Tag Archives: social security benefits

What You Don’t Know About Social Security—but Should

retirement-exit-2My Comments: You may not agree with me but Social Security is a complicated issue. If you hope to find a quick and easy summary of what is implied by the title, you’ll be disappointed.

My assumption is that if you haven’t yet applied for Social Security benefits, that day will come, and statistics tell us you will be receiving those benefits for many years. The total dollars flowing into your family pockets over those years will be substantial.

To some extent, the flow of money will be determined by which of the 97 months you have to choose from to start your benefits. Each will result in a different number at the other end. So choosing the best month for you and your family could mean gaining or losing well over $100,000 before it’s all over.

To find out for yourself and get a free report to help you make your best choice, call or email me and I’ll provide you with some of the answers. It’s in your best interest if money means anything to you.

By Glenn Ruffenach / June 22, 2014

Imagine that you’re about to accept a new job, and it’s time to talk salary. You sit down with your boss, who begins as follows:

“Actually, our payroll system is impossibly complicated. You can pick from dozens of different ways to be paid and hundreds of different start dates, and each will produce a different salary. We offer some guidance, but we’re short-handed. As such, deciding when and how to collect a paycheck is essentially up to you.

“So…what would you like to do?”

Welcome to Social Security.

Each day, thousands of Americans apply for the first time for Social Security benefits. And each day—if questions from our readers and the stories we hear from financial advisers are any indication—many applicants have no idea what they’re getting into. They know little or nothing about the program’s complexity, the myriad ways to collect benefits and the Social Security Administration’s staffing and service problems.

As such, they’re putting their retirement—and, in many cases, their spouses’ future—at risk.

“People spend more time planning a vacation than they do planning for 20 or 30 years of Social Security benefits,” says Barry Kaplan, chief investment officer for Cambridge Wealth Counsel in Atlanta. Those benefits, he notes, are insurance against market downturns, hyperinflation and living longer than you anticipate. But would-be beneficiaries, he says, typically “go into this without a clue.”
SS summary JUL2014If you and/or your spouse are weighing your options about Social Security, here’s a look at some of the biggest issues—involving both the agency and the benefits program—that could shape your retirement for better or worse.

The Social Security Administration isn’t your financial adviser.

A fair amount of the mail we receive from readers with questions or complaints about Social Security goes something like this: “My Social Security office never told me about….” About a particular strategy for claiming benefits. About a little-known rule. About the consequences of starting one’s payouts at a particular point in time.

No, the Social Security Administration isn’t perfect. (More about this in a moment.)
But its primary job is delivering a service, paying 59 million beneficiaries, and not financial planning. The agency provides loads of information about benefits on its website http://www.ssa.gov/and does its best to answer the public’s questions in its field offices and by telephone. But a comprehensive talk about the nuances of Social Security and your financial future? That’s not going to happen.

Indeed, the Social Security Administration doesn’t know about—and it isn’t the agency’s job to know about—your household budget, your health, your savings, life insurance, plans you might have to work in retirement. In short, all the variables that should go into a decision about filing for benefits, says Mr. Kaplan in Atlanta.

So, the onus is on you to learn about, or find help in deciphering, the basics: how benefits work, claiming strategies, possible pitfalls. And if you’re hellbent, for instance, on grabbing a payout at age 62 (the earliest possible date for most people) and locking yourself—and perhaps your spouse—into a permanent reduction in benefits, the agency isn’t going to stop you.

The Social Security Administration is stretched increasingly thin at the worst possible time.

In March, Carolyn Colvin, the agency’s acting commissioner, didn’t mince words in a report tied to President Barack Obama’s request for additional funding for the Social Security Administration.

“Our service and stewardship efforts [have] deteriorated,” she said. “In fiscal year 2013, the public had to wait longer for a decision on their disability claim, to talk to a representative on our national 800 number, and to schedule an appointment in our field offices.”

The agency, in short, is overextended. In the past three years, it has lost 11,000 employees, or about 12% of its workforce; by 2022, about 60% of its supervisors will be eligible to retire. Meanwhile, budget cuts have resulted in the consolidation of 44 field offices, the closing of 503 contact stations (mobile service facilities) and a delay in plans to open eight hearing offices (where appeals about agency decisions involving retirement and disability benefits are heard) and one call center.

And that 800 number? According to a report in December from the agency’s inspector general, wait times in 2013 exceeded 10 minutes, an increase of more than five minutes from 2012.

The point: The Social Security Administration is grappling with its own problems just as the baby-boom generation, with about 75 million members, is moving full speed into retirement. (The oldest boomers are turning 68 this year.) The demands on the agency mean that you might not be able to find, or find in a timely fashion, the information or help you need. That said…

More services outside Social Security are offering more help.

The Social Security Administration is the first to acknowledge that benefits are complicated. The opening paragraphs of the agency’s “Social Security Handbook,” a guide to the benefits program, state plainly: “The Social Security programs are so complex it is impossible to include information [in the handbook] about every topic.”

Fortunately, a growing number of tools and services—some free, others for a cost—are available to help people navigate these waters.

In recent years, AARP, the Washington-based advocacy group for older Americans, and T. Rowe Price Group Inc., the Baltimore-based mutual-fund company, have introduced sophisticated online calculators that help users determine how and when to claim benefits. Both are free. (The Social Security Administration has several calculators, also free, that can help determine the size of your benefits, but not necessarily when to claim them for maximum effect.)

Among the services that charge a fee: MaximizeMySocialSecurity.com, from Economic Security Planning Inc.; SocialSecurityChoices.com, from SocSec Analytics LLC; and SocialSecuritySolutions.com, all started by academics. Our review of several Social Security tools last fall singled out Social Security Solutions for its ease of use and Maximize My Social Security for its flexibility.

Finally, check out weekly columns at the Public Broadcasting Service website from Laurence Kotlikoff, an economics professor at Boston University and the developer of Maximize My Social Security. The articles, published each Monday, address a wide range of issues about Social Security (including numerous “secrets” and “gotchas”) and answer questions about benefits. In short, invaluable reading.

