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.

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.

AARP Retirement Calculator: Are You Saving Enough?

Are you looking for a fun, free, and easy method to try estimating your retirement? We discovered the AARP Retirement Calculator, a neat online device that can make thinking about your future and retirement a little more enjoyable. Using the calculator can be a great way to check if the plan you currently have for your financial future should allow you to retire when and how you want. Discover all your options and how the choices you make today and in the near future could ultimately affect your retirement finances!

Before using the calculator, we encourage you to read our list of “Pros and Cons of Using the AARP Retirement Calculator”:

PROS:

• Using this calculator can be a good starting checkpoint to see if you are currently on track for retirement, currently way off track for retirement, or somewhere in between.
• After inputting your information, click on “Options” to see what changes you can make in retirement to help you have more income available if needed or desired.
• At any point, you can also go back to the “About You” section and change answers, allowing you to see how different choices starting now could possibly affect how much income will be available to you in retirement. This can be a helpful tool if you are able to actually implement some of these changes in your life, such as how much of your income you and your partner save for retirement each year.
• When deciding your lifestyle in retirement, click on “Learn more about Retirement Lifestyle Assumptions” and you can manually input what percentage of your current lifestyle expenses you plan to have in retirement.

CONS:

• The calculator does take into consideration the multitude of creative ways you can collect more Social Security income (to be discussed in next week’s blog!)
• The calculator cannot substitute for the valuable knowledge and experience of a financial advisor. This tool should only be used for fun to see where you are at now and how different decisions could affect your future outcome, but make sure you discuss any officially changes in your retirement plans with your financial advisor.

Think you’re ready to give it a try? Click here to Get Started.

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.

Nasty Tax Surprises

Don't allow for tax surprises.  In its article "5 Nasty Tax Surprises," MSN Money explains five income sources you may not have considered to be taxable:

1) Unemployment benefits

2) Alimony

3) Forgiven debt

4) Prize winnings

5) Some Social Security benefits. 

3 Costly Surprises for Retirees

Check out this Kiplinger video titled, "3 Costly Surprises for Retirees."  These three factors can make a huge difference in how well you plan for (and live in) retirement.

What's your number? Part Two

Dr. Jason White
Director of Investments, Family Investment Center

This is a continuation of my last column discussion of the best-selling book "The Number" by Lee Eisenberg. I previously indicated that the book itself was primarily a moral and philosophical examination of the process of monetary accumulation. Eisenberg asks us some difficult questions regarding our motives for saving; our future plans, be they in retirement or otherwise; and the most difficult financial question of all – how big must our “number,” that is our annual income generated in retirement, be.

Page 251 of the Eisenberg primer describes for us what he calls “The Number, Quick and Dirty.” Despite the rule-of-thumb nature of the title of Eisenberg’s number calculation, his formula is actually quite elegant and comprehensive. If you are nearing retirement, or a prudent long-term planner wanting a comfortable retirement, consider plugging your financial information into the following formula.

A) Total all of your investments account balances for retirement.
B) Multiply line A by .04, which represents a safe and reasonable 4 percent rate of savings withdrawal in retirement.
C) Divide your total home equity by the number of years you plan to live in retirement. When I do such financial planning, I automatically assume a client lifespan of 100 years. If you run out of money at age 100, you probably won’t know or care anyway!
D) Divide any anticipated inheritance monies your expect to receive by the same number of years you used in part C.
E) Add the anticipated annual Social Security payment you expect to receive.You get a statement from the Social Security Administration every year showing this amount, so it shouldn’t be too tough to find.
F) Add in your annual anticipated pension or annuity payments (if any).
G) Add in realistic earnings you expect to possibly receive from part-time work, consulting, etc., if any.
H) Total lines B through G. This total represents the annual dollar amount you can reasonably and safely expect to have available to meet expenditures during your retirement years.

See, that wasn’t too horribly complex. So, how did you come out? Were you pleasantly surprised? Were your intellectual gut-feeling “number” guesses close? Are you shocked and terrified that you won’t have enough money in your golden years?
Take a deep breath.

Now you know the facts of your situation and can begin to tweak the savings or expenditure side of your personal balance sheet as you and your financial advisor see fit, especially if it appears you may be short (as most of us probably are). If you have a number of years left to retirement, or can delay retirement a few years longer than you had planned, you may be able to make up the difference with more aggressive savings. Note: I do NOT recommend more aggressive investing for folks nearing retirement for fear of principal loss and a worsening of the situation. Sometimes macroeconomic timing is just lousy. Still, even a prudent investor, with an understanding of portfolio risk, should likely never drop their stock allocation to less than 25 percent of investable assets.

