Category Archives: Social Security

3 Things That Affect When You Should Apply for Social Security

My Comments: As you approach your retirement and your 62nd birthday, this question becomes increasingly relevant.

Retirement is that point in your life when you essentially quit working for money and instead money starts working for you. The challenge is to make sure it’s working hard enough to keep you from running out of money before you run out of life.

Social Security benefits have become an absolute requirement for millions of Americans to maintain an existing standard of living as they age.

by Brian Stoffel \ April 17, 2017

You can choose to take Social Security as early as age 62 and as late as age 70. When to claim your benefits is a question many retirees take a long time to consider. To make the best decision, it’s important to look at how your monthly benefits change based on when you begin receiving them.

Currently, the average retirement benefit check from the program is $1,360, and the average retirement age is the earliest option, 62. But if recipients waited, these checks could get much bigger. Here’s what it would look like for those born in 1954 and earlier:

As you can see, those aren’t small differences. On the one hand, if you wait until age 70, your monthly benefit will be a whopping 76% higher than if you claim right away. On the other hand, if you do decide to delay your benefits that long, you’ll go almost a decade with no Social Security income coming in even though it was an option.

While there are tons of different variables that affect when you should apply for Social Security benefits, the following three questions often play an outsize role.

1. How do you feel when you get up and go to work in the morning?

This may seem like an odd place to start, but hear me out. Most people worry about having enough money to retire — that is an important concern, and we’ll get to it in a bit. But there’s one big blind spot to tackle first: hedonic adaptation.

You’ve likely heard hedonic adaptation being used in the context of getting used to lifestyle improvements, as in, “Even after buying the new car to keep up with the Joneses, Mark was still miserable — that’s hedonic adaptation for you.”

But in truth, it works both ways: We can have much less materially, and not be nearly as depressed about it as we’d expect.

If you want proof, I point you toward a Merrill Lynch/Age Wave survey that came out in 2015. When respondents of different ages were asked how often they felt happy, content, relaxed, and/or anxious, here’s how they responded:

And lest you think that this was just a survey of wealthy respondents, it was “nationally representative of age, gender, ethnicity, income, and geography.”

The bottom line is that if you hate your work and you can make ends meet on Social Security plus other sources of income, you shouldn’t wait to apply for benefits.

2. Can you make ends meet?

Of course, we can’t forget entirely about money. In the survey mentioned above, 7% of retirees said retirement was less fun and more stressful than pre-retirement years. The main culprit: financial concerns.

Almost all retirees report spending less in retirement than while they were working, and these expenses continue to fall as people age. Of course, everyone has heard about rising healthcare costs — and it’s true that healthcare expenses do jump. But there’s a host of other realities that keep costs down: less money spent on transportation costs commuting to and from work, a drop in food costs as you can make your own food more often, and a house finally being paid off in full, to name a few.

In general, you’ll need to calculate how much income you’ll get from three streams:

  • Social Security and/or pensions
  • Withdrawals from your own retirement accounts, using the 4% rule
  • Other forms of income

The “other” forms of income could come from rental properties you own or even part-time work.

The bottom line is that you should try living for six months on this income to ensure that it’s suitable.

3. Have you coordinated with your spouse?

Finally, we have to deal with the sobering reality that one partner often lives longer than another. In that situation, Social Security has a simple rule: The surviving spouse gets to either keep his or her current benefit, or assume the benefit of the deceased — whichever is larger.

It’s important to remember that, statistically speaking, wives will live longer than their husbands. And if husbands were the higher earners, they may want to consider waiting as long as possible to claim their benefit, as it maximizes what their wives will receive after they pass away.

In this respect, there are a dizzying number of variables to consider, and I suggest doing further reading to figure out which will be best for you and your partner.

In the end, if you can answer these three questions accurately, you’ve got a good grasp on the factors affecting when to claim Social Security benefits.



3 Reasons 62-Year-Olds Should Take Social Security Now

My Comments: To all this, I will add another reason to take your benefits early.

Reason #4: You are single and might not live very long.

This applies to people who are single, likely to remain that way, and have a serious health issue. If there is reason to think you might not live into your 80’s, take the money and run. Benefits stop when you die. So if you pass before you reach the break even point, you’ve not left any money on the table.

by Dan Caplinger \ October 15, 2018

As people approach retirement, it’s natural to want to claim Social Security as soon as possible. Even though waiting beyond the earliest claiming age of 62 for retirement benefits can give you larger monthly checks, you still have to make it through months or even years without getting anything at all from the program.

The trade-offs between more benefits later or collecting benefits sooner can be tough to analyze. But there are a few situations in which it generally makes a lot of sense to look closely at making the decision to take Social Security at 62. Here are a few of the most important ones that millions of retirees and near-retirees face all the time.

