Creative Strategies to Collect More Social Security Income (Part 1 of 2)

By Olivia Sandham

 

As mentioned in last week's post, this week we would like to start discussing “Creative Strategies to Collect More Social Security Income”.  Lucky for us, one of our Family Investment Center advisors, Mrs. Elaine Coder, is our designated Social Security Specialist.  I recently worked on an educational presentation with Elaine, and through that experience I gained a lot of insight into how just about anyone, in just about any situation, can use these strategies to incorporate Social Security as a key factor in their retirement plan.

 

Before jumping into Part 1 of 2 of our discussion about the main strategies to collect more Social Security (SS), let’s cover a few terms that we will be using throughout these posts:

 

Full Retirement Age (FRA):  The age at which a person may first become entitled to full or unreduced SS benefits.  Click here to find your FRA.

 

Primary Insurance Amount (PIA):  The benefit amount a person would receive if he/she elects to begin receiving SS benefits at his/her normal retirement age.  At this age, the SS benefit is neither reduced for early retirement, nor increased for delayed retirement.  Once claimed, this PIA is what you will receive for your lifetime.

 

Life Expectancy (LE):  The average period of time that a person can expect to live.  Click here to calculate your estimated LE.

 

Now that we know the terms we are going to use, let’s get started discussing the first couple of “Creative Strategies to Collect More Social Security Income”:

 

1) Wait as long as possible to claim SS benefits:  There are many advantages to waiting to claim SS benefits. First, by the taking time to research and meet with a Social Security Specialist, you ensure that you have covered all strategies and that you will be applying for the maximum PIA when it is time to claim.  Second and third, by waiting to claim until you are past your FRA, your PIA will not be penalized for claiming early, and you will earn delayed retirement credits, which increases your PIA.  Finally, since your PIA is adjusted based for inflation, each year you wait to claim can increase your PIA even more.

 

2) Claim SS benefits correctly the first time:  Once you apply for your SS benefits, you only have 12 months to withdraw your application, and you are limited to one withdrawal per lifetime.  There are several other “hoops” to jump through if you withdraw, including paying back the benefits you and your spouse/children received, as well as having anyone who received any of the benefits consent in writing to the withdrawal.  Also, if you miss the 12-month window to withdraw or adjust your claim, you can no longer make any changes and the PIA you claim is the PIA you will receive for the rest of your life.  So, if after applying and claiming your SS benefits, you find out that you missed a step or didn’t capitalize on a claiming strategy, there is nothing else to be done. Claiming correctly the very first time avoids all of these concerns.

 

Next week we will discuss strategies including the living spousal and survivor benefit incomes, as well as how you can combine strategies to be able to compute your overall optimal benefit.  Make sure to stay tuned!

 

This post is for information purposes only.  It is not intended for use in determining when or how to claim Social Security benefits, as benefits and strategies vary based on individual circumstances.  Our firm is not affiliated with the Social Security Administration.  For more information or for help determining a specific strategy for your own situation, please contact our office at (816) 233-4100, or contact the Social Security Administration directly by visiting www.ssa.gov.

5 must-do tasks as you near retirement

 

In his recent article titled "Nearing retirement? 5 must-do tasks," Roger Wohlner of U.S. News & World Report suggests five steps you should take in preparation for your retirement, including:

1) Take a look at all of your company benefits
2) Take a look at any pensions from current or former employers
3) Determine your Social Security benefits
4) Take stock of all of your retirement financial resources
5) Determine how much you will need from all sources to support your retirement lifestyle and compare this with your projected retirement income

To read the full article for further details, click here.

Let's make a plan

Small Tips to Save Big this Christmas

By Laura Price, Investment Advisor

It may seem early to start planning for the holidays, but now is the perfect time to draw up a shopping list and budget. Gift-giving and family gatherings can become expensive in a hurry. Here are a few tips for reducing the financial burden this season brings:

Make a gift list. Start by listing all the family members and friends you wish to give something to. Then assign a specific dollar amount to each person and do not exceed that amount. Neglecting to create a gift budget is recipe for disaster.

