By Elliot Raphaelson
Q: I need help with an insurance policy. I no longer have a local agent to answer my questions. I have an endowment policy, and there is a term on my statement I don’t understand. Specifically, it includes the following: “family endowment at age 85.” What does that mean? I am approaching 85.
A: The phrase “family endowment at age 85” means that when you reach age 85, you will receive the face value of the policy. The policy ends at that point. You no longer make premium payments. If you die before age 85, your beneficiary will receive the face amount of the policy.
Q: My wife recently was approved for Social Security disability payments. She is 62, and now receives $4,000 per month. We have been married over a year. I recently reached my full retirement age and receive $1,500 per month in benefits. Am I eligible for spousal benefits for 50 percent of her disability payments? If she predeceases me, would I then be eligible for survivor benefits? Will her benefits increase when she reaches her full retirement age?
She was married to her ex-husband for more than 10 years. He has not remarried. I have no idea what benefits he is receiving from Social Security. If I receive benefits based on my wife’s disability, do I have to share those benefits with him? Also, if he predeceases my wife, would she be eligible for survivor benefits?
A: Good questions. You are entitled to 50 percent of her benefit as a spousal benefit because 50 percent of her disability payment is more than what you are receiving. However, if she predeceases you, you would not be entitled to a survivor benefit based on her disability payments. You would only be eligible for a survivor benefit based on her work record. You would only be eligible for whichever amount is higher, the survivor benefit or benefit based on your work record—not both. Your wife would not receive a higher benefit when she reaches her full retirement age.
Regarding her ex-husband, if you are entitled to any benefit based on your wife’s benefit, any benefit he would be entitled to would not in any way impact your benefit. They are independent. If her ex predeceases her, she may be entitled to a survivor benefit if it is greater than the Social Security benefit she is receiving; she is not entitled to both benefits, only the one that is higher. A survivor benefit depends on the age of the survivor. The benefit is maximized at full retirement age. Since your wife has not reached her full retirement age, any survivor benefit she is entitled to would be prorated if she applies for it prior to her full retirement age. For example, the survivor benefit available at age 60 is 71.5 percent of the deceased worker’s full retirement benefit. Between age 60 and full retirement age, the survivor’s benefit is prorated.
Q: I am interested in buying some Series I savings bonds because of losses in my portfolio. Can you explain the pros and cons of I bonds. If I invested $10,000 and held them for a year-and-a-half, what would be the expected income taking into consideration the three-month penalty?
A: The main advantage of I bonds is that when there is a high rate of inflation, the interest on bonds will exceed all other conservative investments. You will never lose any of your initial investment if you buy Series I bonds. The main disadvantage is that you must hold them for at least a year before you can redeem them; also, as you pointed out, if you sell prior to a five-year holding period you forfeit three months’ interest.
Another potential disadvantage is that when inflation is low, which is unlikely for the immediate future, the interest paid will be lower. However, when that happens, you can redeem the bonds as long as you have held them for at least a year.
Regarding expected income, if you held the I bond for a year-and-a-half, if the average return was 9 percent, your total net interest income would be approximately $1,125, taking into consideration forfeiting approximately $225 for three-month’s interest.
(Elliot Raphaelson welcomes your questions and comments at [email protected].)
©2022 Elliot Raphaelson. Distributed by Tribune Content Agency, LLC.
The Epoch Times Copyright © 2022 The views and opinions expressed are those of the authors. They are meant for general informational purposes only and should not be construed or interpreted as a recommendation or solicitation. The Epoch Times does not provide investment, tax, legal, financial planning, estate planning, or any other personal finance advice. The Epoch Times holds no liability for the accuracy or timeliness of the information provided.