The earnings test deters people from working in retirement—and shouldn’t.

Social Security’s earnings test, in which benefits are reduced if a person is collecting benefits and income at the same time, generates numerous questions and much confusion. But the apparent penalties aren’t what they seem.

If you are under your full retirement age when you first receive Social Security benefits and if you have earned income, $1 in benefits will be deducted for each $2 you earn above an annual limit. In 2014, that limit is $15,480. In the year you reach your full retirement age, the penalty shrinks; after you reach full retirement age, the deductions end completely.

The good news: Money lost to the earnings test isn’t really lost. Once you reach full retirement age, Social Security recalculates—and increases—your future benefits to account for any dollars withheld.

Most beneficiaries, though, aren’t aware of that; as such, they typically “work up to the [annual] limit—and stop,” says Andrew Biggs, a resident scholar at the American Enterprise Institute and former deputy commissioner at the Social Security Administration.

The earnings test, Mr. Biggs says, “should not be a disincentive to work.” Rather, “think of the test as delaying benefits until later in retirement,” he says. “Over your lifetime, your total benefits will come out the same.”

Spouses, at a minimum, should be aware of three claiming strategies.

Couples have a tremendous amount of flexibility in how they can claim benefits. But the options can quickly become overwhelming, which prompts many spouses to default to the easiest choice: grabbing a payout at age 62.

Before you do that, consider these three claiming strategies. Many couples aren’t aware of these options or don’t think they can benefit from them. Do yourself a favor: Run the numbers. (Fidelity Investments recently did a nice job of explaining these and other claiming strategies.)

Maximize survivor benefits: If you claim benefits before your full retirement age, you could be locking your spouse into a low survivor benefit when you die. The longer you wait to claim, the larger the survivor benefits.

Claim and suspend: Once you reach full retirement age, you can claim your benefit and then suspend it. (In other words, you stop payments before they begin.) This allows for two things: Your spouse, if he or she is 62 or older, can begin collecting spousal benefits from Social Security. (This assumes that the spousal benefit is larger than the spouse’s own retirement benefit. More on this in a moment.) Second, your own benefit, when you eventually claim it, will have increased in size. (Thanks to “delayed retirement credits.”)

Claim a spousal benefit, then later claim your own benefit: At full retirement age—if you are eligible for a spousal benefit and your own retirement benefit—you have the option of claiming just the spousal benefit. At a future point in time, you can then jump to your own benefit, which will have increased in size.

And speaking of spousal benefits…

“Deemed filing” can box you in.

It’s a frequent question: A husband who is already collecting Social Security (or weighing the claim-and-suspend strategy) asks if his wife can take just a spousal benefit at age 62—and then switch to a (presumably larger) benefit based on her earnings record in the future.

The answer: Nope.

If the wife, in this case, applies for benefits before her full retirement age, she is “deemed”—in the eyes of the Social Security Administration—to have filed for both benefits: the benefit based on her work record and a spousal benefit.

She will receive the higher of the two figures, but she will be locked into that reduced benefit going forward. (Reduced because she is claiming benefits before full retirement age.)

Again, as discussed above, if the wife waits until her full retirement age to file for benefits, she would have a choice: She could apply for just a spousal benefit. Then, a few years down the road, she could switch to a payout based on her earnings history.

William Meyer, founder of SocialSecuritySolutions.com, says the “deemed filing” rule trips up innumerable applicants. “We hear about it all the time,” he says.

The lesson is clear and critical: Claim benefits before full retirement age, and your options are limited; claim benefits after full retirement age, and you have more flexibility—and bigger payouts.

Divorced spouses and survivors don’t know what they don’t know.

Ask almost any financial adviser about Social Security slip-ups, and stories about ex-spouses, widows and widowers come tumbling out.

Mr. Kaplan in Atlanta recalls a woman—age 67, divorced and still working—who walked into his office and simply had no idea that she could have been collecting benefits for the previous five years based on her former husband’s earnings.

Prof. Kotlikoff at Boston University tells the story of a friend who had lost his wife and was convinced that he couldn’t claim Social Security checks as a survivor.
“He told me, ‘I made more [money] than she did,’ ” Prof. Kotlikoff says. “And based on that, he thought, incorrectly, that he wasn’t eligible for a survivor benefit. People just don’t know about this stuff.”

The point: Always err on the side of telling Social Security about your family circumstances and/or a change in those circumstances.

“Tell them about ex-spouses, tell them if you’ve lost a spouse, tell them if you have kids,” Prof. Kotlikoff says. (A surviving spouse with children could be eligible for additional benefits.)
“If you don’t tell them, they won’t know. It’s that simple.”

Delaying Social Security doesn’t just result in a bigger benefit; it also can make good tax sense.

You may have heard the advice countless times: Minimize (or avoid) withdrawals from your nest egg (401(k), individual retirement accounts, etc.) for as long as possible to take advantage of tax-deferred growth. Many investors who follow that advice grab Social Security benefits, typically at age 62, to help pay the bills.

But that advice ignores the possible tax benefits associated with following the opposite course: accelerating withdrawals from savings early in retirement so that you can hold off on claiming Social Security.

The thinking here is tied to the fact that Social Security benefits are taxable. As much as 85% of a married couple’s benefits are subject to tax when their income exceeds $44,000 ($34,000 for individuals); as much as 50% of benefits are taxable at lower income levels.

If you delay claiming Social Security and, as a result, end up with larger benefits, future withdrawals from savings will likely be smaller—a recipe for lower levels of taxable income.

“Many retirees don’t consider the impact of their withdrawal strategy on how their Social Security is taxed,” says Mr. Meyer, the SocialSecuritySolutions.com founder. “Missteps in tapping the wrong account and investments to generate income can significantly increase your taxes.”

3 Retirement Planning Essentials to Understand

retirement-exit-2My Comments: I’ve now reduced retirement years to three types of years. They are “go-go”, “slow-go” and “no-go”. Planning for them before you reach retirement is a matter of attempting to get as many $ in the pot as possbile.

