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

By Olivia Sandham
 

Continuing from last week’s post, this week we will finish our discussion on “Creative Strategies to Collect More Social Security Income”.  Before jumping into Part 2 of 2, we recommend revisiting last week’s post for an overview of the terms FRA and PIA.
 
Besides 1) Waiting as long as possible to claim Social Security (SS) and 2) Claiming SS benefits correctly the first time, here are a few other creative strategies you could implement to collect more SS income:
 
3)  Harness the power of the little-known Spousal Income Benefit:  Once one spouse is eligible to receive SS benefits, the other spouse may be eligible to get up to 50% of those benefits as well, until claiming his or her own SS benefits.  This option is also available to divorcees as well.

• The Spousal Income Benefit is available to the second partner regardless of whether the first partner is actually collecting benefits or has decided to file and suspend.
• The Spousal Income Benefit will be available to the second partner once he or she reaches the age of 62, but will be available at a reduced/pro-rated amount until he or she reaches FRA.  At FRA, the second partner can receive 50% of the first partner’s PIA.
• It is important to note, once the second partner starts collecting the Spousal Benefit Income, the amount he or she claims is the amount of Spousal Benefit that will be received for the rest of his or her lifetime, until claiming his or her own SS benefits.  Once claiming his or her own SS benefits, the second partner will receive the higher benefit of the two.

4) Plan for the Surviving Partner’s Income Benefit:  Widows or widowers may be entitled to receive a portion of their deceased partner’s SS benefits, which may be increased by using the previous strategies.  Click here to see how much surviving family members would receive.  As a side note, the Social Security Administration should be notified as soon as possible when any family member passes away, because there are several other ways that Social Security can help you when a family member dies.
 
5) Compute your optimal benefit amount:  Rather than picking one or two strategies to increase your SS benefits, finding the right combination of all the strategies discussed for your situation can be advantageous in figuring out how to collect more SS income.  Since Social Security rules are very intricate and every situation for every family is different, meeting with a Social Security specialist would be your best way to use this strategy.

 

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.

Video: How to Build a Budget

Financial situations can change quite frequently.  Everything from employment changes to new family life stages can greatly alter your income and/or expenses.  Therefore, it's a good idea to reevaluate your budget every few months.  Watch this video from Investopedia.com on "How to Build a Budget" and follow the steps to see if you are still on track, or if your current budget may need a few adjustments.

Retirement Plan Gone Awry: What Do I Do Now?

By Olivia Sandham 

Type the word “retirement” into any search engine and you’ll be directed toward hundreds of web pages, articles, and videos presenting advice on how to save and invest for your retirement.  But what if you’ve already been retired for several years, you are already collecting Social Security, and after taking a closer look, you begin to realize that you will soon be outliving your retirement fund?  You may have planned ahead by saving and investing for decades pre-retirement, but somehow it simply hasn’t been enough to cover your expenses post-retirement.  Although this can be an overwhelming realization, there are several options available, many of which do not require financial expertise.  With a little motivation and “Thinking Outside the Box”, you can remain financially secure throughout retirement.

Option 1:  Re-enter the workforce.  Although you may not be as energetic as you once were, consider finding simple work for modest pay.  Think Outside the Box:  This job does not have to be a traditional position.  For example, parents are happy to pay for a reliable person to watch their children, and grown children are happy to pay for a reliable person to help tend to aging parents.  If you work in a more traditional position, you might be entitled to free services or discounts which could work in your favor during retirement as well.

Option 2:  Offer your knowledge or skills.  After decades of working you most likely picked up a few tips and tricks along the way, which someone may be seeking.  Advertise with your local newspaper offering your services as an informal mentor or advisor in fields in which you have some expertise.  Think Outside the Box:  If you don’t have money to spend on a newspaper ad, ask your local shopping markets and retailers if you can post a sign or flyer for free.  And of course, spread the word with your family and friends.

Option 3:  Prioritize your spending.  It’s easier to stay financially viable during retirement if you are paying attention to your expenses.  Look for deals on needed items, lessen finances spent on clothing, entertainment, and travel, and watch out for spending too much on loved ones.  Think Outside the Box:  Some not-so obvious changes in spending patterns that can make a difference during retirement.  These include using liquid forms of payment (cash, check, debit card) rather than racking up interest bills on credit cards, buying generic rather than name brands, and doing any necessary shopping at church/charity stores.  Any of these adjustments can certainly add up in your favor over time.

