a flat fee or an hourly rate starting at $150, says Cindy Charleston-Rosenberg, president of the International Society of Appraisers. (You should avoid those who charge a fee based on a percentage of the item’s value.) Depending on location and the level of expertise your property requires, the total bill may be $400 or more.

For that fee, you’ll get a written report that includes the object’s value, the procedure used to estimate this, and a full description of the item.

Be aware that an item can have different values for different purposes: For insurance or estate taxes, you need to know its retail value, or what it would cost today to purchase. For selling, you need the fair-market value or what a buyer would pay you.

If your item has a minimal value and doesn’t require a full written appraisal, Charleston-Rosenberg says she and the vast majority of appraisers will tell you its ballpark worth and waive the service fee.

“An honorable appraiser will turn away a project when an object is not worth it,” says Charleston-Rosenberg.

Often by calling an appraisal office, you can get a rough idea of whether to pursue a full consultation. Charleston-Rosenberg says she knows of appraisers who request an emailed image of an heirloom to determine if their services are actually needed.

Because your heirloom is not a single object but a larger collection, however, you will probably need to have an appraiser view the stamps in person.

More from Money 101:

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What if I need more time to file my taxes?

How do you know if it makes sense to itemize?

MONEY Ask the Expert

Are Robo-Advisers Worth It?

Investing illustration
Robert A. Di Ieso, Jr.

Q: I downloaded the app from Personal Capital to get a better look at my finances. Is it worth the money to use their advisory service? I had a free discussion with one of their advisers and liked what they had to say, but I have a complex portfolio inherited from my parents. — Dan in Gillette, Wyo.

A: Over the last several years a new breed of technology-based financial advisory services — sometimes referred to as robo-advisers — have come on the scene in an attempt to serve investors who otherwise wouldn’t seek or couldn’t afford professional advice. Many investors don’t meet the minimum required by traditional advisers, while others are, understandably, reluctant to pay the typical 1% management fee for hands-on financial advice.

Enter the likes of Personal Capital, Wealthfront, Betterment and other services that help investors allocate, invest, monitor and rebalance their assets.

Personal Capital offers a free app that aggregates financial information on a single dashboard, and in turn uses that information to call on clients who may benefit from their advisory service, which melds technology with traditional human advice; clients and advisers communicate via phone, text, instant message and Skype.

Here’s the catch: At 0.89% for the first $1 million, the fee for Personal Capital is nearly as high as what you’d pay for a traditional advisory relationship.

“Is it worth it? We think there are several other options available that may be a better fit,” says Mel Lindauer, co-author of “The Bogleheads’ Guide to Investing” (Wiley) and a founder of the Bogleheads Forum, which focuses on low-cost, do-it-yourself investing à la Vanguard Group founder Jack Bogle.

If you’re primarily interested in help with asset allocation, he says, there are more affordable services worth checking out. Vanguard Personal Advisor Services, for example, charges 0.3% for its service. On a $1 million portfolio, that’s the difference between $8,900 a year and $3,000 a year, says Lindauer. An even cheaper option yet: target date funds, which peg their portfolios to investors’ retirement date.

Of course, asset allocation is only one piece of the financial puzzle. A good adviser can help you with everything from budgeting and taxes to estate planning.

Personal Capital advisors do work with clients on broader issues, but if your situation is truly complex, you may be better served sitting down with a traditional fee-only adviser.

MONEY Ask the Expert

How to Collect Child Support from an Ex’s Social Security Benefits

Ask the Expert - Family Finance illustration
Robert A. Di Ieso, Jr.

Q: “Can I collect unpaid child support from my ex-husband’s Social Security?” — Carol

A: That depends on the kind of benefit your ex receives. If it’s Supplemental Security Income (SSI), you’re out of luck. But if he collects any other type of benefit, you can get the money you’re owed.

Because SSI is considered a welfare benefit—rather than an earned Social Security benefit like retirement, disability, or survivor benefits, which individuals pay into over their lifetimes—the federal government does not allow this income to be garnished for child support payments, says Vicki Turetsky, commissioner for the Office of Child Support Enforcement.

For other Social Security benefits, however, if your ex is collecting and is either not paying child support or owes back support, you can request that your local Social Security office garnish those benefits. (In certain circumstances, you can also make a claim if an application for Social Security is pending).

In order for the agency to do this, you’ll need to send an income withholding order issued by a judge. So you must go to court and prove that your ex has failed to fulfill his child support obligations.