1. When a family member is waiting on you to claim

In order for a spouse, child, or other eligible family member to collect benefits based on your work history, you have to have filed for your own retirement benefits first. This wasn’t always the case, because retirees could use strategies like file-and-suspend to activate spousal or children’s benefits while retaining the right to get a larger retirement payment in the future. Recent law changes put this restriction on nearly everyone seeking to claim family benefits.

This most often comes up in one-earner families in which the nonworking spouse is older than the working spouse. For instance, someone who’s four years older than you are might have to wait until 66 to claim spousal benefits just to give you time to make it to the minimum age of 62 for claiming early benefits. Waiting even longer than that might not be a good option for your spouse in that situation.

Also, children’s benefits tend to be available only for a short period of time — until the child turns 18 or graduates from high school. For those relatively rare situations in which a child is still below that age when you hit 62, claiming immediately could be the only way to get those children’s benefits on top of regular retirement payments.

2. When a surviving spouse wants to maximize total benefits

Unlike most benefits, a surviving spouse can make separate decisions about when to claim survivor benefits based on the deceased spouse’s work record and when to claim the surviving spouse’s own retirement benefit. Therefore, it often makes sense to claim retirement benefits early while letting the survivor benefits continue to grow by waiting before claiming them as well.

At first glance, it might seem like this would result in smaller checks than what you’d get if you claimed all your benefits at once. But because of the way that Social Security calculates payments, you can often get almost as much just by claiming one of your benefits and then get more money later when the other benefits have grown. This is one of the only situations in which Social Security essentially lets you have your cake and eat it too.

3. When you’ll have to give up your benefits because of a public pension

One of the most hated Social Security provisions involves employees who work in the public sector in a state that doesn’t participate in Social Security. Through the Windfall Elimination Provision, you can lose as much as $447.50 per month in Social Security benefits if you had a career of 20 years or less for a private employer before going to work in the public sector. In some extreme cases, this can eat up your entire Social Security payment, although the reduction is also limited to one-half of your public pension.

If you become eligible for public pension benefits only at a later age, then claiming Social Security before that age can give you a brief period of full payments from the program. When pension benefits start getting paid later on, the Social Security Administration won’t go back and take away your past Social Security, as the Windfall Elimination Provision only applies to current and future payments.

Make the right choice

There are plenty of situations in which waiting to take Social Security until well beyond 62 is the smartest move. However, that’s not always the case. In these particular cases, claiming early can sometimes be the best decision you could make.

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The Forgotten Architect of the American Social Security System

My Comments: I’ve never understood the fear that surfaces among some people when the term ‘socialism’ appears. What threat do they feel from this poorly understood word? Yes, I remember the McCarthy hearings and the red menace of Communism. It manifested itself in Russia and China, and was perceived as a global threat to capitalism. We are still bothered by the notion that Cuba has never officially renounced Communism as its mantra.

But socialism describes any civil action that communalizes behavior, such as the education of children, caring for the sick, or the elderly. It appears among chimpanzees and other advanced animals, humans being one of them. But suggest someone favors social behaviors in our society and they are immediately branded a heretic.

The following words talk about the architect of what we now call Social Security. Today, there are over 62M US citizens receiving benefits from the Social Security system. Put that in your pipe when you think about Congress talking about reducing benefits instead of finding ways to keep the system viable. And then all the effort to nullify the benefits of the Affordable Care Act that saw almost 12M people insured in 2018. Why do universal health insurance and Social Security come to be such a threat to so many people?

BTW, Medicare Open Enrollment started yesterday, October 29, 2018

by Stephanie Buck, June 8, 2017

In the early 1930s, homeless Americans were picking food scraps off the street and cooking over oil drums in shantytowns. At one point, the unemployment rate reached an all-time high of 25 percent. The country needed new leadership, a plan for healing. It elected President Franklin Delano Roosevelt, whose New Deal ushered in many successful programs, not the least being Social Security. That’s where Barbara Armstrong stepped in.

Her theories on economic security formed the backbone of one of America’s most successful social benefit programs. Social insurance, she felt, should be a universal right enjoyed by all — without an expiration date. Today, it’s one of the reasons Baby Boomers are off kiteboarding in Florida.

Before she became the first female law professor in the country and a drafter of the Social Security Act of 1935, Barbara Armstrong (nee Nachtrieb) was born in San Francisco in 1890. She grew up the third of four children. By 1913, she had earned her BA from the University of California at Berkeley, and her law degree two years later from the university’s Boalt Hall — one of two female graduates that year.

For two years, she split time taking on occasional cases and working as executive secretary for the California Social Insurance Commission. There, she studied worker’s compensation and other government-sponsored poverty solutions, which inspired her return to school for a Ph.D. in economics. In 1921, she earned her doctorate while at the same time working as the first tenure-track female faculty member at a law school approved by the American Bar Association.

