Tag Archives: financial planner

Social Security and the U.S. deficit: Separating fact from fiction

My Comments: As someone who depends on payments from the Social Security Administration to maintain my standard of living, the idea that people in Congress are considering reducing those payments is concerning.

We have to hope that elected representatives find a reasonable solution that will allow the program to remain viable. It’s become an integral part of our economic destiny. Keeping it viable for the forseable future with structured changes over time is essential and doable without chaos.

Unfortunately, there is also a effort to promote chaos as a governing mantra.

by Mark Miller \ November 1, 2018

CHICAGO (Reuters) – For decades, some of our most prominent U.S. politicians have been sounding the alarm that Social Security is an important driver of the federal budget deficit. But is that really true?

U.S. Senate Majority Leader Mitch McConnell, a Republican, recently pointed to “entitlements” as the key cause of rising federal deficits, and blamed Democrats for refusing to go along with proposals to cut spending by Medicare, Medicaid and Social Security.

McConnell was responding to a report from the U.S. Department of the Treasury last month that the budget deficit grew to $779 billion in fiscal 2018, the highest in six years. Treasury attributed the increase to the tax cuts contained in the Tax Cuts and Jobs Act (TCJA), higher spending and rising interest payments. (Full Story) (reut.rs/2CNjSBm).

The call for cuts to our very popular entitlement programs just before an election makes for surprising politics – and it is not selling well with the public; a poll this week by NPR, PBS NewsHour and Marist (bit.ly/2zewazj) found that 60 percent of Americans would prefer to reverse the tax cuts than cut spending on Social Security, Medicare and Medicaid.

But is there substance to McConnell’s argument?

You can make a case that rising spending on Medicare and Medicaid contribute to deficits, since both depend partially on federal general revenue. I would counter that the rising cost of these programs reflects a general problem with rising healthcare costs that affects not just government, but employers who insure workers and individuals buying their own insurance.

But it is quite a stretch to argue that Social Security drives deficits.

By law, Social Security cannot contribute to the federal deficit, because it is required to pay benefits only from its trust funds. Those, in turn, are funded through a dedicated payroll tax of 12.4 percent of income, split evenly between employees and employers, levied on income (this year) up to $128,400.

The program’s revenue and expenses are accounted for through two federal trust funds that have operated with large and growing surpluses in recent years, and they finished fiscal 2018 with an estimated $2.89 trillion. By law, Social Security must invest these surplus funds only in special-issue U.S. Treasury notes, which have the same full faith and credit guarantee as any other federal bond.

LONG-RANGE OUTLOOK

Going forward, the trust fund surplus will be drawn down as an aging population claims benefits, and as the U.S. fertility rate continues to decline, which means fewer workers are coming along to pay taxes into the system.

That already is starting to happen. In fiscal 2018, expenditures exceeded revenue (including interest on investments) for the first time since 1982. Social Security took in $912 billion in fiscal 2018 and spent $991 billion. The difference – $79 billion – came from repayment of interest on those Treasury notes. Some conservative policy analysts point to that payment as evidence that Social Security is a cause of deficits, since the $79 billion payment came from general revenue.

“We can call that $79 billion an interest payment on past borrowing – fine,” said Brian Riedl, senior fellow at the Manhattan Institute, a conservative think tank. “Social Security in the past ran annual surpluses and lent that surplus money to the Treasury. In those years, the existence of Social Security reduced the federal budget deficit. Today, it is relying on a cash infusion from the Treasury to pay full benefits.”

 

Riedl’s point is technically correct. But in this sense, Social Security is no more a cause of the deficit than any other holder of U.S. Treasuries, be it Wall Street or the Chinese government. “Government needs to raise a certain amount of money unless it balances its general fund,” said Nancy Altman, president of Social Security Works, an advocacy group.

“If it doesn’t do that, it issues bonds – the only question is, who buys them?” said Altman.

A second argument that Social Security contributes to deficits is related to the longer-run outlook for the program. The trust funds are projected to be exhausted in 2034; at that point, incoming revenue would be sufficient to continue paying only about 75 percent of promised benefits.

