Ask Larry: In What Month Does Social Security Consider Me To Be 62?
Today’s Social Security column addresses questions about how and when Social Security determines someone to have turned 62, filing for retirement benefits at FRA before later spousal benefits and retroactive retirement benefits before survivor’s benefits. Larry Kotlikoff is a Professor of Economics at Boston University and the founder and president of Economic Security Planning, Inc.
See more Ask Larry answers here.
Have Social Security questions of your own you’d like answered? Ask Larry about Social Security here.
In What Month Does Social Security Consider Me To Be 62?
Hi Larry, Social Security website says if your birthdate is on any day after the second day of the month, you are not that age for the entire month. You can start your benefits as of the following month. Your answer to a previous question says you can start your benefits in the month you turn the age you wish to initiate retirement benefits. Which is correct? Thanks, Chris
Hi Chris, With regard to Social Security retirement benefits, the only time when being of a certain age for an entire month is when a person turns age 62. The first month that you can collect retirement benefits is the first month that you are 62 for a whole month. Social Security counts people as reaching their next age on the day prior to their birthday, so a person born on November 2 1960 for example could claim retirement benefits as early as November 2022.
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You can also claim retirement benefits any month after the month you turn 62, in which case your birthday is irrelevant when calculating your benefit rate unless you were born on the first day of a month. In that case, Social Security considers you to have reached your next age on last day of the prior month prior to your birthday.
So for example, if a person reaches full retirement age (FRA) on November 29 2022 and they claim retirement benefits on any day in November 2022, they will be paid their full unreduced retirement benefit rate. Best, Larry
Would It Make Sense For My Wife To Apply For Her Own Benefits Now?
Hi Larry, I’m 63 and my wife is 65+ and eligible for Social Security. Her payments if taken now will be small, ~1,100 per month and mine are estimated at ~$4,000 if I work to 70. We both work, though her income is variable as a consultant.
Would it make sense for her to apply now given the little increase from waiting until 70? I understand she could actually receive spousal benefits based upon my work history and would like to understand its likelihood and how to apply for this. Thanks, Ronald
Hi Ronald, I don’t know how close your wife is to her full retirement age (FRA). but yes, based on the amounts cited in your question it sounds like your wife might want to claim her retirement benefits effective no later than the month she reaches full retirement age (FRA).
When you apply for your retirement benefits, your wife can apply for an excess spousal benefit, which will then be calculated by subtracting her primary insurance amount (PIA) from 50% of your PIA. A person’s PIA is equal to their Social Security retirement benefit rate if they start drawing their benefits at full retirement age (FRA).
If your wife waited instead until 70 to start drawing her own benefits, then her eventual excess spousal rate would be calculated by subtracting her age 70 rate from 50% of your PIA. Therefore, if 50% of your PIA will be higher than your wife’s own rate even if she waited until 70 to start drawing, your wife’s combined benefit amount once she starts drawing an excess spousal benefit would be the same regardless of whether she had started drawing her own benefits at FRA or 70.
It sounds like you and your wife may want to consider using my company’s software — Maximize My Social Security or MaxiFi Planner — to ensure your household receives the highest lifetime benefits. Social Security calculators provided by other companies or non-profits may provide proper suggestions if they were built with extreme care. Best, Larry
If My Wife And I Both Wait Until Age 70 To Claim Our Benefits But If I Die Before Then, Could My Wife Claim Her Own Benefits Retroactively For Six Months And Then Start Widow’s Benefits?
Hi Larry, My wife and I are basically the same age and we both just reached FRA, her FRA retirement benefit is about $,1600 and mine is about $2,400. We do not plan to claim for either of us until 70. If I were to die say a year from now, could she file for retroactive benefits on her own record, collect six months payments and then file for her widow’s benefits and get whatever my monthly payment would be upon my death? Thanks, Arnold
Hi Arnold, Yes, since in the scenario you present your wife would be at least six months past her full retirement age (FRA) at the time of your death, she could file for six months of retroactive benefits on her own account and then claim widow’s benefits in your month of death.