Armstrong was beloved by students and faculty alike. She worked diligently as a lecturer and later as an assistant professor in both the law and economics departments at Berkeley. She was an ardent feminist whose early interests in social insurance preceded popular theory by years. Many of these ideas she had studied during academic travels to Europe between 1926 and 1927. When she returned home, Armstrong synthesized the social insurance applications of 34 different industrial countries into Insuring the Essentials: Minimum Wage Plus Social Insurance — A Living Wage Program in 1932. Not exactly a rollicking read, but an important work. In it, she concluded, “Except in the field of industrial accident provision, the United States is in the position of being the most backward of all the nations of commercial importance in insuring the essentials to its workers.” The book astounded Washington with its theories on unemployment, disability, health care, and retirement.

In 1928, Boalt Hall hired Armstrong as an associate professor full time. She was promoted to professor after seven years, longer than most of her male colleagues. She was also paid less. Her dean — who presumably wasn’t in charge of compensation — reportedly said no professor should earn so little.

In the throes of the Great Depression, Armstrong put forth progressive hypotheses about the obligations of industrialized nations to the economic well-being of their citizens. This drew the attention of FDR, who in 1934 invited Armstrong to work as Chief of Staff for Social Security Planning, on the Committee on Economic Security (CES). Suddenly, she moved from advocating radical reform to writing actual legislation.

Prior to Roosevelt, U.S. presidents were expected to steer clear of Wall Street interests. President Herbert Hoover had formed a conservative belief in small government that would define his approach to Depression Era economics, which offered no immediate or major federal intervention. Instead, he called upon states to regulate minimum wage and private charities to help solve the nation’s poverty.

Meanwhile, conditions around the country worsened. By 1931, the unemployment rate hit 15.8%. Homeless families scavenged in makeshift shantytowns (sardonically known as Hoovervilles). Still, Hoover refused to involve the government by fixing prices or controlling currency, which he feared would lead to socialism. Instead, he emphasized aid through private volunteerism and charitable works. He asked employers not to cut wages. He suggested neighbors help each other. He believed the economy relied chiefly on morale, and that it would self-correct.

When it didn’t, the country elected FDR, who believed an aggressive federal intervention was needed. He surrounded himself with people like Armstrong, who had studied social insurance for years.

Armstrong was attuned to politics. According to Nancy Altman, author and president of Social Security Works, she was an “infighter” whose outspokenness convinced the CES to propose a federal program that addressed old age insurance. With the help of Labor Secretary Frances Perkins, the first woman appointed to the U.S. Cabinet, the Social Security Act of 1935 passed. “There were a lot of very strong women who surrounded Roosevelt at the time,” says Altman.

Granted, the act had its flaws, one being that participants wouldn’t see the first monthly benefits until 1942. Republicans argued that building up reserves amounted to IOUs and warned people would have to start paying taxes. Many of the act’s original proposals, such as the inclusion of agricultural and domestic workers, were “temporarily” thrown out due to implementation difficulties. Armstrong supported excluding the groups for these reasons, though Altman insists critiques around gender and racial bias are unfounded. A series of reforms in 1939 expanded Social Security benefits to include family dependents, wives, and widows — but no benefits for dependent men, who were presumed to be in the workforce.

“The 1939 legislation changed the basic nature of the program from that of a retirement program for an individual worker, to a family-based social insurance system (based on the then-current model of the family, in which the man was the breadwinner with a nonworking wife who cared for the minor children),” according to the Social Security Administration today.

The first person to become a Social Security beneficiary was Ida May Fuller, who, upon retiring as a legal secretary in November of 1939 at age 65, received her first benefit on January 31, 1940 — a monthly check for $22.54 (an amount equal to $389 today).

In 1950, the Social Security Advisory Council demanded further expansion. Congress brought 10 million additional workers under coverage, mainly self-employed, domestic, and agricultural workers; disabled workers were added in 1957. The goal was universal old-age and disability security (and actually, was initially designed with universal health care in mind). Today, about 93 percent of working Americans pay taxes into the Social Security program. By June of 2016, one in six Americans was collecting, at an average of $1,350 per month.

Barbara Armstrong returned to Berkeley after the initial Social Security Act of 1935 passed, long before Social Security’s many additional reforms. She had clashed with a few cabinet members — she reportedly called CES executive director Ed Witte “half-Witte” behind his back. Alas, she had a professorship, a daughter, and new issues to tackle back home. She taught courses on family and labor law, and in 1940, she and others attempted to introduce universal health insurance in California, but failed. On campus, Armstrong was a respected, passionate, opinionated, and witty presence. She supported other female staff through the Women’s Faculty Club at a time when “most of the faculty thought of women as frankly inferior beings,” said Lucy Sprague Mitchell, the first dean of women at Berkeley.

In 1970, at age 79, Armstrong was still actively teaching at Boalt Hall. That year, she was attacked by three unknown men while walking in Berkeley. She spent the rest of her years in a wheelchair, and contributed studies in cooperative measures against crime. She died in her Oakland home on January 18, 1976.