We might or might not reach that point – we could eliminate much of this long-range shortfall by gradually increasing payroll taxes and raising the cap on covered income. Or we could reduce benefits by further increasing the full retirement age, or craft some combination of tax increases and benefit cuts.

Other creative options could include permitting the Social Security trustees to invest a modest portion of reserve funds in equities, or to levy a tax on financial services. From where I sit, the smart move is to bolster the program with higher revenue to close the shortfall and expand benefits.

But deficit hawks point to the 2034 exhaustion date to argue that the government would have to make up any shortfall and continue paying full benefits. The argument here is that Congress would never allow a huge cut to Social Security benefits in light of the program’s popularity and the importance of benefits; if the trust fund were to run dry, lawmakers would simply make up the difference out of general revenue.

But the assertion that we will reach the 2034 benefit cuts is speculative. Congress may craft a solution ahead of that date, or it may not.

Even more speculative is the question whether general revenue would be tapped if we do reach the 2034 exhaustion doomsday scenario. The long-range budget forecast by the Congressional Budget Office assumes this would happen – but not because the nonpartisan congressional budget scorekeeper has an opinion one way or the other. Federal law requires the CBO to assume that payments for some mandatory programs would continue to be fully funded in this situation.

What would the Social Security Administration actually do if the trust fund were exhausted? The answer is not clear, according to recent analysis by the Congressional Research Service. It could continue paying benefits on a delayed schedule or cut payments. And beneficiaries might take legal action to claim full benefits, since Social Security is a legal entitlement.

One hopes that these questions will never be answered, because exhaustion would be a real mess. But we can get the answer to the question of whether Social Security drives the deficit right now: No.

Source: https://www.reuters.com/article/us-column-miller-socialsecurity/social-security-and-the-u-s-deficit-separating-fact-from-fiction-idUSKCN1N64GR

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How Donald Trump Is Shaping The Next Global Economic Recession

My Comments: My observations and memories of economic and financial forces over the past five decades has led me to fundamentally distrust the moves made by those who profess to Make America Great Again.

My instincts told me they were pushing us in the opposite direction, ie Make America Irrelevant. It started with us withdrawing officially from any effort to participate in what was the Trans-Pacific Partnership. That told me the Trump Administration was willing to cede global economic supremacy to China.

And so it continues… Forbes Magazine is not known as a liberal rag. All of us need to pay attention.

by Yuwa Hedrick-Wong \ Forbes Magazine \ November 4, 2018

American presidents’ economic policies tend to take time, often a decade or more, to feed into and affect the business cycle. Lyndon Johnson’s decision to debt finance the Vietnam war to avoid unpopular tax increase led to stagflation a decade later. The impact of Ronald Reagan’s supply side revolution was felt most strongly in the investment surge in the late 1990s that ended only with the dot-com bust. Donald Trump’s impact on the economy, however, will prove to be much more immediate. His policies have both raised the risks of a new global recession while seriously weakening the government’s ability to deal with it when it comes.

The current recovery is the longest on record, but also one of the weakest. And as in the nature of the business cycle, the longer its expansion, the closer it is to the next downturn. Over the 2017 to 2018 period, the economy charged ahead on a sugar rush fueled by Trump’s corporate tax cut, a massive stimulus just as the economy was running close to full capacity. Wall Street loved it and stock indexes reached new heights.

In the meantime, the U.S. Federal Reserve started to raise interest rates. In the coming 12 to 18 months, the sugar rush will wear off and attention will gradually shift back to economic fundamentals, which are far less robust than what the frothy equity markets may suggest. The risk of a recession will rise.

The risk may be higher than we think thanks to Trump’s continuous assault on multilateralism and his administration’s erratic policies, which has seriously deepened uncertainty in the global economy. When the herd instinct switches from risk-on to risk-off under conditions of uncertainty, any numbers of confluence of unanticipated events could easily trigger the next recession.