After that, it’s a timing issue that is driven by health, the expected life style, and the nature of your bucket list. Plan to spend more in the “go-go” years than you will in the “slow-go” years and they dry up in the “no-go” years.

by: Rachel F. Elson / Financial Planning / Monday, June 9, 2014

HOLLYWOOD, Fla. — Longevity increases and cultural shifts have changed the way Americans plan for retirement — and advisors need to make sure they’re keeping pace.

That was the message from Lena Rizkallah, a retirement strategist at J.P. Morgan Asset Management, at the Pershing Insite conference here on Thursday.

A generation ago, said Rizkallah, the mantra was “be conservative” — whether in lifestyle or in investment decisions. “Now, though, boomers have a bucket list,” she said. “They want to retire in good condition financially but also have goals for themselves.”

That changes some of the calculus for advisors said Rizkallah, who joined Elaine Floyd, a director of retirement and life planning at Horsesmouth, for an energetic discussion of retirement planning.

Among the recommendations they made:

1. Make sure clients have a retirement plan.

“I call this the heart attack slide,” Rizkallah said, posting a chart that mapped a client’s age and current salary against retirement savings benchmarks. “It helps clients gauge where they are.”

She encouraged advisors to talk frankly about both saving rates, for those still in the workforce, and spending plans. In general, she said, spending tends to peak at age 45, then decline in all categories except health care.

But she added a big caveat: “Note that housing continues to be 40% of spending. … More people are entering retirement with a mortgage.”

2. Know the threats to a secure retirement.

Rizkallah outlined three big risks for retirees.

Outliving life expectancy. Remember, she cautioned, that as we age our life expectancy gets longer. There is now a 47% chance that one spouse in a 65-year-old couple will live to 90,” she said, pointing out that the likelihood had increased even during the last year.

Not being able to keep working. People may think they’re going to bolster their retirement plan by working longer, but not everyone can control the timing, Rizkallah said, citing such issues as poor health, family care needs, and layoffs and other workplace changes. “There is a disparity between people’s expectations and the reality,” she said, encouraging advisors to tell clients: “You want to keep working? Great. But don’t make that part of the plan.”

Facing higher costs of health care. Costs continue to rise, she pointed out, adding that there’s a lot of uncertainty around future costs. “It’s really crucial to have this conversation,” she said. “Say, ‘Because we’re seeing this, let’s talk about saving, let’s talk about diversifying.'”

3. Do the math on Social Security.

It’s critical that advisors understand — and are able to communicate to clients — the real impact of delaying Social Security benefits, Floyd told listeners.

She cited as an example a maximum earner who turns 62 this year, noting that if the client takes Social Security at 62, he or she will have collected $798,387 by age 85. But by deferring until age 70, that same client will have $1,035,653 by 85. If the client lives to 95, Floyd added, the deferral would have a more than $600,000 payoff.

Other Social Security nuances are important as well, said Floyd, who received the lion’s share of questions during the Q&A period at the end of the panel. “We are getting lots of questions about the earnings test … which suggests that people are continuing to work and filing for Social Security” — something she said clients “just shouldn’t do.”

Advisors should understand whether their clients are eligible for spousal benefits, whether and when clients can change their minds and undo a Social Security election, and how to maximize benefits for a surviving spouse. That last part gets particularly tricky given boomers’ penchant for divorce, Floyd added: “Social Security rules can get really complicated when there are multiple divorces.”

6 Social Security Traps to Avoid

Social Security cardMy Comments: (I’ve missed a couple of posts for which I apologize. We went to my 55th high school reunion and met some interesting people. Much more interesting than thay were 55 years ago, assuming I remembered them at all. The prevailing sentiment was to congratulate each other for being upright, breathing and taking noursishment.)

About this post; several months ago, seven years after I qualified to receive full Social Security benefits, I realized how very important it was to pay attention to when you apply for SSA benefits. It was too late to help myself, but not too late to help a lot of other folks.

So I aligned myself with a group located in Topeka, Kansas and started providing clients and anyone who asked, with a comprehensive report to help them decide which of the possible 97 months you can choose from to apply for benefits.

The reports are helpful, to say the least. Call me or email me and I’ll make sure you get one for yourself. There is no cost except a willingness to listen as I explain what it all means to you.

By Kandice Bridges May 6, 2014

If you’re looking forward to turning age 62 so you can begin collecting Social Security benefits and live on Easy Street, you might get caught off guard. Some of the Social Security rules can be frighteningly complex. Because it will likely represent a large portion of your retirement income, it’s important to understand how the government program works.

For instance, there are limits on how much you can earn while collecting benefits, and if you exceed those limits, your Social Security benefits will get cut substantially. That’s just one of the snares that could trip you up.

Make sure you plan appropriately to avoid these six Social Security traps.

Trap No. 1: Social Security may be taxable

If your earnings exceed a certain level, up to 85 percent of Social Security benefits may be taxable. Even income sources that are normally tax-exempt, such as income from municipal bonds, must be factored into the total income equation for the purpose of computing tax on Social Security benefits.

Eric Levenhagen, CPA and Certified Tax Coach with ProWise Tax & Accounting, says to find out whether any of your Social Security benefits are taxable, “Look at your total taxable income plus half of your Social Security benefit. Make sure you add back any tax-exempt interest income.”

When your taxable income, tax-free income and half of your Social Security benefit exceed $25,000 ($32,000 for married couples filing jointly), that’s when you’re in the zone to pay taxes on Social Security income.

Another unexpected income source that could impact taxes on Social Security: proceeds from a Roth conversion.

If you’re thinking about doing a Roth conversion, do so before receiving Social Security benefits, says Steve Weisman, an attorney and college professor at Bentley University. “A lot of people considering converting a traditional (individual retirement account) into a Roth IRA should be aware that if they do that, they will end up paying income tax on the conversion, which will also be included for determining whether Social Security benefits are taxable,” he says.