And provided that you haven’t started drawing your benefits at the time of your death, your wife’s widow’s rate would be calculated based on the amount that you would have been paid if you had started drawing your benefits effective with your month of death. Best, Larry
This Week In Credit Card News: Apple Pay Later Launched; Credit Card Interest Rates Hit Record High
Apple’s Buy Now, Pay Later Plan Launches, Allowing Users Loans for Purchases
Apple launched Tuesday Apple Pay Later, a buy now, pay later feature that allows users to split purchases into four payments over the course of six weeks. For now, the service will be available only to randomly selected users who will get early access to a prerelease version of Apple Pay Later. Apple plans to offer the feature to all eligible users in the coming months. Apple Pay users will be able to apply for Apple Pay Later loans of $50 to $1,000, which can be used for online and in-app purchases on their iPhone or iPad. [USA Today]
Credit Card Debt Is at Record High as Fed Raises Rates Again
As the Federal Reserve raises interest rates again, credit card debt is already at a record high, and more people are carrying debt month to month. The Fed’s interest rate increases are meant to fight inflation, but they’ve also led to higher annual percentage rates for people with credit card debt, which means they pay more in interest. The Fed announced last Wednesday that it would increase rates another quarter of a point. With inflation still high, people are leaning on their credit cards more for everyday purchases. 46% of people are carrying debt from month to month, up from 39% a year ago, according to Bankrate.com. Data also shows more people are now falling behind on payments. [Associated Press]
Florida Governor Ron DeSantis Introduces State Legislation Banning CBDCs
Florida Governor Ron DeSantis proposed legislation on Monday that would ban central bank digital currencies from the Sunshine State, portraying it as a measure to safeguard Floridians’ financial privacy. The legislation would prohibit in Florida any CBDC that the U.S. Federal Reserve could introduce and any created by a foreign government, outlawing the technology entirely from being used as a form of money within the state. [Decrypt]
What Happens to My Credit Card Account if the Issuing Bank Shuts Down?
In the event of a bank failure, the Federal Deposit Insurance Corporation typically steps in and takes over the institution. The FDIC keeps the operations of the failed bank ongoing, including its credit card business. In the meantime, the regulatory authority would look for a buyer for the failed bank. You should keep up with your bank’s website for any updates on your credit card account. If a buyer emerges, the failed bank’s credit card portfolio would be transferred to the acquiring institution. This buyer would then become the new issuer of your credit card and set the terms of your account. The new issuer might change your interest rate on new transactions, for one, after giving you 45 days’ notice. It could even change the interest rate on your existing balances in certain circumstances, as well as your credit limit after giving you sufficient notice. You might even get a new card under a different brand name. [Yahoo Finance]
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CFPB Officially Takes Aim at Credit Card Late Fees
On March 29, the CFPB published a proposed rule in the Federal Register to amend Regulation Z, which implements the Truth in Lending Act, to limit late fees charged on credit card accounts. If adopted, amended Regulation Z would adjust the safe harbor dollar amount for late fees to a flat $8, down from the current safe harbors of $30 for a first violation and $41 for a second violation within six billing cycles. It would also provide that late fee amounts must not exceed 25% of the amount of the required payment deemed late. [Lexology]
Walmart Wants to Buy Back Your Old Electronics Turning Your Junk into Walmart Gift Cards
Walmart has recently launched its Gadgets to Gift Cards program, an innovative way to dispose of used electronic devices that reduces the amount of waste in landfills. If you have old cell phones, tablets, video games, consoles, laptops, GPS devices, MP3 players, and cameras you don’t have any use for, you can trade them in by filling out an online appraisal form. Then, you pack up your items following the directions given to you by the Walmart CExchange program, and ship them away for free. Once your package is received, Walmart will appraise your devices in about two to four weeks, where you will then be paid however much the item is worth. Though they can’t pay you in cash, Walmart offers a Walmart eGift Card that will allow you to use the funds on Walmart.com or on Samsclub.com, if you’re a member. [Cord Cutters News]
Rocket Mortgage Launches a Credit Card to Help You Save For or Pay Off a Home
The new Rocket Visa Signature Card comes with a rewards system that’s hard to decipher at first glance. While advertised as a cash-back card, the card offers 5X Rocket Rewards points on all purchases. The value of your rewards will depend on how you redeem them. Your points are worth 1 cent each when redeeming towards down payment and closing costs with Rocket Mortgage (up to $8,000 in rewards), so you’re essentially earning 5% cash back on all purchases if you use your points this way. Or your points are worth 0.4 cents each when redeeming towards Rocket Mortgage loan principal. In this case you’re effectively earning 2% cash back on all purchases. Your points are worth 0.25 cents each when redeeming towards a statement credit, meaning you’re earning 1.25% cash back on all purchases. [CNBC]
Why and How Are Virtual Cards Disrupting the Finance Industry
Virtual cards to the finance industry are what mobile phones were to the telecommunications industry. In 2022, the virtual card market size was $411 billion. By 2032, this valuation is expected to shoot up to a staggering $1.3 trillion. Virtual cards carry the potential to change the way you spend. Here are some reasons why. Transacting using virtual cards is not only faster and seamless but also secure and convenient. Virtual cards are widely accepted: over 39% of businesses in the US use virtual cards to make B2B payments. Virtual cards are environmentally friendly. [Finance Feeds]