Apart from raising the risk of a recession, Trump has also made it much harder for the American government to deal with it when it happens. Trump’s fiscal spending, especially the tax cut, is on track to raise America’s fiscal deficit from 4.5% of GDP in 2018 to over 6% by 2020, even if no new tax cuts are enacted. This is a shockingly rapid increase and it means the government will have no fiscal power left to jump start the economy when the next recession hits.

Source: https://www.forbes.com/sites/yuwahedrickwong/2018/11/04/how-donald-trump-is-shaping-the-next-global-economic-recession/#14e76b2657e1

Retirees Will Spend a Third of Their Social Security on This One Big Expense

My Comments: My efforts to coach people to start thinking seriously about their future retirement is complicated. For every positive associated with retirement there are just as many negatives. This is one of them.

Unless you plan to die before you reach retirement, you should find time to get your ducks lined up well in advance.

by Christy Bieber \ Nov 17, 2018

You probably have lots of plans for your retirement. Unfortunately, if you’re counting on spending your Social Security benefits on enjoying retirement, you may be surprised to find much of your money is eaten up by one expense that isn’t very much fun but that’s very necessary. 

That cost: healthcare. A new study from the Center for Retirement Research (CRR) shows that seniors spend an average of almost $4,300 annually per person on out-of-pocket healthcare costs.

These expenditures consume around one-third of the total amount of monthly benefits seniors receive from Social Security.

Your Social Security benefits will be consumed by healthcare expenses

According to the CRR, the average senior’s annual out-of-pocket spending on healthcare totals $4,274 per person, with $2,965 of that money going to insurance premiums.

Premiums generally must be paid for Medicare Parts B and D. Some seniors opt for Medicare Part C plans or Medigap plans that charge higher premiums but reduce coinsurance costs for care.  

Spending so much on healthcare significantly reduces income available to retirees. The CRR revealed the average retiree had just 65.7% of Social Security benefits remaining after paying out-of-pocket healthcare costs and just 82.2% of total household income remaining after paying for care.

And, for many senior households, things are even worse. Close to one-fifth of all retirees had less than half their Social Security income left after healthcare spending, and 6% of retirees spent more than half of total household income from all sources on healthcare.

Spending this much is a major problem, especially when many seniors are overly reliant on Social Security and have too little income to begin with

How can you keep healthcare costs down?

The best way to make sure you can afford your care as a senior is to save money specifically earmarked for healthcare.

If you’re eligible to contribute to a Health Savings Account, you can get big tax benefits. If you aren’t, you should set aside extra money in other tax-advantaged accounts, such as a 401(k) or IRA, specifically for care. 

Unfortunately, if you’re already in retirement and don’t have a fortune saved to cover healthcare, you’ll need to find ways to keep costs as low as possible. Some of the best ways to keep your healthcare expenditures low include:

  • Talking with your doctor: Medical professionals can often help you find generic versions of expensive medications, may have prescription drug coupons to offer, and can otherwise find ways to help you reduce spending if you’re struggling. 
  • Taking steps to stay healthy: The healthier you are, the lower your care costs. To stay healthy, get preventive screenings (which are often free under Medicare) so you can fix little problems before they turn into big ones. Avoid smoking, exercise regularly, and get help managing chronic conditions. 
  • Matching your insurance coverage to your needs. You have the option to buy a Medicare Part C plan to replace original Medicare, and some of these policies provide more comprehensive coverage. You can also opt for a Medigap plan to supplement traditional Medicare. By comparing what different policies cover — and cost — you can either choose to pay higher premiums for more coverage or reduce premiums and get a skimpier plan if you don’t use many medical services during the year. 
  • Determining if you can qualify for Medicaid. Medicaid can help you to more easily afford your care. Depending upon your income, Medicaid may provide help with Medicare premiums and coinsurance costs. Medicaid can also cover certain kinds of care Medicare doesn’t pay for, such as unskilled nursing home care. 

It’s up to you to find ways to keep healthcare costs as low as possible if you don’t want to lose a third — or more — of your Social Security benefits to healthcare costs. 

