Tag Archives: social security benefits

Understanding Social Security Spousal Benefits

SSA-image-3My Comments: these details were found at a site called WiserWomen.com . They are consistent with my thoughts about how to get the most from the Social Security system as you ask questions to find the optimal timing to apply and possibly suspend your benefits. If you want a personal analysis and comprehensive report, talk with me. Their comments follow this first paragraph.

Social Security is a vital source of retirement income for most women. For this reason, it is important to understand how the spousal benefit works and how it can impact the amount of Social Security income you receive. While this fact sheet is written for women, the information here is the same for men who may want to claim the spousal benefit based on their wife (or ex-wife’s) earning record.

As a spouse, you can claim a Social Security benefit based on your own earnings record, or collect a spousal benefit in the amount of 50% of your husband’s Social Security benefit, but not both. You are automatically entitled to receive whichever benefit provides you the higher monthly amount. In order to qualify for Social Security spousal benefits, you must be at least 62 years old and your husband must also be collecting his own benefits. If your husband is of full retirement age and is not yet collecting benefits, he can apply for retirement benefits and then request to have the benefits suspended and receive delayed retirement credits until age 70. Once he has applied for and suspended his benefits, you would then be able to apply for spousal benefits. Additionally, if you are the higher earner, your husband can apply to collect spousal benefits based on your work record. It is important to note that claiming a spousal benefit does not impact the benefit amount received by the worker whose earning record is being used.

Taking Benefits Early

A full spousal benefit is worth 50% of the non-claiming spouse’s retirement benefit at their full retirement age (known as the “primary insurance amount”, or PIA). It does not matter when the non-claiming spouse actually filed for their own retirement benefit. Therefore, even if your current or former spouse is receiving a reduced benefit as a result of early claiming, your spousal benefit will not be affected. What CAN impact your spousal benefit, however, is if YOU claim the benefit before your own full retirement age. For example, if your full retirement age were 66, then the following reductions to benefits would apply:
• At age 65, you would receive 45.8% of your spouse’s benefit.
• At age 64, you would receive 41.7% of your spouse’s benefit.
• At age 63, you would receive 37.5% of your spouse’s benefit.
• At age 62, you would receive 35% of your spouse’s benefit.
It is also worth noting that unlike delaying your own worker benefit, there is no credit for delaying a spousal benefit beyond full retirement age.

Divorced Spouses
You can receive benefits as a divorced spouse on your ex-husband’s Social Security record, even if he has remarried and his current wife is collecting benefits based on his record. However, there are a few eligibility requirements:
• You must have been married to your ex-husband for at least 10 years.
• You must be at least 62 years old. However, if your ex-husband is deceased and you are currently unmarried, you may collect benefits as early as age 60 as a surviving divorced spouse. If he is deceased and you are disabled, you can collect benefits as early as age 50.
• Your ex-husband must be eligible for benefits. If he is eligible but is not currently receiving benefits, you can still qualify for spousal benefits if you have been divorced for two or more years.
• You must not be currently married. If you remarried and your second husband is deceased, you can claim benefits from either your first or your second husband as long as each marriage lasted at least 10 years.

Surviving Spouses
• If your husband passes away, you can collect survivor’s benefits as early as age 60.
• You are eligible to receive his full Social Security benefit amount if you claim the benefit at your own full retirement age. If you claim before your full retirement age, your benefit will be reduced. (You can learn more about this on the Social Security website by clicking here.)
• If your ex-husband is deceased and you remarry before age 60 (or 50 if you are disabled), you cannot receive survivor’s benefits unless the latter marriage ends (whether it be through death, divorce, or annulment). If you remarry after age 60, you can continue to receive benefits on your former husband’s Social Security record. However, if your current husband is also a Social Security beneficiary and you would receive a larger benefit from his work record than you would from your former husband’s record, you should apply for spousal benefits on your current husband’s record. You cannot receive both benefits.
• Regardless of your age or marital status, if you are caring for your deceased husband’s child or children, you would be eligible to receive benefits for raising them until they are 16 years old. These children can then continue to receive benefits based on your husband’s work record until they are 18 or 19, as long as they are unmarried. If a child is still a full-time student (no higher grade than grade 12) when they turn 18, they can continue to receive benefits until 2 months after they turn 19 or until they graduate, whichever comes first. Children who are disabled can also continue to receive benefits after they turn 18 years old.

