Bereavement and Social Security: The Facts

Thinking about a spouse’s death is not something anyone likes to do, but it’s an important part of financial planning. If your spouse dies, will you receive any or all of his or her Social Security benefit?

You could – but it depends on your age when your spouse passes away.

Let’s say you and your spouse both are eligible for or receive separate Social Security benefits, and your spouse dies. You can either collect your own benefit or your survivor benefit – but not both at the same time.

You’ll want to choose the greater benefit – and which one that is depends on whether you have reached your full retirement age, as defined by the Social Security Administration, when your spouse died.

If you’ve already reached full retirement age: You’ll be eligible to receive your deceased spouse’s full benefit, assuming your spouse’s benefit is larger than yours.

As an example, let’s say you’re 68 and collect $1,000 a month, and your husband is 70 and collects $2,000 a month. If he dies, you’ll be able to collect his $2,000 a month instead of your $1,000, since you are past your full retirement age.

If you haven’t reached full retirement age: You’ll be eligible to receive a fraction of your deceased spouse’s full benefit, just as you would if you took your own benefit early.

As an example, let’s say you’re at least 60 but have not reached your full retirement age when your spouse dies at age 70.

You could collect between 71% and 99% of your deceased spouse’s benefit, depending on your age.

Try these resources for more information:

•    SSA Publication 05-1007, What You Need to Know When You Get Retirement or Survivors’ Benefits

•    SSA Publication 05-10084, Survivors’ Benefits

•    SSA retirement age calculator. All at

•    Your financial advisor

Managed Futures: Are They Right for You?

Returns on managed futures are appealing, but investors may want to look before they leap.

A managed future is like a mutual fund, except instead of stocks or bonds, it holds futures contracts and similar securities. Managed futures are overseen by commodity trading advisors (CTAs).

Managed futures may seem to offer solid returns in any economic environment. The Barclay CTA Index of managed futures rose 14% in 2008, beating the S&P 500 index by leaps and bounds. It has gained an annual average of 12.2% since 1980, losing money in only three of those calendar years.1

But are managed futures right for you? Probably not. Here’s why:

•    Performance may not be as good as it seems: The historical performance of managed futures is based only on the results of those managers who choose to report their returns to industry databases, meaning the worst funds may not get into indices.

•    Fees are high: You may have to pay an introducing broker to get into a managed future. Once in, managed futures charge a management fee, plus a percentage of any “new new profits.” All told, the fees can reach 6% to 8% annually.

If you’re looking for an alternative investment strategy, we recommend you contact your financial advisor, who can point you in a suitable direction.

1Index returns assume reinvestment of all distributions and do not reflect fees or expenses. It is not possible to invest directly in an index.

Why Municipal Bonds Offer Opportunities Today

The turmoil in the credit markets has made many investors nervous – but it has also created opportunities for those who are willing to consider municipal bond funds.

Municipal bonds are issued by state and local governments and agencies, such as counties, cities, schools and water districts. They’re used to finance public projects such as roads, schools and airports and certain private projects, including nursing homes and assisted living centers.

Traditionally, investors have purchased municipal bonds primarily because they offer tax-free income: The interest on municipal bonds is exempt from federal taxes, and because most states don’t require their residents to pay state and local taxes on interest received from bonds issued by political entities within those states, it may also be exempt from state and local taxes.

The Pre-Refunded Bond

Today, many investors are interested in a specific type of municipal bond called a pre-refunded bond, because these bonds offer additional benefits.

A “refunding” occurs when a municipality issues a bond at a lower rate to retire a bond that was issued earlier at a higher rate. In most cases, municipalities will spend the money raised by the new issue on government debt such as Treasuries and then, at a later date, use these securities to retire the older bond.

Why Consider these Bonds

Why consider municipal bonds that are candidates for refundings? First, these pre-refunded bonds are essentially backed by the federal government, but they generally offer a higher yield than do Treasuries. Second, if the municipality does cash the bond, the bondholder has received a yield that one might expect to receive from a longer-term bond for a short amount of time. As a result, prices for pre-refunded bonds usually rise.

Buying interest for these bonds is higher now than at any time since the early 1990s, and as a result, they may be hard to find. Your financial advisor can help you locate them.

Investing in Your Values with Socially Responsible Funds

Many investors turned off by the questionable business practices that made headlines during the financial crisis are seeking to align their personal values and their retirement savings by making “socially responsible” investments.

So-called socially responsible mutual funds have been around for a while. Typically, they don’t invest in companies that create products or have practices deemed undesirable. In some cases, that may mean avoiding companies that manufacture alcohol or tobacco or are involved in gambling; in other cases, it may mean avoiding companies with poor pollution records or those involved in nuclear energy.

After those criteria are met, these funds typically screen for companies in the same way other funds do – by looking for strong balance sheets and good growth prospects. They may also consider factors such as workplace diversity and environmental impact.

In the past, socially responsible funds were primarily available to individual retail investors. But today, more investors are demanding – and getting – these funds as options in their retirement plans. The question is, will socially responsible funds outperform the market any better than traditional funds? That remains to be seen.

If you think the governance offered by socially responsible funds is good for your portfolio, you may want to speak to your financial advisor. He or she can help direct you to a fund that meets your values as well as your investment goals and risk tolerance.