Trap No. 2: Must take required minimum distributions
Required minimum distributions, or RMDs, must generally be made from tax-deferred retirement accounts, including traditional IRAs, after a person reaches age 70 1/2. The distributions are treated as ordinary income and may push a taxpayer above the threshold where Social Security benefits become taxable.

“This is a double-edged sword,” says Weisman. “If you are over 70 1/2, you are required to begin taking distributions from IRAs (except Roth IRAs) and other retirement accounts.”
“Here again, you take half of the Social Security benefits plus all other income to determine whether Social Security benefits are taxable. RMDs will be included and drive that up,” says Levenhagen.

You can’t avoid required minimum distributions, but you can avoid being surprised at tax time.

Trap No. 3: Some workers don’t get Social Security
Most people assume Social Security is available to seniors throughout the U.S., but not every type of work will count toward earning Social Security benefits. Many federal employees, certain railroad workers, and employees of some state and local governments are not covered by Social Security.

“Some of my clients have participated in retirement programs offered by employers that don’t pay into Social Security,” says Charles Millington, president at Millington Financial Advisors LLC in Naperville, Ill. “If your employer does not participate in Social Security, then you should be covered under the retirement program offered by your employer.”

However, certain positions within a state government may be covered by Social Security.
Find out whether your employer participates in Social Security or not and if not, whether your position may be covered by Social Security. Make sure you understand where your retirement benefits will be coming from.

Trap No. 4: Early benefits could be a big mistake
If you opt to take Social Security as soon as you are eligible, you may be doing yourself an injustice.

“If you delay taking benefits until age 70, you will see as much as an 8 percent increase in benefits for each year you delay,” says Steve Gaito, Certified Financial Planner professional and director of My Retirement Education Center. “In addition to receiving a higher benefit, the annual cost-of-living adjustment will be based on the higher number.”

“It’s hard to find that kind of rate of return on regular investments, so it’s good to delay if you can,” says Weisman.

Of course, life expectancy plays a part in the decision of when to begin drawing benefits. “You generally know how healthy you are and what your family medical history is,” says Ryan Leib, vice president of Keystone Wealth Management. “We advise clients to determine whether they think they will live longer than age 77. If so, delaying until age 70 will net you more in benefits than opting to start collecting benefits early.”

If you’re able to live off other funds and delay taking Social Security, you should seriously consider doing so. “Delaying taking Social Security until age 70 could mean the difference between cat food and caviar in retirement,” says Leib.

Trap No. 5: Windfall elimination provision
If you work for multiple employers in your career, including both employers that don’t withhold Social Security taxes from your salary (for example, a government agency) and employers that do, the pension you receive based on the noncovered work may reduce your Social Security benefits.

“Many people are not aware that their actual Social Security benefit may be lower than the amount shown on their statements or online because the windfall elimination provision reduction does not occur until the person applies for their benefits and (the Social Security Administration) finds out they are entitled to a pension,” says Charles Scott, president of Pelleton Capital Management in Scottsdale, Arizona.

Social Security applies a formula to determine the reduction. In 2014, the maximum WEP reduction is $408. There is a limit to the WEP reduction for people with very small pensions.
If you have worked for both noncovered and covered employers, don’t let the windfall elimination provision catch you by surprise.

Trap No. 6: Limits on benefits while working

You are allowed to collect Social Security and earn wages from your employer. However, if your wages exceed $15,480 in 2014, your Social Security benefits will be reduced by $1 for every $2 you earn above that level.

During the year in which you reach full retirement age — which ranges from age 65 to 67, depending on your birth year — you can earn up to $41,400 before $1 of your Social Security benefits will be deducted for every $3 you earn above that threshold. However, the money isn’t lost forever. You will be entitled to a credit, so your benefits will increase beginning the month you reach full retirement age.

At full retirement age, no income restrictions apply. “There is no penalty for additional income earned,” says Gaito.

If you plan on working beyond age 62 and anticipate earning more than $15,480 per year, strongly consider putting off Social Security benefits.

10 Numbers Everyone Should Know About Social Security

SSA-image-2My Comments: Understanding the Social Security system and helping clients make the best choices has become a passion for me.

Before a few months ago, I never realized there were a total of 97 months to choose from when signing up for benefits. I never knew the difference between the best month and the worst month could mean a couple of hundred thousand dollars to me and my family.

I never knew that if my spouse and I were more than a few years apart in age, there were options that might allow us to realize even greater benefits. I didn’t know I could apply for benefits and then suspend them to gain an advantage.

If you are going to reach age 62 in the next few years, or have reached it and have not yet applied for benefits, you need to get in touch with me to get a free report on how to maximize your benefits. Go to the Contact Info tab above and reach out to me.

By Emily Brandon April 10, 2014

If you want to maximize your Social Security payments, you need to familiarize yourself with the rules. The taxes you pay and the age you sign up for benefits play a big role in how much you will receive in retirement. Pay attention to these important components of Social Security.

6.2 percent
Workers pay 6.2 percent of their earnings into the Social Security system, and employers pay a matching 6.2 percent. Self-employed workers contribute 12.4 percent of their pay to the Social Security Trust Fund.

$117,000
This is the income cap for Social Security taxes in 2014. Workers do not pay Social Security taxes on earnings that exceed $117,000 and will notice a bump in their paycheck once they earn above this amount in a single year.

$1,294

Retired workers receive an average Social Security payment of $1,294 in 2014. Retired couples receive an average of $2,111.

$15,480
If you sign up for Social Security benefits before age 66 and continue to work, you can earn $15,480 in 2014 before $1 in benefits will be temporarily withheld for every $2 you earn above the limit. The year you turn 66, the earnings limit increases to $41,400 and the amount withheld drops to $1 for every $3 earned above the limit. After you turn 66, there is no penalty for working and collecting benefits at the same time.

62
This is the earliest age workers can sign up for Social Security payments. However, monthly payments are significantly reduced if you sign up at this age. And if you work and collect benefits at the same time, your Social Security payments could be temporarily withheld if you earn too much.