Option 4:  Turn your assets into cash.  You may own a home, car, valuables, or life insurance policies which could be converted into liquid assets.  Think Outside the Box:  Converting to liquid assets doesn’t always mean the asset has to be sold.  A reverse mortgage may allow you to withdraw equity from your home without having to move.  Also, consider the possibility of renting out a room in your house, or even consider renting your entire house and living with friends or relatives, or in a modest apartment.

Option 5:  Re-invest and re-grow your nest egg.  Once you follow the previous suggestions, you might start to find extra finances available.  Rather than spending or only saving these funds, stay on track with what you have been doing and look into ways to reinvest your small amounts of income.  Just because you are retired does not mean you can’t continue to grow your nest egg.  Think Outside the Box:  Traditional thinking says the older we are, the less risky our investments should be.  However, since you do not have as big of a nest egg as you did years ago, investing with a little more risk tolerance might create more growth.

Option 6:  Get by with a little help from your friends.  It can be tough to ask people for help, since most of us like to feel independent, and having to explain that we fear outliving our savings can seem embarrassing.  However, it is very likely that you have a lot of people in your life that would be happy to help, even for a short period of time.  They can be friends or family.  This is not the time to be stubborn with pride; rather this is the time to be smart and reach out to others.  Think Outside the Box:  Look into retirement resources and services available within your community, such as services provided at your local church or within a nearby retirement community.

Option 7:  Get in touch with an expert.  Expert financial advisors might take a peek into your assets, liabilities, income, and expenses and give you a better picture of what changes you need to make.  Experts may also be able to help you make adjustments in your investments or assets which you may not have otherwise been aware were options for you.  Think Outside the Box:  If you don’t have the funds to seek ongoing expert advice, at the very least try to find a non-profit firm or government agency who would be willing to offer a short analysis for free.  It doesn’t hurt to make a phone call and ask.  And as always, make sure to utilize your network of friends and family to see if they know anyone who might be willing to help.  Good luck!

PIMCO: Stay The Course

PIMCO (PacificInvestment Management Company, LLC) produced a market-relevant article earlier this month entitled “Stay The Course”.  This article discusses four (4) reasons why long-term investors should remain focused on their goals and not fear rising rates.  Click here to view the full article (with visuals!) in PDF form.

1)  Rising Rates Build Income:  With interest being the primary driver of bond returns, reinvesting into a gradually rising rate environment can actually help build long-term growth.  When rates rise, new bonds may pay higher, which can increase what you (as a lender) receive in the long run.
 
2)  Lower Volatility Helps Preserve Capital:  During uneasy times in the market, investors are often reminded why fixed income investments can be solid anchors for their portfolios.  Bonds have historically been less volatile than stocks, while also providing capital preservation, income and growth, and low-to-negative correlations to equities.
 
3)  Cash ‘Safety’ Comes at a Price:  Investors concerned about market fluctuations and short-term bond volatility may be tempted to withdraw their investments until prices stabilize.  However, with cash and money market investments typically yielding rate of returns close to zero, and especially after accounting for inflation, these types of investments can actually provide a negative return.  Compounding over the long-term, maintaining investments in bonds will almost always generate a higher rate of return.
 
4)  Experts Have Access to a Diverse Toolset:  Although mainstream media tends to focus on U.S. Treasuries (which are the most sensitive to changing rates), the “market of bonds” is exceedingly diverse and global, including corporate and high yield bonds, mortgage-backed securities, floating rate issuers, emerging market bonds, and many others.  Since each sector or asset class responds differently to economic and market trends, a skilled bond fund manager should be capable of diversifying a portfolio which can defend against capital losses while also capturing a range of growth opportunities.
 
PIMCO is the world’s largest bond investor and one of the world’s largest active global fixed income investment managers.  As of the end of 2012, PIMCO had $2 trillion in assets under management.

5 Ways to “UP” Your 401(k) Plan

By Olivia Sandham

1. “BUMP UP” your deferral rate.
The average 401(k) deferral rate lingers near 4%, but this doesn’t mean your investment has to.  Increase your deferral to 10% of your paycheck, and your deferral combined with the company match will build an income base that can last in retirement.  Find out if your plan has an auto-escalation feature, which will allow you to automatically raise your deferrals incrementally over time.