Healthcare is expensive — so make a plan

The new data from the CRR makes clear just how much of your money will be eaten up by healthcare. Experts have been warning for a long time that seniors will need a lot of money to pay for their care.

The sooner you start making a plan for taking care of your health needs as a senior, the more easily you’ll be able to afford them without skimping on everything else you’d hoped to spend money on during retirement. 

Source: https://www.fool.com/retirement/2018/11/17/retirees-will-spend-13-of-their-social-security-on.aspx

The clear message in the United States’ shifting demographics

My Comments: Do you want to re-invent the present so it more closely resembles the past that you know and understand and were happy with? Good luck with that.

The present and the future is the only thing we can influence. Whether it’s over millennia or the next decade, the sooner you come to terms with ‘adapt or die’, the happier you are likely to be.

Someone this week asked if I was a racist. It was in response to my sharing a post about Trump’s mother being an immigrant welcomed to the US with no issues. I suggested it was because she was white. He than asked if I was a racist.

Perhaps I am. I’m also a white immigrant who became a US citizen because my father and mother thought our life in this country would be better than if we stayed in Europe. 

But to me, Trump’s threat to close the border with Mexico is because those folks are not white. Don’t tell me the government couldn’t find enough qualified people to properly process those folks in a timely way, consistent with US laws, instead of using tear gas in an attempt to change their minds. Fundamentally stupid and inconsistent with our long held values as an open society.

The MAGA crowd, which I’m guessing includes that woman in Mississippi who made comments about hangings, appear threatened by those who are genetically different and not white. I’m suggesting they adapt or die.

Sam Fulwood III \ Jun 25, 2018

Within our lifetime, the United States will be a majority minority country, no matter how loudly the MAGA crowd shouts.

As difficult as it might be for some recalcitrant Americans to believe or embrace — Trumpsters, listen up, this column is especially for you — the United States is in the midst of a profound and irreversible demographic shift. 

Two dramatic changes in the nation’s population are occurring simultaneously: we’re getting older, and more racially diverse, according to a U.S. Census Bureau tip sheet released last week. Census figures show that fewer than 17 percent of U.S. counties reported a decrease in median age from April 2010 to July 2017, with the majority of those counties clustered in the Midwest. Nationally, the median age rose to 38.0 years in 2017, up from 37.2 years in 2000.

“Baby boomers, and millennials alike, are responsible for this trend in increased aging,” Molly Cromwell, a demographer at the U.S. Census Bureau, said in a statement released with the report. “Boomers continue to age and are slowly outnumbering children as the birth rate has declined steadily over the last decade.”

As the nation grows older, it’s also becoming more racially and ethnically diverse.  “Nationally, the population of all race and ethnic groups, except for the non-Hispanic white alone group, grew between July 1, 2016, and July 1, 2017,” the Census statement said.

Specifically, the Census Bureau reported:

  • The Hispanic population increased 2.1 percent to 58.9 million.
  • The black or African-American population increased 1.2 percent to 47.4 million.
  • The Asian population increased 3.1 percent to 22.2 million.
  • The American Indian or Alaska Native population increased 1.3 percent to 6.8 million.
  • The Native Hawaiian or Other Pacific Islander population increased 2.1 percent to 1.6 million.
  • The population of those Two or More Races increased 2.9 percent to 8.7 million.
  • The white alone-or-in-combination population increased 0.5 percent to 257.4 million.
  • The non-Hispanic white alone population decreased .02 percent to 197.8 million.

Of course, none of these revelations are particularly earth-shaking. Keen demographers and social scientists have been tracking the so-called “browning of America,” for years.

But in the current political environment, it bears repeating over and over, if for no other reason than to remind more Americans of the inevitability of change. Soon — within the lifetimes of the vast majority of Americans alive today — the U.S. will no longer be a white-majority nation.

And that’s why this column is directed to Trump’s MAGA crowd, which seems hell-bent on returning the country to some idealized era of the 1950s or earlier, when white men were the unquestioned arbiters and beneficiaries of the nation’s politics, culture, and economy.