Buy Now, Pay Later Could Become a Multi-Trillion Dollar Business
The market for buy now, pay later, an alternative to credit cards whose popularity exploded during the pandemic, could surge to nearly $3.7 trillion by 2030 as more consumers take advantage of ways to pay for goods and services in interest-free installments instead of lump sums. That’s according to Straits Research, which puts the market at $132 billion now. As of last year, 360 million people around the world used BNPL, a number that could almost triple to 900 million by 2027, according to Juniper Research. While growth projections vary widely, BNPL is expected to record a compound annual growth rate between 20% and 45% through the end of the decade. PayPal dominates the market with four times as many users as the next largest BNPL provider. [Investopedia]
Cryptocurrency Outlook Picks Up Amid Bank Crisis
After a roller-coaster year filled with arrests, speculation, scams, bankruptcies and billions in value lost, cryptocurrency market experts could hardly wait for boring times. Then Silicon Valley Bank hit the skids, and financial markets were thrown out of whack. For cryptocurrencies, particularly bitcoin and ethereum, the 2023 bank panic has been a net positive. The bitcoin price, already up strongly to start the year, recently moved to around $28,000. That’s its highest level since June, before Sam Bankman-Fried’s FTX exchange started to melt down. Ethereum is trading above $1,700 and near September highs. [Investor’s Business Daily]
Credit Card Spending Topped $13 Trillion Last Year
Global spending on credit cards last year rose to more than $13 trillion across in-store and online checkout, according to an annual report from Fidelity National Information Services. FIS attributed the rise to more sources of credit, including digital wallets loaded with credit cards, buy now, pay later options and point-of-sale financing offered by fintechs, banks and merchants. Facilitated by real-time payment rails, account-to-account payments are becoming a more popular payment method globally. Global account-to-account transaction value was about $525 billion last year. [Payments Dive]
Yes, You Can Put Your Taxes on a Credit Card
It turns out it is possible to put your federal tax bill on a rewards credit card, reaping hefty rewards or, if it’s what you need, gaining extra time to pay off your bill. But there are some big caveats and risks. Among the biggest hurdles: Putting your federal taxes on plastic isn’t free: the third-party processors that the IRS uses all charge a fee for the service. Fees range from 1.85% to 1.98%. Like anything else you charge to your credit card, you will incur interest charges at your purchase APR if you carry a balance from month to month. Most credit card issuers report your credit card balances and the amount of available credit to all three major credit bureaus monthly. So having either a large amount of debt or maxing out your credit cards may lower your credit score while those balances are reported. That could ding you if you’re shopping for a top interest rate on a loan, such as a mortgage. [The Wall Street Journal]
The Spending Breakdown: Here’s What We Bought In February
It’s been a financial doozy out there for consumers lately, to say in the very least. Inflation continues to bubble up to the forefront of many stories, followed by tech sector layoffs and skittishness within the banking sector.
On March 15, the U.S. Census Bureau released its results for retail sales in February. The report is a useful roadmap that provides insight into what consumers are prioritizing and spending on. It also showcases the segments within retail where consumers might have cut back or pared down.
February was a mixed bag for consumers. In response to the results, Chip West, a retail and consumer expert at Vericast, a marketing solutions company, noted that higher interest rates seemed to affect some consumer discretionary purchases.
“Consumers have been under intense pressure from continued high inflation where interest rates are headed,” writes West in an update.
Overall, consumers spent $697.9 billion in February, sightly down from $700 billion in January. Within these numbers, many categories for this round showed slow to no increase, while some declined.
Digging a bit deeper, non-store retailers were among the biggest winners, with consumers spending $112,722 billion, up from $110,956 billion in January. General merchandise stores reported $73,794 billion, up from $73,392 billion. Within that category, department stores edged down to $11,579 billion from $12,056 billion in January.
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Groceries have been a large part of the spending narrative over the past few quarters because of inflation. The increase in spend on food and groceries continued in February with consumers plunking down $81,014 billion in February, up from $80,618 billion in January. During those same time periods, grocery stores were up slightly to $72,540 billion from $72,142 billion.
Consumers paid slightly more for electronics (a total of $7,214 billion) during this time period as well.
We are also still tightening our proverbial belts by cutting back on some purchases, and February was no exception. Furniture and home furnishings, for example, took a hit, reporting $12,048 billion in sales compared to $12,359 billion in January.
In the automotive department, motor vehicles and parts also slowed to $130,647 billion from $133,037 billion. Meanwhile, gasoline stations reported $58,379 billion, down from $58,721 billion in January.
Finally, we bought less clothing totaling $26,691 billion compared to $26,906 billion in January and dined out slightly less at $92,740 billion in February, down from $94,789 billion in January.
The results are not all dismal, according to Neil Saunders, managing director of GlobalData. Saunders sees retail sales as being in “positive territory with overall spending up by 5.6% over the prior year.”