Applying for Benefits
You can apply for benefits online by going to http://www.socialsecurity.gov. You can also apply over the telephone by calling 1-800-772-1213, or apply in person by visiting your local Social Security office. For more information on how to apply, visit www.socialsecurity.gov/retire2/applying8.htm.

To make the application process easier, you should know your husband’s (or ex-husband’s) date of birth and Social Security number. You may also be asked to provide certain documents as proof of eligibility, such as your birth certificate or other proof of birth, naturalization papers, W-2 forms, a marriage certificate, or divorce papers if you’re applying as a divorced spouse.

What You Should Know About the New Social Security Rules

SSA-image-3My Comments: If you have not yet signed up to receive your Social Security benefits, you would be well served to better understand the rules associated with Social Security. Believe me, it’s confusing to experts like me, much less someone with an aversion to thinking about money. Here’s a start to your journey.

Kristin Wong, June 1, 2016

Social Security is already a hot-button issue, and recent changes have people really freaking out about it, which makes it tough to get past the outrage and just navigate the facts. Here’s what you should know about the changes.

If you’re not familiar with how Social Security works, it’s okay—the program is complicated and frequently misunderstood, but the basics of taking benefits are simple to follow. Last year, the government signed the Bipartisan Budget Act into law, and the bill included some changes to the rules for collecting Social Security benefits. Those changes recently went into effect, and they axed some smart strategies that helped people maximize their benefits.

What’s Changed

If you retire after your full retirement age, you usually get 8 percent more until age 70. In other words, the longer you wait, the higher your payment. The SSA refers to this as delayed retirement credits. Up until recently, married couples used a couple of “loopholes” in the rules to get even more out of these delayed credits. The new changes closed the loopholes and eliminate these strategies.

You Can No Longer “File and Suspend” to Activate Benefits for a Spouse

Known as the “file and suspend” strategy, the loophole allowed married couples to delay one spouse’s benefit while the other spouse received a payout on that same benefit. It’s a little confusing, I know, but here’s how it worked in practice.

Basically, one spouse (usually the one who earned more money) would file for Social Security once they reached their full retirement age. Once they filed, Spouse #2 would then file for a spousal benefit, usually half of the full benefit. Spouse #1 would then suspend the benefit, postponing their own payout and letting their benefit grow 8% every year.

In other words, they file, take the spousal benefit, then suspend. Meanwhile, Spouse #2 gets a check every month, but the main benefit earns interest. You get the best of both worlds.

With the new rules, which took effect May 1st, this is no longer an option for most of us. According to the SSA:
… if you take your retirement benefit and then ask (on or after April 30, 2016) to suspend it to earn delayed retirement credits, your spouse or dependents generally won’t be able to receive benefits on your Social Security record during the suspension. You also won’t be able to receive spouse benefits on anyone else’s record during that time.

When you suspend benefits, you can no longer receive spousal benefits. The new rules don’t apply to people born before April 30, 1950, however. This gives recent retirees a chance to take advantage of the strategy they may have been counting on for income.

No More “Restricted Applications” to Collect Benefits While Sitting On Future Payouts

Along with “file and suspend,” some used a strategy called “restricted applications” to optimize their benefits. Going back to the previous example, this allowed Spouse #2 to receive spousal benefits while delaying their own Social Security benefits, which are separate. This way, both spouses could enjoy the annual 8% increase and still get paid every month.

Not anymore, though. The new rule, which applies to anyone born after 1954, eliminates restricted applications and forces you to take both benefits at the same time. Here’s how the Social Security Administration puts it:
if you are eligible for benefits both as a retiree and as a spouse (or divorced spouse), you must start both benefits at the same time. This “deemed filing” used to apply only before the full retirement age, which is currently 66. Now it applies at any age up to 70, if you turned 62 after January 1, 2016.