The other side of the coin to examine is your anticipated retirement expenditures. Maybe regular golfing at Mozingo makes more sense for you that at St. Andrews. A reasonably priced Ford is probably nearly as reliable and comfortable as that coveted BMW. You get the idea ...

I hope you found this exercise helpful and informative. Call me if I can be of assistance to you in fulfilling your long-run dreams.

Social Security changes can affect retirees wallets

By Robyn Davis Sekula

Ask anyone in their 30s if they expect to receive Social Security upon retirement, and you'll find that almost all of us think it won't be around for us. Some of us, like me, are saving aggressively for retirement to make up for it.

Statistics actually show that Social Security may be around, just not at its current levels. Even those currently on Social Security (or getting ready to retire) are affected by the changes to the program.

It's a great idea to keep abreast of developments and changes in Social Security. Here's a great piece we found from Fidelity.com, posted on Yahoo.com, about Social Security income and how seniors will be affected by raising the eligible age to 70.

Here's an excerpt:

Social Security will, according to the last annual report from its trustees, be able to pay full benefits through 2037. Then, if there are no changes in the program in the meantime, the taxes collected will be enough to pay out only about 75 percent of benefits through 2083.

So while Social Security's finances are stable in the short term, most experts agree that the program needs to be bolstered for the long term. Among the proposals circulating is one from Representative John Boehner of Ohio, the House Republican leader, who recently suggested raising the retirement age to 70 for people at least 20 years from retirement.

Read the full article here:

http://finance.yahoo.com/focus-retirement/article/110241/social-security-jitters?mod=fidelity-readytoretire&cat=fidelity_2010_getting_ready_to_retire

Moving to a foreign country not a good retirement option

By Dan Danford

I spotted this article on retiring in a foreign country on Yahoo! this morning. It's an interesting idea - your money stretches further, and you may be able to live comfortably on just social security income.

But life is about so much more than money. What will you miss out on if you move to Panama, or Mexico, and you're away from your children, grandchildren and siblings? To me, this is an extreme, and possibly even crazy, reaction to retirement, and one I wouldn't want to see any of my clients undertake unless they were perhaps originally from that country, and wanted to return - or it was a life-long dream.

It may be fine when you're 65, and in good health. But your health will turn, and you absolutely will need someone to keep an eye on your health, your medications, the doctors you see and possibly even to drive you to appointments and such. If your spouse is in good health, that can work, but counting on that isn't the best option. You really should consider moving near other family, including children, if you are not - and NOT several countries away. Also, the quality of medical facilities probably isn't ideal in a third world country.

Instead, plan. Plan to stay in the U.S. - and save accordingly. And don't make it your plan to die with a giant pile of money unless you can comfortably afford to do so and still live some.

I'd love to hear your take on this. Here's the article:

http://yhoo.it/bf6tRA

Dad's Divorce: When should I take Social Security payments?

In this week's edition of Money Made Easy, host Dan Danford answers this question from a viewer: I’ve heard the longer you wait before taking your social security benefits, the bigger your checks are. So when should I retire and take my social security benefits? Why wouldn’t everyone just take it later?

Danford, MBA, CRSP of Family Investment Center, explains what the benefits are at which age, which is the best choice for you, and basic rules of taking your social security benefits.

Social Security: Don't count on it.

Each week, we answer a question from a reader in this space. If you have a question for Dan Danford, post it in the comments section.

QUESTION: I’m 52 and looking at what I need to put away for retirement. How should I treat Social Security income? Should I include it in my calculations or plan as if I won’t have it?

ANSWER: The old "social security won't be there when I retire" myth. I hear this all the time, but I don't buy it at all. Social security is - more that anything else - a political issue. No substantive changes can take place because it's politically impossible to make them. We baby-boomers account for 70 million votes, and most of us get a bit indignant when someone threatens our retirement!

My colleague at Family Investment Center, Jason White, Ph.D., did his dissertation on social security and published it as a book. His premise is that the system is much more solvent than generally believed, and his arguments are compelling. As I said earlier, this is a political topic and much that is said is motivated by politics. It's hard to sort out the truth, but Jason does a nice job.

Having said all that, I consider social security to be an augmentation of retirement savings. The best of all worlds is to have enough that you don't need social security, and then to get it anyway. So, my default would be to plan and save as if it's not going to be there. Then, you'll have more than enough when you retire.