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Millions Of Americans Are Leaving Social Security Spousal Benefits On The Table

My Comments: Facing retirement without enough money is a frightening prospect. And leaving money on the table that you can claim doesn’t make much sense. These words from Laurance Kotlikoff might apply to you if you’re between ages 64.9 and 68.

by Laurence Kotlikoff \ October 15, 2018

• The 2015 Social Security amendments severely curtailed the ability to take a spousal or divorcee spousal benefit while waiting to take one’s retirement benefit at an increased level.
• What’s not generally known is that the new law grandfathered those who were 62 as of January 1, 2016.
• The cumulative free spousal benefits available to those grandfathered can range as high as $67,000.

I had dinner recently with friends I hadn’t seen for years. Darren is 67. His wife, Suzy, is 62. Somehow the topic of Social Security came up. Suzy, I learned, was already collecting her retirement benefit. Darren told me he’s waiting till 70 to collect his.

Within 15 seconds, I made them $15,000 in free Social Security spousal benefits.

I told Darren, “Tomorrow, file with Social Security, but just for your spousal benefit based on Suzy’s work record. You’ll receive half of her full retirement benefit through age 70.”

“But,” said Darren, “I thought they changed the law to keep people from collecting a spousal benefit while waiting to collect their retirement benefit.”

“They did,” I replied. “But they grandfathered those born before January 1, 1954. You were grandfathered! So get up early tomorrow and file a restricted application at the local office – just for your spousal benefit. Given the size of Suzy’s full retirement benefit, you’ll get an extra $425 per month for free and this will mean about $15K over the next 3 years. And, by the way, you’re paying for dinner.”

“Fantastic,” said Darren. “Order whatever you want.”

“I wish I had talked to you a year ago.” I bemoaned. “You should have filed just for your spousal benefit the day you turned 66. Or the other hand, it may well be that Suzy filed a year or two too early. In taking benefits early, she enabled you to collect a free spousal benefit. You didn’t know it, but she did. However, because she filed early, her own retirement benefit will be permanently reduced.”

“Well, $15K is just fine.” said Darren.

There are millions of couples who can do what Darren and Suzy are now going to do. And the amount of available free spousal benefits can be as high as $67,000. The strategy will, to repeat, only work if the spouse who was grandfathered has not yet filed for his or her retirement benefit and the other spouse has filed for their retirement benefit or is willing to do so.

How about divorcees? They too can collect a free spousal benefit (called a divorced spousal benefit) for up to 4 years (between full retirement age and 70) provided they were married for 10 or more years, their ex is over 62 and either a) they have been divorced for more than 2 years or b) their ex has started collecting their retirement benefit.
As we waited for the check, Darren asked, “Any other tricks up your sleeve?”

“There are. You may do even better by taking your retirement benefit earlier than 70 so that Suzy can start collecting an excess spousal benefit off of your record. Since your retirement benefit is much higher than hers, this strategy could produce more than the $15K in higher lifetime benefits.”

“Or,” I continued, “it may be optimal for Suzy to suspend her retirement benefit at full retirement age and restart it at 70 when it will be almost 30 percent higher. Once she suspends, her own retirement benefit will stop and she won’t be eligible to collect any benefits off of your record. Nor can anyone collect any benefit off of a suspended benefit while the benefit is in suspension. But, in your case, you’ll be 70 and collecting your own retirement benefit by the time Suzy hits full retirement age. So it may be optimal for her to suspend. It depends not just on your own full retirement benefits, but also Suzy’s birth date and the maximum ages to which you two might live.”

“So it’s complicated,” said Darren.

“Very.” I answered.

“How’s anyone supposed to figure out precisely what to do?” asked Darren.

“That’s where my company’s software tool comes in. Run it. You can afford the 40 bucks. It will consider thousands, possibly tens of thousands of alternative joint strategies to figure out precisely the one that maximizes your and Suzy’s remaining lifetime benefits.

“That many?” asked Darren.

“Yes.” I said. “There is a ton of options given the different months in which you both can take particular actions and given the different benefits at play. This includes the widows benefit for which Suzy will be eligible once you die.”

“By the way,” I said. “The Social Security officials at the local office may not realize you are eligible for free spousal benefits. If they tell you that you aren’t, show them the PDF from my program. If they still get it wrong, ask to speak to a supervisor or call me from the office. I’ve talked to many a supervisor in real time. It’s amazing how quickly they change their tune when they realize someone speaks their language and may be on to their mistakes.”

“My other warning is this. Make sure you specify in the comments section of the application that you are filing a restricted application – just for spousal benefits and that you plan to wait to file for your own retirement benefit. If the staffer you deal with mistakenly files you for both your spousal and retirement benefit, your retirement benefit will start immediately and you’ll get a zero excess spousal benefit given you earned much more than Suzy.