Importantly, “Consumers continue to dig deep to fund consumption and are showing remarkable resilience despite various unfavorable economic factors,” according to Saunders. Despite digging deep, however, consumers are also “gradually changing behaviors to cope with higher inflation and numerous pressures on their household budgets.”
As we head into spring, one thing remains clear: the consumer may be battered, but the spending isn’t going away. The next report is expected on April 14 and will help us round out and complete the spending picture for the first quarter of 2023.
A Deeper Look At DeSantis’ Anti-ESG Legislation: What Is ESG?
Florida’s anti-ESG legislation, championed by Governor Ron DeSantis, is positioned to be the model for anti-ESG legislation in the United States. 20 Republican Governors have already signed on to adopt similar policies. The legislation itself is massive and sweeping, touching on multiple areas of law and policy. This is the first in a series of articles that will deep dive into Florida’s proposed legislation and look into its potential impacts in the larger ESG debate. However, before looking at the language of the legislation, we must start at the beginning. What is ESG?
ESG stands for environmental, social, and governance. It has gone by other names over the years including impact investing, social impact investing, and sustainable investing. At its core, it is an investment strategy. A way to use your money to impact change. We often see this in political movements. Conservatives boycotting Disney because of “woke” policies, or going to a business to support their Christian values. Liberals boycotting businesses over Black Lives Matter stances, or supporting environmentally friendly companies. Companies know that, and they include it in their marketing strategy.
In theory, ESG just took that to the next step and applied it to your retirement funds, giving you the option to choose how your money is invested. Fund managers already present their clients with multiple options, allowing the investor to choose their level of risk. ESG adds another option, where the investor can choose a lower return, but feel like their money is doing something good. Investing in a green company may not make you as much money, but you’ll feel like you’re doing your part to help the environment. If that is your choice, you should be allowed to make it. However, ESG took on a life of its own.
If I told you that the United Nations developed a plan to manipulate financial investments to force businesses to enact environmental and social policies that align with their goals, announced by Al Gore, you would probably start pushing me into the conspiracy theory category. Yet, it happened. It didn’t happen in secret. There are no leaked documents or conspirators. It happened in public, through public meetings, with clearly stated goals and outcomes, and they held a press conference to announce it. We just didn’t know what they were talking about.
That push drove ESG, primarily in the European Union. This rapid growth was problematic for those tasked with making financial decisions. The first real issue for ESG was the lack of clarity. Sure, “e” stands for environmental, “s” stands for social, and “g” stands for governance. “C” is for cookie, and while that is good enough for the Cookie Monster, that is not good enough in the world of financial investments. Terms need clear definitions, measurements, and projected outcomes.
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When most people discuss ESG, they gravitate towards the environmental piece. It appears to be fairly self-explanatory; a company that is environmentally friendly. However, environmentally friendly is a vague term. It could be a reduction in waste, adding solar panels, low emission vehicles, or any number of factors, all of which are self-reported by the company. As no reporting standards are currently in existence, companies can make their claims based on their own internal calculations, and fund managers can make their choice to invest based on what they choose to prioritize. This has led to what is known as greenwashing, or when a company exaggerates its environmental policies in order to appear more environmentally friendly than they really are.
Do not overlook the social and governance components, as that is where the real conflict arises. In the United Kingdom, social includes investment in affordable housing. In the European Union, it looks at factors like the use of slave labor in the supply chain. In the United States, it includes diversity and inclusion. Those factors, and how they are weighed, vary wildly from jurisdiction to jurisdiction and fund manager to fund manager. ESG is not just about the environment.
There are international efforts to create reporting standards, but they will not be released until later this year and no front-runner has been selected. That alone is problematic, to say the least.
To this point, I’ve presented ESG as if it is your choice, but ESG has taken a turn from elective to mandatory. A select group of fund managers followed the UN’s lead and started including ESG factors in all their funds, under the premise that ESG is good for the long-term growth of a company. This approach has wide ranging impacts. It effects long-term growth calculations for publicly held companies. It impacts credit ratings for government bonds. Banks are calculating the risk of business loans and accounts based on ESG. What was an abstract concept a few years ago, is now directly driving sectors of the business and financial markets.
In response, business leaders and Republican elected officials began pushing pack. The Trump administration introduced a Department of Labor rule limiting ESG that was eventually overturned under the Biden administration. States then started taking action. Texas struck first by adjusting how they invested state pensions. Florida followed soon thereafter by doing the same, then took it a step further introducing their anti-ESG legislation.
The legislation addresses five key areas: investment of state money, investment of pension funds, issuing bonds, banks, and government contracts. Those areas are about states controlling what they can control. Over the next few articles, each of those areas will be looked at in depth. What is happening in Florida could be the future of the anti-ESG movement in the United States.
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