If your children are still minors, you can apply for child support services offered by the state. The typical application fee is $25. This service will walk you through the legal process and is the “inexpensive route” to getting those child support funds, says Turetsky.

If your children are fully grown, you will need to hire a private attorney to help you go through the process—unless you applied for child support services when your children were minors, in which case you may be able to use the services.

Once your local Social Security office has this order, it will enter the data about your case into their database and begin withholding the child support payment, or a percentage of the total back child support that’s owed, from your ex’s benefit payments. If no benefit payments are being made, the garnishment order will remain on file, and those deductions will resume if he begins collecting again.

Under federal law, the Social Security agency can only withhold up to 65% of your ex’s monthly benefit. It may be less depending on your state law and whether your ex is supporting another child or spouse. “The government also has the authority to take your ex’s entire bank account; however, some states look at the overall financial circumstances of the noncustodial parent,” says Turetsky. “This may be the only money he has to survive on.”

If you cannot collect sufficient payments from your ex-spouse’s Social Security benefits, your state’s child support enforcement office may be able to help you get the funds you’re owed by withholding the amount from state or federal tax returns also.

MONEY Ask the Expert

When Selling Winning Stocks Makes Sense

Investing illustration
Robert A. Di Ieso, Jr.

Q: Is there a benefit to taking profit on a stock that has done well over several years? It was $24 when we bought it and is $64 now. We will be in the lowest tax bracket this year and should be in a higher bracket in a later year. A planner suggested selling some, paying taxes on the profit, and repurchasing it. — Viola C.

A: “Taxes should never be the sole reason to trade a stock,” says Scott Bishop, director of financial planning at STA Wealth Management in Houston. Likewise, you can get into trouble holding a security longer than you should simply for the sake of saving a bit on taxes.

That said, there are times when selling in one year may be more opportune than selling in another.

First, you need to understand how any gains from the sale of stock will be taxed.

If you had held the shares for less than a year, they would be taxed at your marginal tax bracket, in which case an early sale would probably do nothing to improve your tax situation.

Since you’ve owned these shares for several years they will be taxed at your long-term capital gains rate. “Currently the tax rates on long-term capital gains vary depending on your income level,” says Bishop.

If you’re in the 10% or 15% marginal bracket, your long-term capital gains will be nothing. Obviously, there would be a benefit to selling before the end of this year if you expect to be in either of those brackets in 2015.

If you’re in the 25% to 35% bracket, your rate will be 15%. And if you’re in the 39.6% bracket, you’ll be taxed 20% on the gains; plus you may owe an additional 3.8% of net investment income tax stemming from the Affordable Care Act.

It’s probably helpful to do the math and see how the decision translates to dollars.

Say you own 100 shares of stock that has appreciated $40 a share. If you’re in the lowest brackets this year, selling will save you $600 versus waiting until the following year and paying at the 15% rate. If your long-term rate is 15% and you think it will be 20% next year, the difference is only $200.

“Some people get stuck in this analysis when they are talking about a pretty small dollar amount,” says Bishop, noting that you should be sure to factor for the transaction costs of a sale.

If you decide to sell, there are no rules preventing you from buying the very same stock the next day. (The only time you need to worry about this is when you sell a stock at a loss and hope to write that off against a gain.)

That said, if you wouldn’t buy the stock again at today’s prices, says Bishop, consider putting the proceeds to work somewhere else. “Don’t let biases drive the decision to buy the stock again,” he says. Just because the stock has done well so far doesn’t mean it will continue to do so.

Finally, if you’re looking at taking advantage of a lower tax bracket to sell a single stock, ask yourself if you should use this window to make more substantial changes to your portfolio. For example, maybe you’d benefit from converting some of your IRA holdings to a Roth IRA.

In doing so, you’ll owe income taxes now but have the benefit of tax-free withdrawals later. Over time, that could translate not just to hundreds of dollars in savings but possibly thousands.

MONEY Ask the Expert

The 3 Secrets to Maxing out Social Security Spousal Benefits

Ask the Expert Retirement illustration
Robert A. Di Ieso, Jr.

Q: My wife was born in 1950 and will be 65 this year; I was born in 1953 and will be 62. As I have earned more in my lifetime, my Social Security benefit is estimated to be larger than hers at full retirement age. But her spousal benefit would be less than half of her individual retirement benefit. When the younger spouse has a higher estimated benefit, what are some strategies to explore? —Jack

A: If there’s one set of rules worth understanding, it’s spousal benefits. Every year, couples leave literally billions of dollars on the table because they make the wrong claiming choices. Here are three secrets to getting this claim right, and how they apply to your situation:

1. To get spousal benefits, the primary earner must file for retirement benefits first. Spousal benefits can equal as much as half of the amount the person would receive in individual Social Security benefits at full retirement age (FRA). For anyone born in 1943 through 1954, FRA is 66; it will gradually rise to 67 for people born in 1960 or later.