66
Age 66 is when baby boomers born between 1943 and 1954 are first eligible to collect unreduced Social Security benefits. The Social Security full retirement age is 66 and two months for people born in 1955, and it increases in two-month increments to 66 and 10 months for people born in 1959. The earnings limit for working and collecting benefits at the same time also disappears once you reach your full retirement age.

67
The full retirement age is 67 for everyone born in 1960 or later. Most members of generation X and millennials will not be able to claim unreduced Social Security benefits until a year later than the baby boomers and two years after their grandparents, whose full retirement age was 65.

70
Social Security payouts further increase for each year you delay starting your payments up until age 70. After age 70, there is no additional benefit for waiting to sign up for Social Security.

$34,000
If the sum of your adjusted gross income, nontaxable interest and half of your Social Security benefits totals more than $34,000 ($44,000 for couples), you will have to pay income tax on up to 85 percent of your Social Security payments. If these income sources are between $25,000 and $34,000 ($32,000 and $44,000 for couples), income tax will be due on up to half of your Social Security benefit.

$2,642
This is the maximum possible Social Security benefit for a worker who signs up at full retirement age in 2014. However, to get this amount, you would need to earn the maximum taxable amount, which is $117,000 in 2014, in each of the 35 years factored into your Social Security payments.

10 Things You Should Know About Social Security

My Comments: It’s no secret that Social Security is a major issue these days. So many people are arriving at the magic number when you can apply. For financial advisors like myself, knowing most of the variables and being able to help clients and others make the best decision for themselves is important. When you start digging, the number of variables is mind boggling and making the wrong choices can be costly.

As before, Kiplinger has put together an interesting slide show for you to follow. The image just below is a screen shot of their page. I’ve set it up so that if you click on the image, you reach the slide show and navigate to all the pages with the blue arrow. All 12 pages. Have fun!
10 things about SSA

Is Social Security Really Going Broke?

Social Security 2My Comments: Two days ago, I posted an article with 11 Tips About Social Security. Only it somehow got posted without a Title. I didn’t notice and no one called or emailed to tell me about it. Maybe the article was compelling on its own or more likely, few people pay any attention to these posts. Since then I’ve added the Title it was supposed to have.

My son argues that it really doesn’t matter how much he puts into the SSA system since by the time he arrives to collect his benefits, there will be no SSA since it will have long since run out of money.

I’ve argued again and again that it WILL be there, though probably changed somewhat. After all, it was “going broke” 25 – 30 years ago and it got fixed. All they did was delay the full retirement age. They can do that again, or increase the % of payroll that gets sent into the system.

Or maybe it’s not going broke after all, just the way it is. Here’s an article that says all the fuss and hullabaloo is a waste of time and energy. And this argument is compelling, to my mind. See what you think and let me know. Please!

Article added by Dan McGrath on April 4, 2014

There is a lot of rhetoric in the news lately about Social Security becoming insolvent as the baby boomers head towards retirement. The logic makes sense; there is a disproportionate amount of people heading towards retirement, who will be accessing the benefits provided by Social Security while having far fewer people funding the same benefits.

To complicate matters even further, the trust fund that was created at the onset of Social Security has been depleted over the years by politicians who decided to fund their own pet projects with the money that was deposited in it, instead of letting that money grow.

So, the outlook does appear to be ominous at best, especially with too many people taking, not enough people putting in, and the government withdrawing money whenever possible. But even with all of this happening, the rhetoric and the worry may be all for naught and the reason is very simple: health care.

Flying under the radar when it comes to retirement is how the rules have been changed over the course of the last 10 to 12 years, and because of these rules, the baby boomers who are in and heading towards retirement may, to their detriment, actually save Social Security for everyone else who will follow them. Unfortunately for them, there will also be a large strain placed on their financial plans moving forward and quite possibly a chance that the wealth transfer that is often mentioned will be wiped out as well.

Starting in 1993, under a simple change to the Program Operations Manual System of Social Security, it was ruled that in order to receive Social Security, a person must also accept Medicare Part A or forfeit all benefits of Social Security, meaning that those in and heading to retirement must, once eligible and accepting Social Security, accept Part A of Medicare in order to keep receiving Social Security.

Once Part A is accepted and there is no longer any credible insurance from an employer, then a retiree must also enroll into Parts B and D of Medicare or face late enrollment penalties, too. And, by the way, these late enrollment penalties are concurrent, total the length of time late and unfortunately follow for the entirety of a retiree’s life.

The other change to retirement that is creating a windfall for Social Security is the fact that Medicare is also being means-tested for Parts B and D. This means that the more income you earn, the more you will pay for this coverage. This may be the specific reason why, in 2007, the Congressional Budget Office (CBO) released the below graph detailing the impact that Medicare/Medicaid, Social Security and the budget would have on the overall U.S. economy.SSA $ 2002 to 2072

See anything in particular? Do you see how Social Security levels off after about 2029, even in the face of the rhetoric that it should open wide like a funnel?

One possible reason why this 2007 chart from the CBO depicted Social Security as leveling off in the future and not becoming a burden to the economy might just be due to the fact that 2007 was the first year that Medicare was actually means-tested. It could be just some strange coincidence, or it could be that the CBO was really trying to tell us something — that it is due to the fact that Medicare is being means-tested and that certain Medicare premiums and any surcharges are automatically deducted from any Social Security benefit you may receive.

With Medicare inflating at 6.5 percent, the lowest rate reported by the government, and Social Security’s cost of living adjustments (COLAs) only expected to be at a maximum of 2.8 percent annually for the foreseeable future, it is only a matter of time (and simple math) before it’s realized that the government’s obligation of providing Social Security benefits will be lowered drastically, all at the expense of those in and heading to retirement.

On the surface, it would appear that the deck is stacked against Social Security, but due to these simple rule changes the end is most likely not as near as the media would like to report on it. And judging by what the CBO actually told us back in 2007, the end of Social Security is probably nowhere in sight.