Take an inventory of your skills and talents. Instead of purchasing gifts for everyone on your list, perhaps homemade gifts (a growing trend!) would be appropriate. What are your gifts? Sewing? Woodworking? Scrapbooking? Baking? Photography? Put those talents to use to please the folks on your list who appreciate sentiment or practicality.

Gift exchanges. With family and friend holiday gatherings, it makes the best sense financially for each person to draw one name and set a price limit. That way, you’re only buying one $50 gift for Grandma instead of buying $20 gifts for ten people. You save money and Grandma gets a better gift.

Keep an eye on the ads. Clip out coupons and take advantage of Black Friday sales. Don’t want to fight the crowds? Most sales apply to online shopping as well.

Shop early. Stores LOVE last-minute shoppers. When you’re down to the wire and desperate to find a gift, you will almost always pay more. Take your time and start shopping early.

Search the Internet. The Internet has an abundance of resources for ideas on cheap holiday parties, homemade gifts, coupons, and other ways to make the holidays less expensive. It pays to do your research!

Start planning for next year. When this holiday season is over, immediately start saving for next year. Also review this year’s budget to see how you made out. What adjustments will need to be made next year? Some folks even set up a separate savings account for gifts, allocating a certain amount from each paycheck to avoid shelling out extra from their year-end paychecks.

How fear can ruin your retirement

Commentary on MSN Money article
By Laura Price, Investment Advisor at Family Investment Center

Click here to read MSN's original article.

Uncertainty about the future, fear of poverty, lack of confidence in their investing abilities and distrust of the financial services industry were four of the most common feelings expressed…

A common mentality is that after years of hard work and diligent saving, retirement is the time to “live it up” and spend the money you’ve worked so hard to preserve. And while this is true to a point, the sad fact is: budgeting is still hugely important in retirement. I’m friends with a couple who bought a new RV and boat and began traveling as soon as they hit retirement. They had saved up a nice nest egg and wanted to start spending it immediately. Four years into retirement, their IRAs had been sucked dry. They never feared poverty. They never even saw it coming.

Few people are fully confident in their investing abilities. And of those few, only some are actually competent investors. The do-it-yourself model has produced undesirable results for many. But if you hire someone to help, who do you hire? A broker? An independent advisor? A friend or relative that claims to know all about investing? Then once you hire them, what’s a fair amount of compensation? Will they trade excessively? Will your portfolio receive individual attention?

You know the old saying, “No one knows what the future holds.” It’s true. And whether you’re starting your first job or already in retirement, it’s critical that we take the right steps now to protect ourselves from what may happen in the future.

One 66-year-old retiree quoted in the report said he is "having night sweats now. I'm really concerned about having enough. You never know how long you'll live and how much you'll need."

I’m only 25, but from time to time (admittedly more often than I should), I get panicky over money. My dad, bless him, is often the one I go to for sympathy, and he is always quick to remind me that “it’s only money.” Easy for us to say as we’re years from retirement, huh? But let’s be honest: no matter what our age and employment circumstances are, it’s not worth getting sick over. After all, getting sick is expensive, too! Luckily there are folks available to help in the meantime. You still need to stay informed and aware of your investments and overall financial health, but hiring the right team of professionals removes a huge burden, which will help you sleep at night.

Said one 60-year-old about his investing uncertainty: "Trying to shift stuff around at our age is scary. . . . If you make a mistake, we're in a cardboard box eating dog food. I don't have 20 years anymore."

A good investment advisor will regularly review your portfolio and, in most cases, make only gradual changes toward a more conservative portfolio over time. Drastic changes to a portfolio can have drastic consequences. For example, when the economy tanked in the late 2000s, many investors made the mistake of liquidating their portfolios when the Dow was at its lowest, worried that they would lose everything if they held tight. When the market had jumped back up enough that they felt comfortable to reenter, they obviously paid much higher prices. Though still recovering, those who rode the wave through the recession are way ahead of their counterparts who had bailed out of fear and uncertainty. Emotions are powerful things, and when it comes to investing, it can be dangerous to let emotions get the best of you.