Indeed, the hateful atmosphere brought about by Trumpism and echoed in archly right-wing media has its roots in a vocal white nationalist movement, which seized on the president’s embrace of their racist rhetoric as permission to openly act on impulses that previously were tucked away from public view.  

“Clues in the president’s language and behaviour led the alt-right to hope that he might really be one of them, and critics to accuse him of inciting racial hatred,” The World Weekly, an international online news magazine, reported recently. “Mr. Trump’s flagship campaign promises were music to the ears of self-described ‘white advocates,’ whose numbers swelled under Barack Obama.”

For all their bluster and bravado, however, white nationalists are whistling past their own graveyards. The numbers and unrelenting facts of demography stare in the face of those who believe they can restore some non-existant glory of white supremacy.

Valerie Wilson, director of the Economic Policy Institute’s Program on Race, Ethnicity and the Economy (PREE), estimates that by the year 2043 — about 25 years from now — the U.S. will reach the tipping point when the country transitions to a majority-minority population. Among working-class Americans — made up of working adults without a college degree — she estimates the tipping point may arrive nearly a decade sooner, possibly by 2032,

In a 2016 PREE paper, Wilson observed the significance of these changes, and how important it will be to accept and embrace them, noting “the working class is increasingly people of color, raising working class living standards will require bridging racial and ethnic divides.”

What’s more, Wilson argues that there are policy challenges the nation must address to make the transition better for all Americans. “The best way to advance policies to raise living standards for working people is for diverse groups to recognize that they share more in common than not, and work together,” she wrote.

The sooner most Americans come to terms with this reality, the sooner the public will rally support and encourage politicians to deal with the changing demographics from a position of national strength, and not as the fearsome dilution of white superiority. One thing is certain: the changes coming to America aren’t going to suddenly shift into reverse, no matter how loudly Trump, his subservient congressional leaders, and white nationalists complain.

So, MAGA crowd, get with the future. It’s in your and the nation’s long-term, best interest to embrace the demise of white superiority in America.

Source: https://thinkprogress.org/demographics-adapt-or-die-6c72e4d13e02/

After midterm election, focus on the ‘healthy’ 30%-plus correction headed for stocks

My Comments: We’re now almost three weeks past the midterm results. And the markets have been mostly negative.

Now the discussion is about how far it will drop, and when, before the inevitable bottom and return to reality.

My frustration is that I’ve been expecting a severe drop now for over 3 years; it makes me sound like a broken record; and uncomfortably hesitant to get out of anything other than significant positions. That’s what I did earlier and all I got was criticism for missing the upside.

If you’re a millennial or far from retirement, you can more or less ignore what’s going on. But if you are close to retirement, are already retired, you better pay attention. It could be very painful.

by Barbara Kollmeyer \ November 6, 2018

Election Day is finally here, and investors should be ready, given that barely a stone has been left unturned with regards to potential outcomes.

While history shows midterms haven’t really carried much weight, at least in the immediate term, “given amount of controversy we have around this government, these elections for the first time could bring some dramatic movement in the financial markets,” says Naeem Aslam, chief market analyst at Think Markets U.K.

The most likely outcome appears to be that Republicans will keep the Senate and Dems will win the house, causing gridlock. That won’t upset markets too much given they’ve had plenty of experience with political infighting. A less likely possibility would usher in a blue wave—Dems win Senate and House—causing lots of headaches for POTUS. Behind door number 3, another not so likely outcome, Republican sweep both houses.

But those playbooks may not matter much, according to our call of the day from Joel Kruger, currency strategist at LMAX Exchange, who sees a hefty selloff coming no matter what the result.

“Ultimately…i think we need to defer to the longer-term cycle and where things look at this stage in the game now that the economy is getting off central-bank proponomics and has to stand on its own two feet. This leads me to believe whatever the outcome…the market will find a reason to be selling risk (selling stocks) to allow for what has been a long overdue correction,” says Kruger, in emailed comments.