So if you apply for one benefit, whether it’s a spousal benefit or your own Social Security payout, you apply for both. Sounds fair enough, but here’s the kicker: you basically only get the higher benefit. The Motley Fool explains:
…that person won’t have the option to collect spousal benefits if his or her own benefit amount is higher. That person will therefore be left with a choice: Start taking benefits and lose out on the 8% annual increase for delaying, or hold off on taking benefits to capitalize on those delayed retirement credits and forego Social Security income in the interim.

That’s not exactly how the SSA puts it, but that’s the gist of what happens and why so many people are up in arms about the changes. Couples could lose out on hundreds or even thousands of dollars every month.

Even though the “Social Security Crisis” is overblown, it’s probably fair to assume that the rules are meant to maintain Social Security funds.

What Hasn’t Changed

People have strong opinions about Social Security. Many of the articles covering the changes seem to imply there’s been a huge overhaul that eliminates basic perks. This isn’t the case—spousal benefits and suspended benefits haven’t been eliminated or even reduced. However, the rules have changed to close some the loopholes that allowed people to really take advantage of those perks. Those changes could make a big difference for a lot of retirees (or soon-to-be retirees).

The most important takeaway, though, is that delayed retirement credits still exist. You still get an annual increase if you delay your Social Security benefits past your full retirement age. And this perk is the backbone for most Social Security withdrawal strategies. In other words, it’s still possible to strategize your benefits and get more out of them.

Your own approach to collecting Social Security depends on your own situation: how much you earn in retirement, when you plan to stop working, how much your living expenses are and so on. The Motley Fool suggests one common strategy, though:
If you want to take advantage of those delayed retirement credits but can’t wait that long to start receiving Social Security income, assuming both spouses worked, you could have one spouse (ideally, the higher wage earner) hold off on taking benefits while the other claims them earlier. This way, you get some income when you need it while allowing the higher wage earner’s benefits to grow.

The SSA also has a handful of calculators that can help you get an idea of what your own benefit amount will be, depending on when you take it and how much you earn.

The Only Way To Save the EU Is For The UK To Leave It

Brexit-4My Comments: Forget the UK and Europe. There’s a message here that applies to us in the United States and the anger among so many that gives rise to a choice between Donald Trump and Hillary Clinton.

It echoes the comments I’ve made here for years that “It’s economics, stupid!”. A primary driver of deteriorating race relations, of attacks on immigrants, on law enforcement, on the LGBT community, on gun owners, etc., is the fear that many of us are no longer in control of our own destiny. There is a pervasive appeal to try and turn back the clock, to reinvent the past and the conditions that led to a growing middle class in this country.

To the extent that those at the lower end of the economic spectrum, whether white, black or brown, cannot find a way to improve their quality of life, there is going to be stress. And that stress manifests itself as protests in the streets that appear to be focused on racial issues, on law enforcement issues, on immigrants who ‘take away our jobs’, and any number of other real and imagined grievances.

When you’re working 40 plus hours a week and making enough money to adequately feed, clothe and house your family, those grievances become irrelevant. Or at least manageable. They only surface and become a societal nightmare when enough people feel abandoned and disrespected and forgotten. And economics is a fundamental cause behind this drift toward chaos.

I’m not sure Hillary can fix this and I’m quite sure Trump can’t fix this. But I’m going to vote for whomever I think is most likely to force a discussion about the economic realities in this country. This is a long read but if you believe that income inequality is a problem, you need to read all of it.

by Gwynn Guilford on July 15, 2016

Xenophobic. Racist. Jingoistic. Nativist. Parochial. The 52% of British voters who hit the EU eject button might be all of those things. But they were also backing the right horse.

The vote repudiates a vision of Europe that rewards companies at workers’ expense. It’s a rebuke of a government that invests authority in a professional elite insulated from the economic realities of ordinary Europeans. The free flow of goods, services, capital, and people within the EU was supposed to spread prosperity. It hasn’t. Eventually, something big had to break.