One 63-year-old said, "If I trusted an adviser, then I'm always wary because I know that they are out to make money. . . . I don't trust them handling my money."

This is where Family Investment Center is different. We actually DO care about our clients. We’re often called “nerds” because we’re genuinely interested in economics, investments, and finance and want to share that knowledge and expertise to help people. If we weren’t helping people, it would all be a waste.

“Yes,” you say, “but you’re a business.” That’s true. But with our fee-only structure, we have direct incentive to help you grow your accounts. So when you’re paying us a small percentage of your portfolio every year, that means that when YOU make more money, WE make more money. Plain and simple.

In a world where we’re constantly bombarded with news of scams in the securities industry, it’s important to stay cautious. There are various safety mechanisms available to investors, such as third-party account statements, custodial insurance, and so on. Bernie Madoff operated outside the rules and got away with it for a while. Ponzi schemes thrive when investors don’t keep their eye on these types of things. For goodness sake, if you don’t trust your advisor, switch. You need to feel comfortable with the person you’ve hired to look after your money.

Are You Retiring In 2011?

Retiring in 2011? What you need to know.
Staying flexible in retirement planning will help keep you fiscally fit.

To read more, click HERE.

Money Made Easy: Financial New Year's Resolutions

In this week's edition of Money Made Easy, Dan Danford answers this financial question from a viewer: What are some New Year's resolutions you think we should follow to help improve our finances?

Danford, of Family Investment Center, offers his financial advice on how you can have a better financial situation in 2011.

Dementia can wreck family finances

By Robyn Davis Sekula

In our family, one of the first signs that Dad was struggling with mental acuity was when I watched him try to fill out a credit card slip at a restaurant. He absolutely could not figure out how to calculate a tip, something I had seen him do routinely over the years. This was about five years ago.

In subsequent years, he got much tighter with money - and worried about things that simply weren't problems. He worried intensely about my ability to pay for my three daughters' college education. I could not convince him that I make enough money and am saving aggressively for their education in a 529 plan.

Mom finally took over the checkbook at least a year ago, maybe more. That was the last of the financial decisions he was involved in.

Dementia can be incredibly destructive to a family's financial picture, certainly from mismanagement, but also from the perspective of paying for care on a long-term basis. Had my father lived more than a year, my mother would have been forced to go on Medicare because he did not have long-term care insurance.

I ran across an article, albeit two years ago, in Smart Money online about dementia and its affects on family finances. I wanted to share it with you because I thought that you might find it helpful - and as a word of caution to anyone who has elderly parents or relatives that they care for. Keep an eye out for the tale-tell signs, and step in before deep damage is done.

http://www.smartmoney.com/personal-finance/elder-care/dementia-can-wreak-havoc-on-family-finances-23715/

Gore divorce will affect their finances

When a couple divorces, their financial picture changes drastically. It can be a fight to the finish for every last dollar. In the case of Al and Tipper Gore, it appears the divorce is amiable, and that would suggest that the property and money will be divided in a more rational way than is typical.

We spotted this piece in WalletPopper.com that explains their divorce and how it will affect their finances, which we think is good to post because it is easy to follow and helps explain the financial side of divorce (any divorce, really).

Have a look at the story here:

http://www.walletpop.com/blog/2010/06/02/an-inconvenient-divorce-how-al-and-tipper-gores-finances-will/

Dad's Divorce: How to find a financial planner

In this week's edition of Money Made Easy on Dad's Divorce.com, host Dan Danford answers this question from a viewer: I'm considering hiring a financial planner to help me with my finances and meet my life-long financial goals, but I have no idea where to start or who to choose. What are the right questions I need to ask when choosing a financial planner?

Danford, MBA, CRSP of Family Investment Center, lets you know what to look for when searching for a financial planner and how you should know if a planner is a good fit for you.

Investor Architecture

By Dr. Jason White
Principal, Director of Investments
Family Investment Center

Investors are the true long-term architects of family wealth accumulation and preservation. They are a special breed who utilize the availability of professional investment management, and have the constitution to stay with the plan, even when it appears all is lost.