2. “CHANGE UP” your fund allocation.
Over the long term, it takes time and skill to choose 401(k) funds successfully.  What seemed like the proper allocation when you were 25 will most likely change when you are 10-15 years older.  If periodically assessing your funds seems time-consuming, a target date fund or asset allocation fund may be more appropriate.

3. “SAVE UP” your account.
There may be a handful of valid reasons for pulling cash from your 401(k), such as a new home or business purchase, or for an emergency situation.  But you could be charged a 10% tax penalty on early distributions taken before you are 59½, and you may have to repay the loan within 60 days.  Instead, consider your 401(k) strictly as a retirement savings account: money goes in and stays in until retirement.  If you do have to take a loan, repay it as soon as possible so your money can get back to work for you in the market.

4. “FOLLOW UP” on your investments.
Make a plan for your 401(k) and keep an eye on it to ensure you are still on track to meet your savings goals.  A 401(k) is a long-term investment, which means there will be highs and lows in performance, so you should periodically check to make sure you’re on track.  Review and keep your quarterly statements, but don’t preoccupy yourself with looking at your account every day.  An appropriate time to reevaluate your 401(k) plan on an annual basis would be during re-enrollment so you can make any necessary adjustments.

5. “LINE UP” your future budget.
Once you’ve retired, you will rely on your 401(k) savings as a stream of income.  Before reaching too near to that point, get an idea of what your future expenses will be.  Understanding how your lifestyle will be during retirement will help you make sure your 401(k) plan will be able to cover these costs.

Dad's Divorce: How To Save Money on Taxes

Dan is a weekly contributor to Dad's Divorce, a web site for men going through the divorce process. The site may have been designed for men, but the advice usually can apply to anyone. This week Dan Danford answers a popular tax season question in this week's edition of Money Made Easy: How do you save money on taxes?

Danford, MBA, CRSP of Family Investment Center, explains the need to understand how the tax system works and how the tax forms work. He also offers tricks to reduce your taxable income without actually earning less money.



For more information on taxes, click here.
For more information on taxes for students, click here.

Dad's Divorce: Saving for retirement

Dan Danford regularly provides a podcast for Dad's Divorce.com, a web site for men going through the divorce process. Here's his latest podcast, which answers a question from a listener: I have never had a job with a 401(k) or much money left over for savings. I'm worried about having enough money to live off of when I retire. What suggestions do you have for planning for retirement?

Audit red flags: what to watch for

By Robyn Davis Sekula


If you aren't currently obsessed with snow, like much of the country, chances are, you're thinking about taxes. We ran across a well-written article on the Yahoo! site today by Investopedia detailing what raises your risk of being audited. It is a quick read and must-have information for every taxpayer.

You can read it here:

http://finance.yahoo.com/taxes/article/108757/avoid-an-audit-6-red-flags-you-should-Know?mod=taxes-advice_strategy

Change your ideas about how to earn money

By Robyn Davis Sekula

As I've written before, I'm a regular listener of Dave Ramsey's radio show, and it irks me when he suggests that the male in the household get a second job, or even a third, before he will suggest the woman explore her work opportunities. Women sometimes have more education than their husbands and more earning power - and I really wish folks like Dave would consider that. Don't assume the dude in the house is the only one who can pull in the dough. Plus, having one person do all the earning and one person do all the child care makes for an uneven house, with one person burned out entirely on spending every waking moment with little ones and the other burned out from working allllllll the time.

I'm cheering as I read the story below, which says that more women are working while dads stay home. Our ideas about work are changing, and I say great. With the technology advances in the past decade, you can work full-time or part-time from home, at night, on weekends, or during regular weekdays. You can make your own job, as I have done during the past six years. I've surpassed my husband in terms of income, and I have the most to gain by the risks I've taken. In fact, in our household, I'm the one who is the most comfortable with risk and has the greatest income potential. I'm the more natural entrepreneur. I really didn't know this until I took that leap.

What I want people to do is explore their options a little more. If you're a teacher who is not teaching but you'd like to earn a little money, consider tutoring, which is far more lucrative than substitute teaching. Consider picking up some jobs cleaning homes, if you like to do that, while your kids are in school - and this could apply to a man or woman.