This will reduce, not increase, your lifetime benefits. Our software will indicate the payment you receive. If it’s bigger than what the program says, they screwed up. The Social Security staff are well meaning, but they are overworked, underpaid and undertrained. This, by the way, is due to Congress not properly funding the program. In any case, the staff routinely get things wrong. And their mistake can become your mistake. If you don’t write precisely what you’ve told them to do in the comments section, you’ll have no way to appeal their mistake.”

After dinner, I wrote this column realizing that there are as many as 13 million Darrens and Suzys out there who may be leaving lots of free money on the table. This includes those who are grandfathered and have filed within the year for their retirement benefit. They still have the option of filing an application to withdraw their retirement benefit and repay all the benefits they’ve received. Once the retirement benefit application is withdrawn, one can file just for a spousal benefit.

I’ve written extensively in the past about free spousal benefits and the many other ways people can maximize their lifetime Social Security benefits. I’ve done so in my co-authored, best seller, Get What’s Yours – the Revised Secrets to Maxing Out Your Social Security and in my Forbes blog, Ask Larry. These are additional resources for figuring out what you, your friends, and your colleagues should do to max out their lifetime benefits.

When to Take Social Security: The Complete Guide

My Comments: Social Security is a complicated issue for almost everyone in the retirement planning process. There are so many variables it’s hard to get your arms around what is in your best interest. Many people just say to hell with it and sign up at age 62.

And that can be a huge mistake. You’ll probably end up with less money over your lifetime, not because you’ll get less in total from the Social Security Administration, but because it may cause you to pay more in taxes. And if you have a surviving spouse, it could hurt them too.

What you pay in taxes cannot be used to pay your bills. And retirement is all about being able to pay your bills and enjoy your life.

By Amy Fontinelle | March 12, 2018

If you’re about to retire, you might be wondering if you should start claiming your hard-earned Social Security benefits. If you need the income and you’re at least 62 – the minimum age to claim – the answer is obvious. But if you have enough other income to keep you going until you’re older, how do you decide?

Benefit Amount
The size of your monthly benefit payment depends on the year you were born and your age when you start claiming, down to the month. You receive your full monthly benefit if you start claiming when you reach full retirement age. To find your full retirement age, see the chart below.

Let’s say your full retirement age is 66. If you start claiming benefits at 66 and your full monthly benefit is $2,000, you’ll get $2,000 per month. If you start claiming benefits at age 62, which is 48 months early, your benefit will be reduced to 75% of your full monthly benefit (also called your primary insurance amount). In other words, you’ll get 25% less per month and your check will be $1,500. You’ll receive that reduced benefit not just until you turn 66, but for the rest of your life (though it will go up slightly over time with cost-of-living adjustments). The easiest way to do the math for your own situation is to use the Social Security Administration’s (SSA) Early or Late Retirement calculator (scroll down the linked page to find it).

If you wait until you’re 70 to start claiming benefits, you’ll get an extra 8% per year, and in total, you’ll get 132% of your primary insurance amount, or $2,640 per month, for the rest of your life. Claiming after you turn 70 doesn’t increase your benefits any further, so there’s no reason to wait longer.

The SSA’s many retirement calculators can also help you determine your full retirement age, the SSA’s estimate of your life expectancy for benefit calculations, rough estimates of your retirement benefits, actual projections of your retirement benefits based on your work record and more.

The longer you can afford to wait, the larger your check will be. But you’ll also have no money coming in from Social Security during the months when you postpone claiming. Waiting as long as possible to start claiming benefits doesn’t necessarily mean you’ll come out ahead overall, though, for several reasons: expected longevity, spousal benefits, taxes, investment opportunity and health insurance.

Expected Longevity
So much of our strategizing about how to maximize Social Security retirement benefits depends on guesses about how long we’ll live. Any of us could die in a car accident or get a terminal cancer diagnosis next week. But putting aside these unpredictable possibilities, how long do you think you’ll live? What is your health like now, and what has your relatives’ longevity looked like? Have you had a physical and blood work lately? How are your blood pressure, cholesterol, weight and other markers of health? If you predict an above-average life expectancy for yourself, you may come out ahead by waiting to claim benefits. If not, you might want to claim as soon as you’re eligible.

To make an educated guess about how to come out ahead, you’ll need to do a break-even analysis. What do we mean by breaking even? It’s the point where your lifetime benefits are the same given different initial claim ages. The question is this: Will you be better off – that is, will you get a higher total lifetime payout – getting more checks for a smaller amount (by claiming at 62, for example), or fewer checks for a larger amount (by claiming as late as age 70)?

The Social Security website will tell you that regardless of when you start claiming, your lifetime benefits will be similar if you live as long as the average retiree. The problem is that most people will not have an average life expectancy, hence all the different claiming strategies.

Spousal Benefits
Being married further complicates the decision of when to take Social Security because of the program’s spousal benefits. Certain divorcees are also entitled to benefits.