And given the one-way direction for stocks since 2009, he says investors may just want to redefine the traditional thinking around bear markets.

“I think we need to throw out the 20% bear market thing and consider the stock market could easily drop +30% and would look like a healthy correction within a strong uptrend. That’s a pullback to 2015 high territory…not so long ago considering,” he says.

Such selling would see a resumption of October’s volatile action, says Kruger. Even with a 6% drop in the current quarter, and some pretty wild days last month, the S&P 500 is still up 2.4% year-to-date, so barely even a bloody nose where pullbacks are concerned.

He sees this larger pullback headed our way between now and the second half of 2019, giving investors time to think about hedging their risk—moving to cash, rotating into bonds, options action.

“Or [if you are locked in] just sit and know that it will happen and not to panic at hearing 30% as it is a lot less intense when taken in context of the entire move and this grand monetary policy experiment,” says Kruger

Continue reading HERE:

The Clear Message in the United States’ Shifting Demographics

My Comments: In addition to death and taxes, a third ‘truth’ is demographics. A reason for our current political troubles is that the historic white Christian majority believes it is under attack. And it is.

And many in that historically white majority want to live in the past. I’ve long learned we cannot live in the past. We can only live in the present and try to influence the future.

Make America Great Again is a valid argument if you are not trying to turn back the clock. But to MAGA, we must re-affirm the values that MAG and embrace them and include everyone in the process. Caucasian, Asian, African, Hispanic and whomever else wants to live and grow a family anywhere in our 50 states.

by Sam Fulwood \ June 25, 2018

As difficult as it might be for some recalcitrant Americans to believe or embrace — Trumpsters, listen up, this column is especially for you — the United States is in the midst of a profound and irreversible demographic shift.

Two dramatic changes in the nation’s population are occurring simultaneously: we’re getting older, and more racially diverse, according to a U.S. Census Bureau tip sheet released last week. Census figures show that fewer than 17 percent of U.S. counties reported a decrease in median age from April 2010 to July 2017, with the majority of those counties clustered in the Midwest. Nationally, the median age rose to 38.0 years in 2017, up from 37.2 years in 2000.

“Baby boomers, and millennials alike, are responsible for this trend in increased aging,” Molly Cromwell, a demographer at the U.S. Census Bureau, said in a statement released with the report. “Boomers continue to age and are slowly outnumbering children as the birth rate has declined steadily over the last decade.”

As the nation grows older, it’s also becoming more racially and ethnically diverse. “Nationally, the population of all race and ethnic groups, except for the non-Hispanic white alone group, grew between July 1, 2016, and July 1, 2017,” the Census statement said.

Specifically, the Census Bureau reported:
• The Hispanic population increased 2.1 percent to 58.9 million.
• The black or African-American population increased 1.2 percent to 47.4 million.
• The Asian population increased 3.1 percent to 22.2 million.
• The American Indian or Alaska Native population increased 1.3 percent to 6.8 million.
• The Native Hawaiian or Other Pacific Islander population increased 2.1 percent to 1.6 million.
• The population of those Two or More Races increased 2.9 percent to 8.7 million.
• The white alone-or-in-combination population increased 0.5 percent to 257.4 million.
• The non-Hispanic white alone population decreased .02 percent to 197.8 million.

Of course, none of these revelations are particularly earth-shaking. Keen demographers and social scientists have been tracking the so-called “browning of America,” for years.

But in the current political environment, it bears repeating over and over, if for no other reason than to remind more Americans of the inevitability of change. Soon — within the lifetimes of the vast majority of Americans alive today — the U.S. will no longer be a white-majority nation.

And that’s why this column is directed to Trump’s MAGA crowd, which seems hell-bent on returning the country to some idealized era of the 1950s or earlier, when white men were the unquestioned arbiters and beneficiaries of the nation’s politics, culture, and economy.

Indeed, the hateful atmosphere brought about by Trumpism and echoed in archly right-wing media has its roots in a vocal white nationalist movement, which seized on the president’s embrace of their racist rhetoric as permission to openly act on impulses that previously were tucked away from public view.