Whenever you hear yourself say, "I can't do that" ask yourself why. You may not have an answer, and if you don't, you're looking at an opportunity.


http://www.cbsnews.com/stories/2010/01/15/national/main6101166.shtml

Need extra cash? This is prime time for a second job

By Robyn Davis Sekula

All of us would like to have more savings and pay off debt. Sometimes, the only way we have to get ahead is to increase our incomes. I’ve done that during the past five years by changing my day job and building my own business, and I’m really pleased with how that’s gone. I’ve also pursued a few simple side businesses that I think virtually anyone could do if they’re willing to take the time and energy to do so. Between now and December 25, opportunities abound for those who need extra cash, and I’m going to outline a few options here.

Here’s a key thing to remember as you read: Everything that makes a strong profit requires knowledge and research. And everything adheres to the general economic principle of supply and demand. You have something that someone else wants, badly. They’re willing to pay a lot for it. The key is knowing what the items are and placing them for sale in a public market place.

But there’s nothing here that’s rocket science. You can do this, too, if you’d like.

I sell items on eBay. Every time I tell people this, they want to know what. Mostly it’s things my husband has picked up at yard sales. Sometimes, he’s bought things that have done very, very well. He pays very little for these antiques, sometimes, as little as $1 to $5 each.


Our best sellers are Art Deco items and things that I’d refer to as “old house parts,” meaning certain types of doorknobs, faucets, bathroom accessories, light fixtures, glass shades, and so on. We also look for antiques that pertain to a certain town but that are far removed from that town. Souvenir porcelain pieces commemorating a particular town park or building were common in the 1920s, and they are highly collectible. Every now and then I get stuck with one (anyone want a vase from Reedsburg, Wis.?) but for the most part, they do well. One I bought three years ago for $7 sold for $302 and returned to its hometown in Florida. There are things that I do price low because they simply will not go. I have a set of 1960s vases in a pale green color that look like they walked off the set of Mad Men and I cannot sell them. But I guarantee you Greg didn’t pay more than $1 for it, so I’m OK with that.

My friend Kate sells items on Amazon. I don’t want to give too much detail because she’s in better physical condition than me and she might really hurt me if I tell you too much. I became a partner with her this summer in picking up items that we could resell on eBay for a large profit. There was a certain type of Crest toothpaste (Lemon Ice, if you must know) that Crest discontinued, and it began showing up at discount stores. I started hunting for that, and then a few other things in the health and beauty area, for Kate. We’d buy the toothpaste for $2 per tube and sell it for $20. She paid a modest fee to Amazon for the listings and we’d split the profit. During the fall, she stocks up on hot toys for the holiday season. How does she determines what’s hot? She goes through the entire Sunday ad of a mainstream toy retailer and runs each and every item through Amazon to see if they’re selling strong and if the item is selling at a higher price than they are in the stores. If so, she buys it when she can, places it on Amazon, and sells it. In almost every instance, she finds that with enough determination, she can buy and resell desirable toys for a large profit margin. “Just about every year, I can find every hot toy with just some determined looking,” Kate tells me. She profits from her knowledge, research and determination, and really, from the other side of it, which is someone’s lack of determination. And yes, I’ve been on both sides of this. I’ve ordered from Amazon and sold with Kate on Amazon. Which side are you? There’s no right or wrong here. If you have a high-paying job where you are paid by the hour, it may in fact be a better deal for you to pay the profit margin to someone like Kate than to spend your time driving from store to store in search of presents for your family and friends. Convenience has a price, and it’s perfectly fine to pay it.

My friend Elizabeth sells on etsy.com, a site for crafters. She buys certain types of old board games, magazines and other items inexpensively and then combines items in packages to sell to crafters and scrapbookers all over the world. I’ve found a few things for her here and there and given them to her to divide up and sell.

My neighbor Chris does handyman jobs, cuts down trees and yard work for extra cash year-round. In fact, he’s scheduled to cut down a tree in our yard and clean the leaves up with this giant leaf-sucker machine soon. Since we have an acre yard and three kids six and under, having him do the yard is a bargain.

Other people refinish furniture, paint, or repair lawnmowers for extra cash. There are all kinds of options – and anything you can do where you work for yourself will make you a lot more money than if you work for someone else. The UPS box-throwing job at nights is good work, and so are the retail jobs you can score this time of year. But those are not jobs that require knowledge or skill. Stay away from the multi-level marketing gigs such as Mary Kay. Those are not side jobs. The people who are good at MLM jobs spend all day, every day on it.

So – what do you do to make extra money? Post it in the comments section.