fyi50+: It’s time to watch 2020 disappear into the rear-view mirror of history and start planning for 2021. David, what are some good recommendations for Social Security and retirement planning for the new year?
David Freitag: There are five super important things everyone needs to do relating to Social Security in 2021:
1. Establish your myAccount with the Social Security Administration
When you have a myAccount, you have a unique username and password protecting you from phishing attacks and thieves who want to gain access to your Social Security and financial records.
2. Beware of Social Security Scammers
If someone calls saying they work for the Social Security Administration in Washington, D.C., and state you are subject to a fraud investigation, hang up. This is a national problem and responding to this type of call will expose your records to people who want your money.
3. Verify Your Reported Social Security Income
Check and verify how much income you reported to the Social Security Administration last year. Your retirement benefit check is based on the highest 35 years of your earnings history. If there is a mistake in your earnings history, it could cause a reduction in your retirement benefits.
4. Check Beneficiary Designations
Review the beneficiary designations on your 401(k) and IRA accounts. These are easy to forget, so be sure they are correct following any changes in your life.
5. Review Your Retirement Account Allocations
We are living through turbulent times and have witnessed massive changes in the equity markets. January is always a good time to revisit your 401(k) and IRA asset allocation percentages. Make sure they are in a balance with any revised short- and long-term goals you have for the New Year.
fyi50+: These are all great Social Security recommendations for the New Year. On another note, most of our readers have children. Do parents need to consider anything specifically going into 2021?
David Freitag: When the 2020 SECURE Act passed in 2020, parents lost the ability to shelter traditional qualified money in an IRA from taxes by using a “Stretch IRA.” The Stretch IRA allowed children to inherit IRA money and stretch the distributions from that IRA out over their entire lifetime. Now, beneficiaries who inherited IRA money must report it as income over a much shorter time that does not exceed 10 years.
As a result, early 2021 is a good time to review how this new rule might impact your gifting and estate plans. It might be better to start gifting programs now rather than waiting. Plus, I think it is better to see your children enjoy those gifts now, not in the future when you are no longer here.