All is never lost, of course. Investors intuitively understand that a retrenchment in asset prices is the time to be aggressive, not to capitulate. Investors understand the importance of saving. Investors know that short-term moves in the market (up or down) are primarily noise, sentiment or whimsy, and have little to no bearing on the long-term value of equities and the businesses they represent.

Warren Buffett describes the stock market in the short-run as a “voting machine.” Popular sentiment, psychology and herd mentality (good or bad), can drive stock prices to amazing bubble peaks and gut-wrenching price nadirs. Neither is fundamental or real. The long run investor understands this, and remains true and loyal to his plan.

It is much easier on mind and spirit to be an investor in prosperous times, than in tumult. The scientific approach to the building of wealth, as embodied in Modern Portfolio Theory, has been proven the most reliable strategy for investors since this break-through approach captured headlines and professional interest in the 1950s. Unbelievers bounce in vain from strategy to strategy always seeking a better built mousetrap, and some succeed in the short run.

Our social makeup in the information age requires near instant gratification. Those who “play the market” move like a stampeding herd, always chasing the tail of out-performance, but never quite able to grasp it. In our own myopic and self-interested view of the world, we want to be unique and special. We believe that this time is truly different. We believe in a new normal of some sort or another.

Yet, business marches forward. Equity prices ebb and flow in the near term for many reasons: news, politics, taxes, earnings, war or tranquility. Business television will run a split-screen when a powerful person, such as President Obama or Chairman Bernanke, steps to the podium. Words are spoken, the Dow Jones vacillates, and commentators link the two together painting a picture of the short-run just as Buffett’s voting machine suggests.

The fact of the matter is that the short run is just as unpredictable as it appears. Daily volatility, a reaction in stock prices to an event or series of events, seems understandable when the experts explain how good or bad news caused a positive or negative reaction in the markets. We accept these notions because the human mind wants to longs for certainty. No investor on earth knows precisely when a bear or bull market will start and finish without benefit of hindsight.

Thus, the most prudent strategy with the highest probability of success is to stay properly diversified and invested, using the proven approach of Modern Portfolio Theory, all of the time. Attempts to time the market invariably result in disappointment. Behavioral finance observes that people logically want to buy when times are good and sell when times are bad. When implemented, this strategy results in buying the market peaks, and selling during the dips – exactly the opposite of family wealth building behavior.

Dr. Jason White is Director of Investments at Family Investment Center and an Economics, Ph.D. at Northwest Missouri State University.

Financial evangelism: It's what we do

By Dan Danford, CRSP
Principal and CEO, Family Investment Center

Our Facebook Fan page describes what we do as “Family Finance Evangelism.” I guess that makes me a family finance evangelist!

What do we mean by that? Here’s what Wikipedia says about evangelism: “Evangelism refers to the practice of relaying information about a particular set of beliefs to others who do not hold those beliefs.”

Our particular set of beliefs:

• Financial success is a personal choice and responsibility.
• Financial success requires family savings.
• Financial success requires wise investment choices.
• Financial success is enhanced by a family stewardship team.

Many people share some of those beliefs. I’ve been working in this field since 1983 and my experience says that some is not good enough. Genuine financial success flows to people who share all of these beliefs. A few words about each one:

Personal choice and responsibility: We all know people who enjoy privilege of talent or birth. Most of us don’t. The amazing thing is that it doesn’t really matter much without a sense of personal responsibility. Alternately, we all know people of modest means who achieve remarkable success. Success is mostly a matter of choice.

Family savings: Distant family goals require money set aside today. If every dollar flowing into a home flows right back out again, it’s not there for education, retirement, or other crucial goals. Success requires regular and systematic savings.

Wise investment choices: There was a time when this wasn’t so important. Today, the time distance between saving to spending can last a half-century or more. Retirement dollars invested at 30 have to buy medicine when we are 90. Invest wisely to serve long-term family purposes.

Family stewardship team: Do-It-Yourself isn’t very helpful when there are 25,000 mutual funds, 6,000 stocks on the New York Stock Exchange, and the Tax Code runs 1,000+ pages. Is it really possible to know enough from CNBC or an occasional glance at the Wall Street Journal? Recruit a qualified team to help you succeed. (A pastor or elder might be helpful, too.)