Spouses who didn’t work or who didn’t earn enough credits to qualify for Social Security on their own are eligible to receive benefits starting at age 62 based on their spouse’s work record. As with claiming benefits on your own record, your spousal benefit will be reduced if you claim benefits before reaching full retirement age (though not at the same rate as claiming your own benefits early). The highest spousal benefit you can receive is half the benefit your spouse is entitled to at their full retirement age.

While spouses will get a lower benefit if they claim before reaching their own full retirement age, they will not get a larger spousal benefit by waiting to claim after full retirement age – say, at age 70. But a nonworking or lower-earning spouse can get a larger spousal benefit if the working spouse has some late-career, high-earning years that boost benefits.

When one spouse dies, the surviving spouse is entitled to receive the higher of their own benefit or their deceased spouse’s benefit, but not both. That’s why financial planners often advise the higher-earning spouse to delay claiming. If the higher-earning spouse dies first, the surviving, lower-earning spouse will receive a larger Social Security check for life.

When the surviving spouse hasn’t reached full retirement age, he or she will be entitled to prorated amounts starting at age 60. At full retirement age, the surviving spouse is entitled to 100% of the deceased spouse’s benefit or to their own benefit, whichever is higher.

A claiming strategy called file and suspend used to allow married couples of full retirement age to receive spousal benefits and delayed retirement credits at the same time. This strategy, which ended as of May 1, 2016, helped some couples receive tens of thousands more from Social Security.

Here’s the next-best thing for older, dual-income couples: Individuals who turned 62 by January 1, 2016, can use a strategy called restricted application. Spouse A claims benefits first; spouse B claims spousal benefits. Once spouse B turns 70, spouse B claims their own benefit instead. Spouse A then claims spousal benefits, which are now higher than their own benefit because of how much spouse B’s benefit has grown by waiting to claim until age 70.

Social Security benefits become taxable at rather low income thresholds. No matter how much you make, the first 15% of your benefit payments are not taxable. But income from interest, dividends and taxable retirement accounts such as 401(k)s and traditional IRAs can quickly push you over the tax threshold.
The Social Security Administration calculates your “combined income” as follows:

Your adjusted gross income
+ Nontaxable interest (for example, municipal bond interest)
+ ½ of your Social Security benefits
= Your “combined income”

If you file your federal tax return as an individual and your combined income is between $25,000 and $34,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $34,000, you may have to pay income tax on up to 85% of your benefits.

If you’re married filing a joint return and you and your spouse’s combined income is $32,000 to $44,000, you may have to pay income tax on up to 50% of your benefits. If your combined income is more than $44,000, you may have to pay income tax on up to 85% of your benefits.

Because the math isn’t at all straightforward, the best way to calculate your tax liability is to use a calculator like the Motley Fool’s Social Security tax calculator. It gives you a detailed breakdown of how the result is calculated after you enter your numbers.

Let’s say you receive the maximum Social Security benefit for a worker retiring at full retirement age in 2018: $2,788 per month. Your spouse receives half as much, or $1,394 per month. Together, you receive $4,182 per month, or $50,184 per year. Half of that, or $25,092, counts toward your “combined income” for the purpose of determining whether you pay tax on part of your Social Security benefits. Let’s further assume that you don’t have any nontaxable interest, wages or other income except for your traditional IRA’s required minimum distribution (RMD) of $10,000 for the year.

Your combined income would be $60,184 (your Social Security income plus your IRA income), which would make up to 85% of your Social Security benefits taxable because $60,184 is more than $44,000. Now, you’re probably thinking, 85% of $50,184, is $42,656, and I’m in the 22% tax bracket, so my tax on my Social Security benefit will be $9,384. Fortunately, that’s completely wrong. By using an online calculator, you’ll see that your tax will really be a mere $340. You can read all about the taxation of your Social Security benefits in IRS publication 915. A Roth conversion could help you lower your tax bill.

How do all of these tax calculations affect when you should apply for Social Security benefits? You’ll lose less of your Social Security benefits to taxes if you can wait until your income is lower to claim.

Investment Opportunity
Are you a disciplined, savvy investor who thinks you can earn more by claiming early and investing your benefit than by claiming later and receiving Social Security’s guaranteed higher benefit? Then you may want to claim early instead of waiting until age 70.

Most investors, however, are neither disciplined nor savvy. People take early benefit payments intending to invest the money, then use it to tour Europe instead. And even savvy investors cannot predict how their investments will perform over the first decade or two of their retirement.

If you claim early, invest in the stock market and average an 8% annual return – which is far from guaranteed – you will almost certainly come out ahead compared with claiming late, according to an analysis by Dan Caplinger, director of investment planning for Motley Fool. But if your returns are lower, if you receive reduced Social Security benefits because you continue working past age 62, if you have to pay taxes on your Social Security income or if you have a spouse who would benefit from claiming Social Security benefits based on your record, then all bets are off. Most people, in other words, will not benefit from this strategy – but it is a strategy to be aware of in case you’re one of the few who might.