Please keep in mind that even though Social Security may be fine in the long run, it still doesn’t mean that people are going to receive the amount of Social Security they have been told. Because of these health costs and these rules, the Social Security benefits that a majority of retirees have and will continue to rely on will, when it comes to actual take-home income, either be stagnant, decreasing or even possibly vanishing all together.

The Hold Harmless Act will only protect people from Part B increases and is null and void for any high-income retirees, as well.

The time to create another form of guaranteed income, one that is not recognized as income by the IRS and/or Medicare, is now because what you don’t know about retirement will hurt you.

11 Tips to Help YOU With Social Security Benefits

SSA-image-2Comment from Tony Kendzior: I’ve been happily accepting monthly checks from the Social Security Administration now for over seven years. I don’t wonder much about it anymore; they just show up in my bank account and along with my wife’s check, make a better positive outcome for us every month.

I’m also finding ways to help individual clients optimize their benefits. It’s a function of doing the math to determine which of the 97 months you can choose to start taking your benefits. And knowing the impact of several options you have in each of those 97 months.

So my goal is to try and post something about the Social Security System at least once every week. If this is redundant, my apologies. But I never know who is reading this stuff so I just keep shoving it at you in hopes you will benefit. BTW, if you want a specific analysis for yourself, let me know. It’s free.

by: Ann Marsh / Financial Planning / Wednesday, January 22, 2014

The Social Security system may be in serious trouble but, right now, it’s still a critical source of support for clients, according to Theodore Sarenski, president of Blue Ocean Strategies Capital in Syracuse.

Sarenski started with the bad news during his presentation before CPA-planners at the Advanced Personal Financial Planning Conference sponsored by the American Institute of CPAs in Las Vegas.

Reserves for Social Security will be depleted by 2033 and, once they’re gone, incoming receipts will cover just 77% of scheduled benefits, Sarenski says. “It sounds like it’s a long time away, but it’s only 19 years.”

Trouble looms even sooner for the Social Security Disabilty reserves, which will be depleted by 2016, according to Sarenski. And, once depleted, anticipated income would cover just 80% of scheduled benefits, he adds.

For these reasons, Sarenski says, he urges caution.

“We need to be conservative, I think, in our planning,” he says. For people who are age 50 or younger, he is currently projecting they will receive 75% of their benefits.

While he holds out hope that government intervention – possibly in the form of tax increases – can provide a solution, planners still can help their clients get solid benefits from Social Security right now.

This is especially important because baby boomers, now entering their retirement years, have not been good savers, he says.

Across the U.S. workforce today, 51% of people have no private pension coverage and 34% has no retirement savings, he adds.

“So, now that we are all depressed,” he says, “what are the things that we can do for our clients?”

His advice includes the following:

1. WAIT
Although there are exceptions, planners should urge most clients to wait to take their Social Security benefits. If they take them as soon as they can at age 62 rather than waiting until age 66, or even 70, they will receive lower monthly benefits. Planners should remind clients that Social Security is the only benefit with a built-in inflation adjustment.
“You cannot buy an annuity that has an inflation rider so it’s worth waiting” for the higher number, he says.

2. FILE AND SUSPEND
In some cases, it can make sense to start benefits at age 62 and then immediately suspend them – a strategy many clients are not aware of. For example, a spouse may want to start his benefits and immediately suspend in order to trigger spousal benefits for a wife who is 62 or older. He can then suspend his benefits in order to receive a higher benefit when he resumes them later. Some people take this route to reduce required minimum distributions from retirement savings.

“The closer [married couples] are in age, the better this works out,” he cautions.

3. MEDICARE B PREMIUM
However, if you do file and suspend, make sure to pay your Medicare Part B premium yourself. If you don’t, Social Security will pay that premium for you, which will reduce future benefits. “Be careful of that,” he says.

4. MARRIAGE
Remember that spouses need to be married for a full year to collect benefit from a spouse’s work record.

5. SPOUSAL BENEFITS

Both spouses in a couple cannot file and suspend in order to trigger benefits on each other. On the other hand, if they decided to get divorced, they could.
Planners “probably won’t get a lot of clients to do this,” Sarenski jokes.

6. DIVORCE
Those already divorced must have been divorced for two years before they can collect a spousal benefit on their divorced spouse. The same goes for their exes if they want to collect on them. Benefits collected by ex-spouses do not impact the benefits due to a client’s family.

7. REPRESENTATIVE PAYEES
When working with clients who are much older and could lose the ability to care for themselves, those clients should appoint “representative payees” to receive funds on their behalf from the administration. That’s because Social Security does not recognize powers of attorney.

Once, Sasenski says, one of his clients had to close out a banking account that took direct deposits of Social Security checks for herself and her husband. Although she had power of attorney over her husband’s affairs, it took four months of wrangling with the Social Security Administration before she could have her husband’s check sent to her for his benefit.

8. IN-PERSON ENROLLMENT

Remember that, although the Social Security Administration has made a large push to get people to enroll for benefits online, anything beyond the simplest arrangements must be handled in person, at a Social Security office. The online system is not set up to handle anything anomalous.

“Someone told me here at the conference that one of their clients couldn’t apply online. Why? Because they were born on Feb. 29,” Sarenski says, and the system couldn’t recognize that leap year date.

9. ANNUAL STATEMENTS
Planners should urge all their clients to enroll online right now to receive annual Social Security statements. The administration sent out paper statements for the last time in 2010. It waited so long to move the entire operation online to ensure that people could safely and securely access their information online. Now, Sarenski says, the administration’s website is robust. But it’s important that clients check their data regularly because the government does make mistakes occasionally and the older those mistakes are, the harder they are to rectify.

10. NO BENEFITS IN JAIL
For anyone wondering, Sarenski says, husbands or wives who kill their spouses can’t collect benefits on them. Neither can children who kill their parents. If someone goes to jail, any benefits that would have come due during that jail time are lost.

