Indiana, PA - Indiana County

SMART MONEY: First wife collects benefits on man's Social Security

by on May 11, 2014 1:50 AM

DEAR BRUCE: My husband was married 10 years ago to his first wife. She is collecting disability benefits on his Social Security although she married after they were divorced. Will this affect me in any way as his present wife? -- F.K., via email

DEAR F.K.: The fact that your husband's first wife is collecting will in no way impair your ability to collect from Social Security. Assuming you meet the other criteria that are applied to the specific program, you are home free. In other words, even after 10 years divorced, you can collect, the first wife can collect, and possibly a third could collect, should that person meet the criteria that applies.

DEAR BRUCE: I am 49 years old, married, with four children. I would have had my house paid off, but the money I put away for college didn’t grow, so I used a home equity loan and then refinanced at 3.1 percent for 15 years.

Because my house would have been paid off, half of my life insurance is expiring, and so I am shopping for life insurance.

I am thinking $300,000 term life for me and $200,000 for my wife.

Our house is worth $230,000 (mortgage payment is $961), and the balance of the mortgage is $121,000.

We have a car payment of $200 a month for three more years ($7,300 balance), and we owe $20,000 on no-interest credit cards (14 more months).

The $20,000 was on a home equity line of credit, but I had it transferred to save interest and protect me in case rates go up. I also owe $7,000 on my home equity line.

We have $30,000 in accounts that I can pull money out of with one week’s notice with no penalties. We also have $50,000 in Roth IRA accounts. We have $150,000 in our 401(k) and $354,000 in a lump-sum pension fund (my wife would get it in full if I die), which I can’t touch now.

Also, I have monthly pension benefits that are calculated at $1,485 a month, but the monthly payout will probably be close to $3,000 when I get to retirement age of 57.

I have been paying into Social Security since I was 17. I make $96,000 and my wife makes $25,000 with her own business, while being a super mom and wife to me.

I am leaning toward term life, but am unsure of whether to go for 20 or 30 years, and I am unsure on the amount.

Can you help me with these two factors? Right now I have $300,000 with $100,000 running out and $200,000 on my wife with $100,000 running out. — K.K., via email

DEAR K.K.: I appreciate your lengthy letter, but cutting to the chase: With all the different expenses you have, it would seem to me that you would be better advised to kick up your $200,000 to $400,000 because you are the primary breadwinner.

For your wife, who has less income, perhaps $125,000 in term insurance.

Arguments can be made for a few dollars in one direction or another, but $400,000 on you and $125,000 on your wife, I think, would be adequate.

Whether you want to go 20 or 30 years is another question.

I would consider the 30 years because that will take you into your 80s and you will clearly be more prone to natural death at that point.

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