Effect on Health Insurance
Here’s another factor to consider: Do you have a health savings account (HSA) that you want to keep contributing to? If so and if you’re 65 or older, receiving Social Security benefits requires you to sign up for Medicare Part A. The problem with signing up for Medicare Part A is that you’ll no longer be allowed to add funds to your HSA.

The Social Security Administration cautions that even if you delay receiving Social Security benefits until after age 65, you might still need to apply for Medicare benefits within three months of turning 65 to avoid paying higher premiums for life for Medicare Part B and Part D. If you are still receiving health insurance from your employer, you might not have to enroll in Medicare yet.

The Bottom Line
You don’t have to take Social Security just because you’re retired. If you can live without the income until age 70, you will ensure the maximum payment for yourself and lock in the maximum spousal payment. Just be sure you have enough other income to keep you going and that your health is good enough that you are likely to benefit from the wait. When you’re ready, you can apply for benefits online, by phone or at your local Social Security office.

Source article: Read it HERE!

4 Signs You’re Thinking About Social Security Benefits the Wrong Way

My Comments: For millions of us, Social Security has become a critical source of income if we expect to continue our current standard of living into the future. For those of you not yet claiming benefits, these four items are critical to your future retirement success.

Christy Bieber \ Oct 7, 2018

Social Security benefits are a major source of income for retirees, but far too many seniors have no clear idea how these benefits work. Even worse, many seniors have major misconceptions about Social Security benefits that could affect their plans for retirement in adverse ways.

To make sure you’re not one of the millions confused about how Social Security will provide for you as a senior, consider these four signs you’re thinking about Social Security benefits the wrong way.

1. You’re expecting Social Security to provide all the retirement income you need
Social Security benefits are designed to replace about 40% of your pre-retirement income, while most financial advisors suggest you’ll need at least 70% of the money you were earning prior to retiring.

If you aren’t saving money to supplement Social Security, you’re putting yourself into a position where your Social Security benefits may be your only source of funds as a senior. This is a recipe for financial disaster, as living on Social Security alone will leave you close to the poverty level.

Don’t count on Social Security to provide you with all you need. Instead, invest in a 401(k) or an IRA so you’ll have supplementary savings. Ideally, try to invest at least 15% of your income. If you can’t start there, at least set up small automated contributions to make sure you’re saving something. You can increase contributions over time as you get used to living on slightly less or when your income increases.

2. You’re counting on taking Social Security at age 65 or later
As many as 70% of workers think they’ll take Social Security benefits at age 65 or later according to Employee Benefit Research Institute. Almost 20% plan to wait until age 70, which is the last age at which you can earn delayed retirement credits to increase monthly Social Security income.

The reality, however, is that 62 is the most common age to claim Social Security, while age 63 is the median age at which retirees claim benefits. If you anticipate waiting to claim so you can increase your monthly income from Social Security, you could find yourself short of cash if illness or unemployment forces you to leave the workforce early.

To make certain you don’t end up with a shortfall, assume you’ll receive the monthly benefit amount you’d get at 62, and plan accordingly when deciding how much additional income you need from savings. If you’re lucky enough to be able to work longer and put off claiming benefits, you’ll simply have extra income — which is far better than having too little.

3. You aren’t considering your spouse when you make your plan for Social Security benefits
If you’re planning on simply claiming Social Security benefits under your own work record, you could potentially be missing out on a higher payment if you’re eligible for widow or spousal benefits. If your spouse earned more, you should carefully consider whether claiming under his or her work record could provide you with more funds than claiming on your own work history.

You can claim spousal benefits even after divorce as long as you were married for at least 10 years, so don’t assume claiming under your own work record is your only option, even if you’re currently single.

If you’re the higher earner, you also need to think about your spouse when making a decision on claiming benefits. When one spouse dies, the surviving spouse could opt to earn either widow’s benefits or their own benefits– whichever is higher. If you’ve claimed your benefits early instead of waiting to earn delayed retirement credits, you’ve reduce the widow’s benefits your surviving spouse would otherwise have received. This could leave your spouse with insufficient funds once you’re gone.

4. You think taking Social Security at 62 won’t impact your benefits over the long-term
Many people who retire at 62 have a major misconception about what claiming benefits before full retirement age does. In fact, 39% of pre-retirees think if they claim reduced benefits early their benefits will increase to a standard benefit at full retirement age.

This isn’t the case, and the reduction in benefits that occurs when you claim before full retirement age affects your annual Social Security income throughout your retirement. Your future cost of living adjustments are based on your lower starting benefit amount, and your monthly income will never be as high as it would’ve been had you waited.