While Brexit is certainly big, the fissure beneath it is bigger than Britain, or even Europe. The imbalances of trade, capital, labor, and—above all—savings that lie at the heart of Europe’s current turmoil warp the entire global financial system. Nearly everywhere you look, growth is sputtering because there’s simply too little demand—and far too much debt—to go around. And that’s thanks in no small part to the EU’s wooly-headed policies. However painful it might make the next few months or years, Brexit might ultimately be the wake-up call that prevents the EU from unleashing another global financial crisis, and condemning the world to decades of feeble growth.

To understand why things have gotten to this point, we have to examine the fundamental flaws in the EU’s design that are largely responsible for these distortions.

CONTINUE-READING

A New Day for Social Security?

SSA-image-3My Comments: As someone who teaches people how to maximize their social security benefits, a major fear that surfaces during a workshop is whether there is enough in the system to guarantee future benefits.

The quick answer is “not without some changes to the system”, which leads to more questions about when it will run out, and what can we do about it.

The last fundamental change came in 1983. At that time, the system was expected to go broke in two or three years. But here we are, 33 years later, with far more people in the system than ever before, and there is enough money in the system today to last another 20 years.

Since most of my students can expect to live for another 30-40 years, the question of whether they’ll still get a check at the other end is a real question. It deserves a more qualified answer than I can possible deliver. Here is a answer from someone very qualified.

By Stephen Hill, July 11, 2016

The U.S. has entered an anxious era in which fewer workers have a single employer or a regular workplace. Instead they have various employers and multiple part-time jobs and “gigs,” with these businesses not required to provide healthcare, make Social Security contributions or even offer compensation for workplace injuries.

A crucial adaptation to these changing circumstances would be the creation of a portable safety net, one that would make it possible for all workers to go from employer to employer while still retaining access to basic benefits. Social Security — which is already gloriously portable — could play a key role in such a system, but only if we fix it.

Social Security is our most effective anti-poverty program; without it, nearly half of the nation’s retirees would be living in poverty. Three-fourths of retirees depend on it heavily, particularly women and racial minorities. During the 2008-09 economic crisis, moreover, when home ownership, private savings and the stock market collapsed, Social Security remained stable.

The criticism that Social Security will face a financial deficit sometime in the 2030s is overblown. Social Security has an established trust fund that, legally speaking, cannot spend more than it takes in. Any future shortfall could be made up from any number of revenue sources, it’s all a matter of budgetary priorities.

In fact the real problem with Social Security is not a shortfall but that its payout is so meager. Social Security is designed to replace only about 35% of wages at retirement, yet most Americans need twice that amount to live decently. With the other components of the retirement system looking wobbly, and with incomes low, Social Security is too skimpy to be the nation’s single pillar retirement system.

The obvious solution is to expand it. There are numerous revenue streams that would allow the nation to greatly increase the monthly payout for the 43 million Americans who receive retirement benefits. Here are a few recommendations to consider.

First, we should eliminate the Social Security payroll cap so that all income levels pay the same rate. Currently any wage income above $118,500 is not taxed for Social Security purposes. The practical effect of the cap is that billionaire bankers and CEOs contribute a far lower percentage of their income into the Social Security Trust Fund than their secretaries and chauffeurs. Making payroll contributions more fair would raise approximately $135 billion annually.

In addition, we should stop exempting investment income from Social Security taxes. Wealthy Americans make 40%-50% of their money from investment income, and we help fund Medicare by taxing it like wages. If we did the same for Social Security, we could raise an additional $75 billion annually.

Along the same lines, we could scrap income tax shelters for wealthy households and businesses, and then reallocate the savings to the Social Security fund. Loopholes include the drastically lower tax rate for investment income like capital gains, “carried interest” and “step-up in basis,” the latter exclusively benefiting inherited wealth. These tax rules cost the national treasury hundreds of billions of dollars per year.