“But your spouse and children, as long as they are not in there with you, they can continue getting benefits,” he says.

11. COMPASSIONATE ALLOWANCES

In some situations, clients can start receiving benefits very rapidly. “There are 200 compassionate allowances,” he says. “You will get Social Security benefits within two weeks if you have one of those conditions.”

Fabulous Freebies 2014

My Comments: The people at Kiplinger have created another great blog post for me to borrow. I encourage you to explore their site and gather as much information as you need. If, at the end of the day, you need someone local to help you make smart financial decisions, Florida Wealth Advisors LLC has its’ hand up, trying to get your attention. We’ve been doing this for almost 40 years. Give us a call or send an email.

This image is what you will find if you simply click on the image. You will find yourself at the Kiplinger web site page about the Fabulous Freebies. Be aware it is a slide show and to get to the next slide, just click on the red arrow at the top right. It will take you to the first of many pages. Some are great, others not so, but there is something for everyone. Have fun.
2014-fabulous-freebies

Social Security Tips: How to Use File & Suspend

SSA-image-2My Comments: I offer great thanks to the author of the following article, Michael Kitces. You’ll find his credits at the end of this post.

This will take a little time to read and understand. But if you are getting ready to file for Social Security benefits, or are just now starting to think about when and how to file, you need to read this and develop at least a basic understanding.

As part of our efforts at Florida Wealth Advisors, we will provide you with a no-cost analysis and report that creates a timeline to help you maximize your benefits over time. The two caveats are (1) we have no idea when you are going to die and (2) we make no assumptions about cost of living increases each year.

Getting it right is important. There are 97 months for you to choose from when it comes to filing for benefits. The difference between the best one and the worst one can be as much as several hundred thousand dollars over your lifetime. Doesn’t it make sense to ask us for one of these reports?

by: Michael Kitces / Monday, March 24, 2014

An especially popular strategy for maximizing Social Security benefits is to utilize the file-and-suspend rules. These permit an individual to file for benefits but suspend them immediately, allowing delayed retirement credits to be earned while letting the spouse begin spousal benefits simultaneously. They can even be used to activate family benefits for young children.

Yet the file-and-suspend strategy is not just an effective planning tool for couples and families with minor children. Since benefits that have been suspended voluntarily can be reinstated later, even singles may wish to routinely file-and-suspend if they intend to delay anyway, as a way to hedge against a future change in circumstances.
At the same time, there are caveats to the file-and-suspend strategy, as well: Suspending will put all benefits on hold (which limits couples from crisscrossing spousal benefits by having each file and suspend); filing and suspending also triggers the onset of Medicare Part A benefits, making a client ineligible to make any more contributions to a health savings account.

UNDERSTANDING THE RULES

The basic concept of file-and-suspend is straightforward: A client files for retirement benefits (triggering all the rules that normally apply), but then suspends the benefits without receiving any payments (allowing the client to earn delayed retirement credits that increase the future benefit by 8% of the individual’s primary insurance amount). The strategy’s primary purpose: By filing for benefits, the client can render a spouse eligible for spousal benefits (only available once the primary worker has applied for retirement benefits), while still earning delayed retirement credits.
• Example 1: A 66-year-old man eligible for a $1,500-a-month benefit chooses to file-and-suspend, letting his 66-year-old wife begin a $750-a-month spousal benefit. The husband continues to accrue 8% a year delayed retirement credits on his monthly $1,500, which by age 70 rises to $1,980 a month, plus cost-of-living adjustments.

Notably, the ability to suspend benefits is available only to those who have reached full retirement age (66 years old for those born between 1943 and 1954; up to 67 for those born in 1960 or later). If benefits are filed early, the election generally cannot be undone (though clients can change their mind within 12 months of the first filing).

Even if benefits were filed early, they can still be suspended going forward once full retirement age is reached. This will not undo the reduction that applies for taking benefits early, though it can almost fully offset the original reduction as delayed retirement credits are earned.
• Example 2: A 66-year-old woman eligible for a $1,000 monthly benefit filed for benefits early at age 62, reducing benefits by 25% to $750 a month. If she now chooses to suspend benefits, she can begin to earn 8% a year delayed retirement credits for the next four years, ultimately increasing the benefit by 32%, back up to $990 a month. (Ongoing cost-of-living adjustments would also be applied along the way.)

While the file-and-suspend strategy is often explained as a loophole to maximize benefits, it actually was a provision added to the Social Security system in 2000, under the Senior Citizens’ Freedom to Work Act, to allow for the associated planning strategies (especially for couples’ benefits).

FILE-AND-SUSPEND FOR COUPLES
As noted in example 1, the primary purpose of the file-and-suspend strategy is for married couples to better coordinate the claiming of individual and spousal benefits – in particular, for one spouse to claim spousal benefits while the other continues to defer individual retirement benefits to accrue the credits. Otherwise, both members of the couple could face benefit delays. If the husband in example 1 had chosen to delay benefits without going through the file-and-suspend strategy, for instance, both he and his wife would have had to wait until he reached age 70 for retirement benefits.

File-and-suspend may be relevant even in situations where both spouses have their own benefits, but each wishes to delay. By adopting the file-and-suspend strategy, one spouse can claim benefits while both generate delayed retirement credits.
• Example 3: Both members of a couple are 66; the wife is eligible for $1,600 a month in benefits and the husband for $1,300 a month. Both are very healthy and wish to hedge against the risk that they could live well into their 90s, so both want to wait and earn delayed retirement credits. If the wife goes through the file-and-suspend process, then the husband can file a restricted application for just spousal benefits while delaying his own individual benefits. The husband gets $800 a month in spousal benefits based on his wife’s record, then can switch to his own $1,300 monthly individual benefit in the future (and earn 8% a year in delayed retirement credits while he waits). And because she filed and suspended, she also earns 8% a year delayed retirement credits on her benefit.

Another benefit of the file-and-suspend rules is that by filing, the primary worker not only activates eligibility for a spouse to claim spousal benefits, but also for dependent benefits to be paid on behalf of minor children as well (albeit subject to the maximum family benefit limitations).