2. If you file for a spousal benefit before your FRA, you will end up with a smaller amount. You can file as early as age 62 but if you do, you will be hit with benefit reductions. Retirement benefits will rise each month they are deferred between FRA and age 70. Spousal benefits peak at FRA, so there is no reason to defer claiming them past that point.

An early filing will also trigger a Social Security provision called deeming—this means the agency considers you to be filing both for your individual retirement benefit and you spousal benefit. You will be paid an amount roughly equal to the greater of the two benefits. But you lose the opportunity to get increases for delayed claiming on your individual benefits. This is a bad deal.

3. Use a file-and-suspend strategy. If both spouses defer claiming until FRA, the higher-earning spouse can file and suspend benefits then. This way, the lower-earning spouse can file for spousal benefits, allowing his or her individual retirement benefit to grow due to delayed retirement credits. Then you can each file for maximum retirement benefits at age 70.

So what’s the right approach for you? If you both defer filing, you can file and suspend your benefit at age 66. This will enable your spouse, who will have turned 69, to file for her maximum spousal benefit. Meanwhile, she can continue to allow her individual benefit to grow due to delayed credits up to age 70

Alternatively, your wife can file and suspend at 69, allowing you to file for your maximum spousal benefit at 66 and collect it for four years, while deferring your own retirement benefit until 70. Even though you are the higher earner. this strategy seems likely to maximize your family’s total benefits.

There’s another advantage to waiting until 70: if you die before your wife, she will receive a widow’s benefit that will equal your maximum retirement benefit. (She can only collect the greater of her retirement or widow’s benefit.)

Of course, choosing the best spousal claiming strategy for a couple depends on many factors, including relative ages, finances and health. This is something married partners need to talk about.

Best of luck!

Philip Moeller is an expert on retirement, aging, and health. He is the co-author of “Get What’s Yours: The Secrets to Maxing Out Your Social Security,” and a research fellow at the Center for Aging & Work at Boston College. Reach him at moeller.philip@gmail.com or @PhilMoeller on Twitter.

Read next: New Rules for Making Your Money Last in Retirement

MONEY Ask the Expert

When It Comes to Muni Funds, Does Location Matter?

Investing illustration
Robert A. Di Ieso, Jr.

Q: I live in New York state and currently invest in a high-yield municipal bond fund. Should I switch to a tax-exempt New York muni fund? — Connie

A: There are lots of considerations when weighing the pros and cons of a high-yield bond fund that invests nationally versus a state-specific municipal bond fund.

The three big ones: “You want to think about taxes, volatility and credit quality,” says Stephen DeCesare, a certified financial planner and president of DeCesare Retirement Specialists in Marlton, NJ.

Let’s start with taxes, since that is the primary perk of investing in municipal bonds, which are issued by local and state government entities to cover general expenses or fund specific projects. Most, but not all, municipal bonds are exempt from federal income taxes, which is a selling point in and of itself.

If you’re in the 28% tax bracket, for example, a 3% yield on a tax-exempt muni is the equivalent of a 4.17% taxable bond. You can run your own numbers using this simple Vanguard calculator.

There are, of course, caveats, such as if you owe the alternative minimum tax. Also, gains on principal are subject to capital gains tax. Likewise, it generally doesn’t make sense to own tax-exempt municipal bonds in a tax-deferred retirement account.

That said, because you live in a state with high-income taxes – New York’s top rate is 8.8% — narrowing your focus to New York can further sweeten the tax side of the deal.

If you lived in a state with low income taxes, however, you might be better off in a national tax-exempt municipal bond fund. Managers of those funds typically have more leeway to find opportunities without necessarily ramping up risk.

It’s always important to weigh the breadth and health of your state’s muni market against any tax break. New York has a relatively robust municipal bond market, says DeCesare, which is another reason why a state-specific muni bond fund could make sense in your case.

Once you’ve looked at all the variables, the decision will ultimately hinge on your risk tolerance and income needs. Remember that high-yield municipal bond funds invest the majority of their assets in bonds that are rated below-investment grade or aren’t rated. These funds can put up higher total returns – even after taxes – but with that comes more credit risk and in turn more volatility.

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