Smart money: Changes in Social Security troubling

Dear Bruce: I know of a friend who is receiving $1,200 from Social Security.

Her daughter died last year and my friend just received notice from Social Security that her check was decreased to about $800 because she inherited a lot from her daughter.

She went to our Social Security office and was told that it was correct. How can this be? How can our Social Security be taken from us like that?

I’m concerned not only for her, but because the same thing will probably happen to me when my mother dies. I stand to inherit $500,000 to $750,000.

I waited until I was 66 to start drawing Social Security so I could get the highest rate (instead of drawing on it when I was younger). It would not be fair to reduce the amount of my Social Security check just because I inherited some money. I worked hard for that money all my life!

– M.T., email

Dear M.T.: As I read between the lines, the government is suggesting that because your friend’s income is essentially increased, the money being distributed on Social Security will be reduced. While $400 a month seems to be a rather substantial decrease, you didn’t indicate how much inheritance was involved.

The $500,000 to $750,000 you talk about in your next paragraph is a substantial amount of money. The fact that you waited until you were 66 years old to start withdrawing to get the highest rate might have been a good plan, but then you say you stand to inherit up to $750,000.

The logic here is clear: You don’t need as much money, in the government’s opinion, if you inherit a large amount, so your check is going to be reduced. The fact that you worked hard for the money is all very well, but those rules were available to you before you made the decision to wait. I assume you knew you would be inheriting upon your mother’s death.

While the reduction in Social Security may be a bit of a burden, I am certain most people would be happy to share your situation.

Dear Bruce: We have been married for eight years. We are both in our late 70s. We do not own anything together. We keep our finances separate. Do you think it’s wise for a married couple to handle their finances like this?

– Reader, email

Dear Reader: If you were a young married couple in your early 20s, I would say absolutely not. I assume you were married at least once before. You may have children you want your assets to go to. For someone your age, I have no problem with you keeping your finances separated.

If you are trying to be certain that the assets you acquired during your first marriage go to your children, you should exercise a post-nuptial agreement. Without it, at least a third of your assets would have to be left to your spouse. That may be perfectly acceptable to you, but if not, the post-nuptial could obviate that.

Send your questions to Smart Money, P.O. Box 2095, Elfers, FL 34680 or email bruce@brucewilliams .com.