Today I got my first, and quite possibly last, social security check. The word “security” in social security is one of those glaring oxymorons for U.S. citizens approaching retirement age.
The check is the whopping $255 survivor’s benefit I got as a result of Sue’s passing. I’m sure I pay more than that into the system every month. However, the good news is that, at age 62, assuming I live that long and assuming I quit working and assuming I don’t remarry by then, I may qualify for a monthly income, as a surviving spouse of Sue, in the approximate amount of $550 per month. That beats a sharp stick in the eye, but it’s certainly not enough income to retire on, and comes nowhere close to giving a 62 year old surviving spouse a sense of security.
Practical and Legal Advice (PLA) Part II (today’s blog) will explore the subjects of social security, disability insurance, life insurance and financial security, retirement income, health insurance, and what to do and what not to do before and after a spouse dies (and some of this discussion applies before and after anyone close to you dies). Sometimes it is necessary for this discussion to include the subjects of bankruptcy, welfare, and medicare/medicaid, so in my PLA Part III blog I will briefly touch on those topics, as well.
1.a. Life Insurance and Beneficiary Designations.
Once you are diagnosed with cancer, or any other serious disease or other medical conundrum, getting life insurance becomes more difficult, if not impossible. So I hope you had the good sense or good luck to purchase life insurance some time ago when you were still healthy and you thought you and your spouse would live forever. And I hope you had the good sense and tenacity to not cancel it or let it lapse. I had an associate and church friend who died at age 50 this past year. He had a massive heart attack. He’d been unemployed for a while, and, because of financial hardship, had let his life insurance lapse a few months before he died. Never never never let your life insurance lapse.
Some employers have life insurance for their employees which the employees and/or the surviving spouse may or may not know about. Be sure to check with your employer (or your spouse’s) to see if that’s the case. In my case my wife worked for a local school district, and they had a $50,000 life insurance policy on every teacher which was supplemental to the life insurance we had purchased.
Also, many businessmen who are in businesses with other people have buy-out agreements which require the business or the other partners/shareholders to buy out the decedent’s ownership share on death. These buy-out agreements often require the business to carry life insurance on key owners (in the old days it was called “key-man” life insurance, but today I’m sure it’s more p.c. to say “key person”). The life insurance proceeds typically are paid to the business, but the purpose of the insurance is so the business has the money to buy out the deceased owner; So the practical effect is the spouse of the deceased shareholder (or his/her heirs) get the money, and the other business owners get the business.
If I could advise those of you who can still buy insurance, particularly those under age 40, my advice would be to buy 15 or 20 year level term insurance that is convertible at any time to whole life insurance without a new qualification or approval. The insurance company will make you sign a beneficiary designation at the time you apply for insurance. That’s the form that says who will get paid the life insurance when you die.
Beneficiary designations are extremely important. Let me advise you now, check all your beneficary designation forms for every insurance account, retirement account, bank account, etc. that you can possibly think of, and when you are done doing that, call and make appointments with your employer’s human resources and benefits department(s) and make sure you know all the benefits available for disability, health insurance, and retirement (and life insurance if the employer has it) and be sure that you have signed all the forms necessary or advisable — including all beneficiary designation forms. Retirement plans (disability plans)that pay money to a retired (disabled) employee and, on the death (disability) of the retired (disabled) employee will pay money to the surviving spouse or someone else, also have beneficiary designation forms. Lots of people never get around to signing them. Get them signed! Check and double check. This is important for those plans that have different pay-out options like: A. Pay all the money to me for as long as I live but then don’t pay money to anyone else; or B. Pay me a little bit less every month for as long as I live, and then pay that amount, or a little less, to my surviving spouse for as long as he/she lives.
Sue’s retirement/disability plan had five different options. She chose the 75% plan, which pays me, as her surviving spouse, 75% of what she was getting.
Remember: If you don’t have a signed beneficiary form designating the person you want to get the money when you die, they probably won’t get the money, or, if they do, they’ll have to jump through extraordinary hoops to get it.
1.b. Life Insurance Pay Outs.