Our role as investment advisors is to help people achieve pesonal and family objectives. We don’t know all the answers and we can’t predict the future. But we can help people discern the path most likely to help them achieve family goals. There is both art and science in what we do, but it’s all we do, for hundreds of families and clients.

The Merriam-Webster dictionary uses the phrase “militant or crusading zeal” in their definition of evangelism. That’s my point today. There are four key beliefs that are most likely to help people achieve family goals. I’m a Family Finance Evangelist. My zeal is to help people succeed. It takes four principle beliefs.

Bedrock retirement considerations

By Dr. Jason White
Director of Investments
Family Investment Center

As many of my friends and colleagues begin their retirement journey, I am often asked about key areas for successful planning. This bedrock advice is essential to securing a long and happy financial life away from the daily grind of work – a glorious time to be alive.

You must match your spending with your means. I am familiar with more than one case where a new retiree goes a little crazy with spending. A vacation here – a condo there – a couple of gifts to the kids and grandkids, and suddenly, we’re running out of money. Not a good situation to say the least.

It is well documented that newly minted retirees do spend more money during their first years of retirement while health is good and that list of “stuff-I’ve-always-wanted-to-do-but-never-did” is fresh and exciting. Nothing is wrong with this, just make allowances for the higher spending level and adjust your asset drawdown accordingly.

If you have your house paid for and can meet most of your monthly bills with Social Security and other annuity or pension payouts – that is fantastic! Just be sure to keep your invest-able assets growing during retirement to counteract the effects of inflation. After all, many folks today are living as long in retirement as they spent as a worker bee. A three or four decade retirement is becoming the norm. Enjoy, but stay within your means.

You and your spouse will need to make decisions about the timing and amount of distributions to draw from various retirement plans pools of money. If you are fortunate enough to have a traditional pension, you must decide if you want payments to end with your death, with the death of your spouse, or some sort of reduced benefit amount regardless of who dies first. From an actuarial standpoint, as my partner and founder of Family Investment Center, Dan Danford, taught me, these options are all equal. The amount of money you will receive as a pension benefit is determined based on your life expectancy, your spouse’s, and the benefit payment scheme you select. There is no better or worse option – the selections have identical risk/reward characteristics.

What does make a big difference is how your pension benefit choice fits in with other annuity payments, like Social Security, and your lump-sum retirement accounts – 401(k) rollovers, Traditional IRAs, Roth IRAs, and any additional savings you have accumulated.

If the total of your lump-sum retirement accounts exceed $100,000, your best bet is to seek out professional investment management to help ensure you do not outlive your nest egg. Most folks have never had the experience of managing that much money, particularly when their lifestyle now depends on those funds. A good attorney would never manage litigation in which s/he is involved as plaintiff or defendant – emotion and personal interest can cloud good judgment and dispassionate decision-making. The same principle holds true for large retirement accounts. Rely on trusted financial professionals to make sure your interests are protected.

Financial planning: what's involved?

Our friends at Dad's Divorce.com publish a podcast by Dan Danford every week on their web site that addresses financial issues, particularly geared towards men going through the divorce process. The advice, though, often applies outside of that group. This week, Dan discusses what happens in the financial planning process. What is good financial planning and how does it work? If you've ever been curious, this is the podcast that will help you learn more.

Annual financial review moves you forward

Happy New Year! With the fresh calendar page comes opportunity. This is your clean slate. To create 2010 goals, you'll also need to review 2009. What did you accomplish last year? What didn't you get done that still matters? Put those goals at the top of your list.

A great tool for getting this process started is an annual financial review. Dan Danford goes into detail on how to do this in this podcast on Dad's Divorce, a web site for men going through the divorce process..

Saving goals and financial recovery

Every week, Dad's Divorce, a web site for men going through the divorce process, posts a podcast with Dan Danford of the Family Investment Center. It's a great platform for delivering information in a succinct, simple way and we feel it helps many people. Of course, the information doesn't just pertain to men. It's great advice for anyone. This week, we tackle a subject that has been on many minds: saving goals and financial recovery. We'd love your feedback.