Make sure you aren’t thinking about Social Security the wrong way

Since Social Security benefits are such an important source of retirement income, it’s worth doing your research to ensure you don’t make big mistakes when it comes to your benefits. Check out this guide to Social Security benefits, and ensure you know the answers to five key questions about Social Security before you claim your Social Security benefits as a senior.


Here’s what you need to know about Medicare if you’re still working

My Comments: Despite the appeal of retirement, no one is ready to admit that the transition from “working for money” to “money working for you” will be easy.

The cost of health care as you get older has the potential to cause your retirement plans to come unglued. To keep that from happening, Medicare is an enormous benefit, especially when coupled with what is known as a ‘medicare supplement’ insurance policy.

Many of us choose to keep working well beyond the age when we become eligible for Medicare and that alone presents some interesting challenges. Here’s a good summary of what you can expect if you are still employed.

by Joe Baker on 9/11/2018

If you’re 65 or older, working and have an employer group health plan based on your current work, you may have questions about how your job-based insurance coordinates with Medicare. On our Medicare Rights Center National Consumer Helpline, such questions are among the most frequent ones we get.

Here’s what you need to know:
For people who work and have job-based insurance, knowing when to enroll in Medicare falls on them. There is no formal notification from the Social Security Administration or Medicare. Some people are misinformed by employers or don’t have reliable information about Medicare enrollment, leading them to delay enrollment in Medicare Part B and then incur penalties and high medical costs.

The rules on coordinating Medicare and employer coverage

Having job-based insurance does allow you to delay Medicare enrollment without penalty and delay paying the Medicare Part B premium (the standard Medicare Part B premium is expected to be $134 a month in 2019). However, it’s important to know whether your job-based insurance will pay primary or secondary to Medicare.

In most cases, you should only delay enrollment in Medicare if your job-based insurance is the primary payer (meaning it pays first for your medical bills) and Medicare is secondary. There are additional enrollment considerations if you have a Health Savings Account (HSA); if you enroll in Medicare Part A and/or B, you can no longer contribute pretax dollars to your HSA.

Job-based insurance is primary if it is from an employer with 20 or more employees. Medicare is secondary in this case, and some people in this situation choose not to enroll in Medicare Part B so that they do not have to pay the monthly premium.

Job-based insurance is secondary if it is from an employer with fewer than 20 employees; Medicare is primary in this case. If you work at an employer this small and delay Medicare enrollment, your job-based insurance may provide little or no coverage. That’s why you should enroll in Medicare Part B to avoid incurring high costs for your care. The rules are different, however, if you are Medicare-eligible due to a disability or because you have End-Stage Renal Disease (ESRD).

The Medicare special enrollment period

If you are eligible for Medicare because you are 65 or older and are covered by your job-based insurance or your spouse’s, you have a Special Enrollment Period (SEP) to enroll in Medicare Part B while you are covered by job-based insurance and up to eight months after you no longer have that coverage. This means you aren’t required to take Part B during your Initial Enrollment Period (IEP), or the seven months surrounding your 65th birthday, when you become Medicare eligible.

Using the Part B Special Enrollment Period means you will not have to pay a Part B late enrollment penalty (LEP). Normally, for every 12 months that people who are Medicare-eligible and not covered by employer insurance delay enrollment, they accrue a 10% penalty, which is then added to their monthly Part B premium amount. In most cases, the penalty lasts for as long as someone has Medicare.

Retiree coverage, COBRA, Affordable Care Act and Medicare

Many Medicare-eligible individuals do not know that employer-offered retiree coverage is almost always secondary to Medicare.

Similarly, health insurance coverage through COBRA (employer-sponsored coverage you can pay to keep after you leave your job, usually for up to 18 months) is also always secondary to Medicare coverage. If you have employer-offered retiree coverage or COBRA, you should enroll in Medicare when first eligible to avoid possible penalties, higher medical costs and gaps in coverage.

You should also make sure you understand how to make Medicare Part B enrollment decisions if you are enrolled in a Marketplace plan under the Affordable Care Act.
If you have an insurance plan certified by the Marketplace, known as a Qualified Health Plan, deciding what to do as you approach Medicare eligibility depends on your circumstances. If you delayed enrolling in Medicare so you could stay in your Marketplace plan, you may be eligible to request time-limited equitable relief. That will let you enroll in Medicare Part B without penalty or eliminate or reduce your late-enrollment penalty under certain circumstances. The opportunity to request time-limited equitable relief lasts until September 30, 2018.

For more information on how Medicare works with other types of health care coverage, visit Medicare Interactive, the Medicare Rights Center’s free, online resource packed with hundreds of answers to Medicare questions.

Joe Baker is president of the Medicare Rights Center, a national nonprofit consumer organization that works to ensure access to affordable health care for older adults and people with disabilities. He is also an adjunct professor at the New York University School of Law. Previously, he was deputy secretary for health and human services for New York state.

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