RULES FOR INDIVIDUALS

While the file-and-suspend rule primarily helps married couples, the strategy also allows individuals who started benefits early to change their mind, suspend benefits and begin to earn delayed retirement credits.

There is another file-and-suspend planning opportunity as well. Under Social Security rules, those who are full retirement age can file for retroactive benefits, but only as far back as six months (resulting in a lump-sum payment of prior benefits). An individual who is 66 1/2 can retroactively file for benefits back to age 66, receiving makeup payments for the prior six months; at age 68, the payments can only go back to age 67 1/2.

Yet if the individual files-and-suspends at full retirement age, a subsequent filing for retroactive benefits goes all the way back to the date of the file-and-suspend. Under Social Security rules, there’s a difference between the standard filing for retroactive benefits and a request to reinstate voluntarily suspended benefits. To preserve flexibility, a client who plans to delay benefits may want to file-and-suspend rather than simply waiting.
• Example 4: A single 66-year-old woman is eligible for a $1,600 monthly retirement benefit. Because she’s in good health, she plans to delay her benefits until 70 to earn delayed retirement credits. But at 68, her health takes a significant turn for the worse and she believes she may not live much longer. Realizing there’s no longer a reason to delay her Social Security benefits, she applies immediately – and retroactively – but at best she can only get benefits going back to age 67 1/2.

If the same woman had filed and suspended at 66, then when she got the unfortunate health news, she would be able to reinstate her benefits all the way back to age 66 – giving her a lump-sum payment for 24 months, rather than just six.

Alternatively, if the woman stayed healthy after doing file-and-suspend, she could still delay her benefits to age 70.

CAVEATS TO THE STRATEGY
There are a few caveats to the strategy. First, remember that the request to suspend benefits will suspend all benefits, barring couples from crisscrossing spousal benefits.

The act of filing also makes the client eligible for Medicare Part A. In fact, because enrollment is automatic for anyone older than 65 who applies for Social Security benefits, clients can’t opt out of Medicare Part A even if they want to.

Automatic enrollment in Medicare Part A isn’t necessarily problematic – at worst, it’s duplicated coverage, but doesn’t have separate premiums or cost like Medicare Part B. However, it renders a client ineligible to contribute to a health savings account. For clients with a high-deductible health plan, file-and-suspend will render them ineligible to make new contributions.

Beyond these caveats, the file-and-suspend strategy provides a great deal of flexibility, a lot of opportunity to maximize Social Security benefits and the ability to hedge the risk of delaying benefits with the potential to reinstate the voluntarily suspended benefits in the future.

Michael Kitces, CFP, is a partner and director of research at Pinnacle Advisory Group in Columbia, Md., and publisher of the planning industry blog Nerd’s Eye View. Follow him on Twitter at @MichaelKitces.

Social Security: Planning Tips by Age

SSA-image-2My Comments: I’m increasingly being asked by people to help answer their questions about Social Security. Here is a short overview of critical ages as you begin to think about retirement.

by: Paul Norr / Wednesday, February 19, 2014

There are many age-related financial and planning milestones that clients will encounter in their sixties. Here is a list of some of the common ones that you and your clients should keep in mind.

59 ½ – Penalty Goes Away
This is the age at which one can withdraw money from traditional IRAs, 401(k)s or similar retirement plans without restrictions and without an added 10% tax penalty. Withdrawals will still be taxed at normal tax rates. For most people, it is not wise to draw down retirement accounts at this relatively young age unless they have specific financial needs. Usually, the value of maintaining tax-preferred savings exceeds the benefit that may come from early spending.

60 – Survivors
This is the first year to collect a Social Security survivor benefit if a spouse or ex-spouse (if they were married for at least 10 years and never remarried) has died.

62 – Social Security – First Call
The earliest age that someone could collect Social Security retirement benefit. Most people should not file for benefits at this early age although certain spousal strategies may be an exception.

62 – Pension Alert
This is a common age at which pension benefits kick in. Pension features vary significantly from company to company or between industry and government. Encourage your clients to carefully evaluate the features of their pension today if they are fortunate enough to have one.

63 ½ – Bridge to Medicare
Not an official milestone but might be an important age for laid-off workers who are offered COBRA health care benefits. COBRA benefits typically last for 18 months and 65 is the age at which one can begin Medicare medical coverage. Therefore, 63 and a half is the earliest age at which , if one were laid off and covered by COBRA health care benefits, that COBRA benefits would provide a health care bridge all the way until they are eligible for Medicare.

65 – Medicare
Medicare eligibility age. Most people should sign up for Medicare benefits within a 7 month window around this birthday in order to avoid lifetime surcharges on Medicare benefits. There are a few exceptions to this requirement such as active employees who are still covered under a large employer health plan.

66 – Social Security Magic Age
Sixty-six is the ‘magic age’ for Social Security when many options become available. For most boomers, 66 is the official full retirement age . At this age a number of creative Social Security strategies for couples become available such as File and Suspend and Restricted Filing. If a client is second-guessing their decision to file for earlier benefits, 66 is also the first age at which they can suspend benefits in order to allow delayed retirement credits to build up.

70 – Social Security – Last Call
Don’t delay any longer. This is the age at which there is no additional benefit to delay filing for Social Security benefits. If a client has not filed for benefits yet, congratulate them. They have maximized their lifetime monthly Social Security benefit but encourage them to file immediately.

70½ – Required Distributions Ahead
Owners of retirement accounts such as IRAs, 401(k)s or other similar retirement plans are required to start taking specified required minimal distributions (RMDs) from these accounts when they turn seventy and a half. They actually have until the following April to make take the first year distribution. After that, each year’s distribution must be taken by Dec. 31 of that year.

The total required distribution is based on the total values of all of a person’s IRAs and retirement plans as of Dec. 31st of the earlier year. The total distribution may all be taken out of any one account or may be split among the accounts in any manner that one chooses.