Get out of debt on your own

For those who want to get out of debt, those commercials that promise to reduce debt by large percentages by working with your creditors, are tempting. But don't be fooled. The old rule still applies: if it sounds too good to be true, it probably is. If you want to get out of debt, there's no better way to do it than to methodically track your spending and just simply pay down your debts, one at a time. You can do this. You may not want to do this, but you can.

Debt consolidation companies rarely keep their promises, and sometimes, their fees eat up any savings they might promise you. Don't go this route. Commit yourself to going after your debt on your own.

Read more here:

http://www.msnbc.msn.com/id/33627704/ns/business-personal_finance/

Save up now to pay for your kids’ college

By Robyn Davis Sekula

I frequently listen to Dave Ramsey. I like his straightforward advice, but I don’t always agree with him. One of the things I don’t see eye-to-eye with Dave on is paying for kids’ college education.

Dave once said on air that he was talking to someone who was a wealthy celebrity, who decided for his kids’ own good, he would not pay for their college – he’d make them work their way through. Dave applauded him. But I listened to that and shook my head in disbelief.

That’s just plain wrong. If you can pay for a child's education, WHY wouldn’t you? I understand the idea of working and earning money, but paying for college, on your own, is really daunting, and getting more so every year. There are kids who drop out every year because they simply can’t afford it, and it only gets harder as the years go past.

But let’s get one thing straight right now: if you can’t afford it, don’t do it. And don’t feel obligated to pay for a pricey private college education you can’t afford. If your child wants to attend a private school, and you don’t have the money to pay for it, they will have to take on debt or get scholarships. Perhaps offer to contribute what you would have paid for a public education and let them make up the difference. You shouldn’t sacrifice your own financial security to help out an adult child.

My parents paid for my college education. I wanted to attend a pricey private university two states away. We visited, and then my parents leveled with me and told me it would be very difficult for our family to afford, and asked me to consider in-state public universities. I chose James Madison University in my native Virginia, which, as it turns out, was a great fit for me and my parents (GO DUKES!). I am very grateful for their financial support – and years later, I realized that their ability to pay for my college education allowed me to start out my adult life without debt, which changed the very nature of where I could live and what I could do. I wanted to pursue journalism, and with any form of student loan whatsoever, I would not have been able to afford that career path. I met friends in journalism who worked collection jobs while they paid off their debt so they could then become a reporter. I’m so glad I never had to detour.

If you’re wealthy and willing to pay for any college they want to attend, great. Do it, and know that you’re giving your kids a wonderful gift.

If you cannot afford an expensive university without going into tremendous debt, then tell your children that. Be up-front about what you can afford, and what you cannot. I do agree with Dave Ramsey that most of the time, a solid state university can provide an education that’s near or equal to the education at a pricey private university. It’s what you do with the education that matters.

Do set some ground rules for your children, though. Tell them they are expected to maintain a certain grade point average. Tell them you expect them to finish in a certain number of years – four if that’s appropriate for their field – and that you won’t pay beyond that. In other words, you aren’t writing a blank check. If you want to pay for graduate school, and you can afford to do so, you can make that offer, but I would advise you to wait until they are well into college before agreeing to anything.

We’ve started saving for our three daughters’ education. I hope to be able to pay for them to attend a solid state university. I know that I’ll have to ramp up the savings to get them there. Yes, it’s daunting – but it’s a gift that will stay with them for the rest of their lives.

Fine-tuning the household budget

One of the best ways to find extra money isn't necessarily to increase your earnings. Sure, that's good, but you may not have time to work any more than you already do. Before you take a second job, look hard at your spending. This article on Yahoo! Finance outlines how to save at the grocery store, and lists ways that you can save almost $500 per month. Keep this in mind when you're planning the family budget for the month.


http://bit.ly/a6AeD

Another great way to look for deals is this blog, written by a dedicated home economist. She keeps up with e-coupons, sales and other information that savvy consumers can use to cut the grocery bill. She posts often. Find it here:


http://www.wickedcooldeals.com/