If a spouse just died and you need to collect the life insurance, start by calling the insurance company. Once they confirm that there is a policy in effect and you are the named beneficiary, they’ll send you a claim form, and they’ll tell you they will need a certified copy of the death certificate as well as a completed claim form. Some life insurance companies also require certified copies of marriage certificates. When they get those from you, they’ll either send you a check or wire the money to your bank. Of course, they’ll try to sell you their own investment accounts too, but just wait on that. (See section 5 below titled “Go Slow; Don’t Make Any Major Decisions Too Quickly)
So you just got paid the big money. Now that you’re rich, don’t blow it. Seriously, don’t spend it. You have to invest it and make it work for you. Spend the income, but try to avoid spending a bunch of the principal. Unless you are an experienced investor, please, please, please get some professional investment advice from a reputable financial planner or investment advisor. Widow/Widower fraud is a major concern. Be careful who you do business with.
2. Disability Insurance and SSDI.
If your cancer (or other illness) puts you in a situation of disability such that you can no longer work, check to see if your employer has disability insurance. California employees are usually covered by a state disability insurance plan. In the absence of employer coverage or self-insurance for disability, or state disability, — actually in addition to those, you should call or visit the social security administration office nearest you and request to apply for social security disability (SSDI). In Sue’s case, she had disability insurance through her employer’s independent retirement plan administrator (State Teachers’ Retirement Systems – STRS) that pays out like a retirement plan, where the payments were made to her for as long as she was disabled, and now the payments will be made to me in a lesser amount (we chose the 75% option) for as long as I live. Remember to submit an option beneficiary designation.
For more information about SSDI, go online to www.ssa.gov/pubs/index.html
3. Health Insurance, COBRA, and the Medicare/Medicaid Option.
Generally when you can’t work anymore, you lose your company-paid health insurance benefits. For the self employed or self insured, and those whose companies don’t carry health insurance, this is less of an issue; You’ve always paid your health insurance premiums anyway, so what’s new? If you can’t work anymore and you quit or are fired, you should be able to continue your health insurance through your company’s health plan for up to 24 months under the Federal COBRA continuation of health benefits act, however, you will have to pay the premiums.
But if you do work for a company or employer that has benefits, get a copy of your company’s benefits plan(s), including the health benefits plan booklet. I got a copy of all the several plan booklets from Sue’s employer, and read them all. Also make an appointment to meet with the benefits people at your employer. They are a wealth of information, and if continuing health coverage becomes an issue, they should be able to tell you what your options are. I found the benefits people at Sue’s employer very helpful and good to work with.
However, don’t assume that even the most knowledgable benefits personnel will know everything that applies to you. In reading the plan booklets I was surprised to learn several things that even Sue’s employer’s benefits people did not know. For example I learned that “if you become totally disabled while insured” then the plan has a waiver of premium for the life insurance plan “for as long as the disabling condition continues.” What that meant for me was that, even though Sue was going to stop working, her employer’s life insurance premiums would be paid and the employer’s $50,000 of life insurance would still be in effect for as long as she had cancer. When the doctors told Sue she had multiple myeloma, that was a disabling-condition life sentence.
If you are destitute and without health insurance, or if you qualify for Social Security Disability (SSDI) benefits, you will probably also qualify for Medicaid or Medicare. Medicaid used to be an automatic qualification for anyone granted SSDI but I am not sure if that’s still the case.
4. Retirement Income and Social Security.
Whether and when you get survivor’s benefits from your spouse’s retirement or social security depends on several things, including: A. Whether there was a beneficiary option in the spouse’s retirement plan and whether or not an option beneficiary form was completed and submitted; B. Your age, and your spouse’s age, and whether the plan benefits had vested.
I recommend calling the employer and/or the employer’s retirement plan administrator and the social security administration office directly, before this becomes a pressing issue, to ask about these questions. For more information about social security, go online to the social security information website at: www.ssa.gov/pubs/index.html
In regard to social security, I learned that, aside from the one-time survivor’s pay-out of $255, I might qualify for additional monthly survivor’s benefits (approximately $550/month) at age 60 if I stop working. Sue would have qualified for a significantly higher monthly benefit at age 60 if I was the decedent and she was the surviving spouse. That has to do with the amount of money contributed to the social security system; in our state teachers contribute to a teacher’s retirement fund and are mostly exempt from social security withholding. Ask all these questions when you call or visit your social security administration office; But don’t be intimidated if you don’t think you know the right questions to ask, because they will ask you a lot of questions and, based on your responses, they should be able to tell you what benefits you qualify for now, and what benefits you might qualify for later.
I intend to cover the following topics in PLA Part III:
5. Go Slow; Don’t Make Any Major Decisions Too Quickly.
6. Keep Working; Stay Active.
7. Bankruptcy Is An Option.
8. Charity and the Welfare Safety Net.