“Clues in the president’s language and behaviour led the alt-right to hope that he might really be one of them, and critics to accuse him of inciting racial hatred,” The World Weekly, an international online news magazine, reported recently. “Mr. Trump’s flagship campaign promises were music to the ears of self-described ‘white advocates,’ whose numbers swelled under Barack Obama.”

For all their bluster and bravado, however, white nationalists are whistling past their own graveyards. The numbers and unrelenting facts of demography stare in the face of those who believe they can restore some non-existant glory of white supremacy.

Valerie Wilson, director of the Economic Policy Institute’s Program on Race, Ethnicity and the Economy (PREE), estimates that by the year 2043 — about 25 years from now — the U.S. will reach the tipping point when the country transitions to a majority-minority population. Among working-class Americans — made up of working adults without a college degree — she estimates the tipping point may arrive nearly a decade sooner, possibly by 2032.

In a 2016 PREE paper, Wilson observed the significance of these changes, and how important it will be to accept and embrace them, noting “the working class is increasingly people of color, raising working class living standards will require bridging racial and ethnic divides.”

What’s more, Wilson argues that there are policy challenges the nation must address to make the transition better for all Americans. “The best way to advance policies to raise living standards for working people is for diverse groups to recognize that they share more in common than not, and work together,” she wrote.

The sooner most Americans come to terms with this reality, the sooner the public will rally support and encourage politicians to deal with the changing demographics from a position of national strength, and not as the fearsome dilution of white superiority. One thing is certain: the changes coming to America aren’t going to suddenly shift into reverse, no matter how loudly Trump, his subservient congressional leaders, and white nationalists complain.

So, MAGA crowd, get with the future. It’s in your and the nation’s long-term, best interest to embrace the demise of white superiority in America.

Source: https://thinkprogress.org/demographics-adapt-or-die-6c72e4d13e02/

7 Things Everyone Gets Wrong About Social Security

My Comments: If you are not yet retired, which means different things to different people, chances are you’ll be eligible for Social Security benefits.

Before your magic day of retirement arrives, you need to have a solid understanding of how the Social Security System works and what you can expect to receive.

And also know that the system is currently under threat from so called leaders in Congress who may or may not fix it properly so that your generation can count on it being there as intended.

By Sabah Karimi / GoBankingRates \ October 18, 2016

Millions of Americans rely on Social Security earnings in retirement. If your golden years are far off in the distance, you might not give a second thought to Social Security and what the program means for you.

But that can be a mistake. If you don’t understand Social Security now, you could be in for some unfortunate surprises after you stop working.

For starters, the program might not be as healthy as you think. “Many estimates have the Social Security Trust Fund exhausting around 2034,” said Peter Donohoe, a Boston-based certified financial planner at Citizens Investment Services.

While many experts are hopeful politicians eventually will act to shore up the system, there are no guarantees. So, to be safe, it’s probably wise to make some smart money moves now that could put you in a better financial position when you retire.

Following are seven things everyone gets wrong about Social Security — and the truths you need to know to be prepared for retirement.

Myth No. 1: Your Benefit Is the Same Regardless of When You Retire

Three months before your birthday, the Social Security Administration sends you a recap of your annual earnings history. If you review this statement closely, you will see that the breakdown of benefits is based on your earnings to date. The statement gives you an estimate of benefits you will earn if you continue working until you reach a certain age.

Many people mistakenly assume their monthly Social Security retirement benefit will be the same no matter what age they retire. However, retiring from work and claiming Social Security at a younger age can hurt you.

Look closely at your statement, and you will see that you can get a bigger benefit by delaying retirement and claiming benefits after your full retirement age. The difference can be as much as a few hundred dollars more per month if you wait than if you retire at 62.

Myth No. 2: You Can Wait Until Retiring Before Thinking About Social Security

Long before you retire, try to learn about the Social Security benefits for which you eligible. Too many people overlook this step.

Learning more about Social Security benefits can help you make more effective financial planning decisions. For example, you might be eligible for your ex-spouse’s benefits, yet not even know it. You can also earn a bigger Social Security check simply by delaying retirement beyond your full retirement age.

You can find a wealth of information about retirement planning on the “Retirement Planner” page of the Social Security Administration website.

Myth No. 3: You Automatically Get Full Benefits When Reaching Age 65

Don’t automatically assume you will receive benefits as soon as you reach 65 years of age. Social Security rules have changed over the years. “The reality is that full retirement age, or ‘FRA,’ was age 65, but is now based on your year of birth and may currently be up to age 67,” Donohoe said.

You still have the option of taking your benefits at age 62, but you will receive a reduced benefit — about a 30 percent reduction — if you do. If you receive a spouse’s benefit beginning at age 62, your benefit is reduced to about 32.5 percent of the amount your spouse would receive if he started getting benefits at full retirement age.

It is a myth that taking your benefit early always pays the highest lifetime benefit, Donohue said. The reality is that many factors — including future cost-of-living adjustments and your eventual age of death — influence “which claiming date maximizes lifetime benefit,” he said.

Myth No. 4: You Can Keep Working While Claiming Full Social Security Benefits

A big percentage of Americans misunderstand the rules for working when collecting Social Security benefits.

More than half of people in a MassMutual survey wrongly thought they could continue working at any age while also collecting full Social Security retirement benefits.

Although you are free to work and receive Social Security retirement benefits, the government will reduce your benefit if you are younger than your full retirement age and end up making more than the yearly earnings limit. In 2016, that earning limit is $15,720. The Social Security Administration deducts $1 in benefits for every $2 you earn above that limit until you reach retirement age.

Things change a little as you get close to full retirement age. In the year you reach your full retirement age, the Social Security Administration deducts $1 for every $3 you earn above the annual limit. In 2016, this limit was $41,880. And once you are fully retired, you can keep working without any deductions on benefits — there are no limits on your earnings.

Myth No. 5: You Cannot Collect an Ex-Spouse’s Social Security Benefits

If you end up getting divorced during your lifetime, you are eligible to receive Social Security retirement benefits based on your ex-spouse’s earnings history, said David Freitag, a financial planning consultant with MassMutual. More than 55 percent of Americans who took the MassMutual survey didn’t know this was an option.

The Social Security Administration lists the conditions of eligibility for these benefits. Among other factors, they include having been in a marriage that lasted at least 10 years to an ex-spouse who is unmarried, and age 62 years or older.

If you start receiving benefits at your full retirement age, your benefit is equal to one-half of your ex-spouse’s full retirement amount or disability benefit, according to the Social Security Administration. But, if you end up remarrying, you cannot collect benefits unless your next marriage ends by death, divorce or annulment.

Myth No. 6: A Spouse Can’t Receive Your Social Security Benefits

Even if your spouse has no earnings history or doesn’t meet the 40-credit requirement to receive benefits, he is eligible for Social Security retirement benefits simply because he is married to you, Freitag said.

To receive this spousal benefit, your spouse must be at least 62 years of age or have a qualifying child in his care. The total benefit might be as much as half of the primary worker’s primary insurance amount. The Social Security website can help you calculate the primary insurance amount.

Myth No. 7: You Are Likely to Be Disqualified for Social Security Benefits

Don’t worry about getting to retirement only to end up disqualified for benefits. “It is more likely to accidentally ‘miss out’ on full benefits than it is to be disqualified for Social Security,” Donohue said.

You can, however, miss out on benefits if you get a part-time job before full retirement age and no longer pass the earnings test, Donohue said. You might also miss out on benefits if you are eligible for a large widow or widower benefit when your spouse dies, but you then get remarried before you turn 60. If you are divorced and get remarried, you will miss out on a spousal benefit.

“Proper planning around life events and claiming is vitally important when claiming Social Security,” Donohue said.

Source: https://www.gobankingrates.com/retirement/social-security/everyone-wrong-social-security/