Lastly, the U.S. could end or reduce tax breaks for private retirement accounts, including 401(k)s and IRAs, and again reallocate the savings to Social Security — which would be far more equitable. Of the $165 billion that the federal government spends subsidizing individual retirement savings, nearly 80% of it goes to the top 20% of income earners. Many of the middle class and poor can’t take advantage of these deductions because they don’t earn enough income to save. (For that reason, a universal 401(k), as has been proposed by President Obama, would be largely pointless).

Just these four revenue streams would come close to raising the $662 billion necessary to double Social Security’s monthly benefit.

Other nations manage to provide retirement benefits at that level, so there is no reason the U.S. can’t. Doing so would create a more secure retirement for everyone, even as it would benefit the overall economy and form a core part of a portable safety net that so many workers need. As the old New Deal crumbles, substantial expansion of Social Security benefits would provide a new kind of deal for U.S. workers.

Steven Hill is a senior fellow at the New America Foundation and author of the recently published “Expand Social Security Now: How to Ensure Americans Get the Retirement They Deserve.”

Will You Regret Taking Social Security ASAP?

SSA-image-3 My Comments: Too many people choose to take early benefits. If you need the money, hate your job, don’t have a job, plan to die soon, or simply don’t have confidence in your life, then maybe it’s OK. But it usually turns out to be a mistake. There is a do over, but you have to take it within 12 months. Most don’t and then when they discover they are 75, there’s not enough money.

By Casey Dowd Published June 30, 2016 The Boomer FOXBusiness

Attention Baby Boomers who will soon be turning age 62 and are planning on taking Social Security benefits early, be sure to do your homework before you sign the paperwork.

A Nationwide Retirement Institute survey of 909 U.S. adults aged 50 or older found that many of those who claimed their Social Security benefits early wish they could change their decision – and the top reason is to maximize their benefit. Meanwhile, of those who wouldn’t change their decision, many say they had no choice – saying they needed the money.

“Social Security is undoubtedly one of the most complex retirement topics facing American workers,” says Dave Giertz, President of Sales and Distribution at Nationwide. “Even those who can identify the factors that will impact their benefit are likely unable to grasp the thousands of rules that apply to Social Security. The complexity makes it extremely difficult for retirees to maximize their benefit on their own.”

Giertz discussed with FOXBusiness.com what you need to know.

Boomer: What impact has claiming Social Security early had on American workers?

Giertz: American workers are potentially missing out on hundreds of thousands of dollars in retirement income by claiming Social Security early. Instead of leaving money on the table, retirees need to consider all of their filing options to help understand how Social Security can fit into their overall retirement income plan.

Maximizing your Social Security benefit is more important than ever because, for most, it is the only source of retirement income. Only 36 percent of future retirees we surveyed have pensions, compared to 54 percent of recent retirees and 60 percent of the oldest retirees. Preparing for retirement holistically by working with online tools and advisors can help retirees face challenges posed by lack of retirement income, health care costs and other obstacles.

Boomer: What surprises typically come up in retirement?

Giertz: Seven out of 10 retirees who have health problems say the problems came sooner than they expected, increasing the impact on their retirement and their wallets. Additionally, almost two in five retirees (37 percent) say health problems keep them from living the retirement they expected.

For many current retirees, health care expenses are eating up a majority of their Social Security benefit. The average American claiming their Social Security at 62 will spend about 61 percent of their Social Security benefits on health care costs, according to a case study comparing data from Nationwide Retirement Institute’s Social Security 360 Analyzer and Health Care Costs Assessment tools. That’s before factoring in long-term care costs.

Meanwhile, according to the same case study, if an average American waits until age 70 to claim Social Security, they have more money left over and end up spending just 47 percent of their benefit on health care costs.

Boomer: How can Baby Boomers project what their benefit will be, so as not to be surprised when they retire?

Giertz: As a start, don’t guess. About a quarter of Americans who haven’t claimed Social Security say they are either guessing or don’t know the amount they will receive in their monthly benefit check. As a result, many Baby Boomers are overstating the amount they might receive. Those approaching retirement say they expect to get $1,610 in monthly Social Security benefits, while in reality recent retirees report their actual monthly benefit is about $1,378, and those who have been retired longer report receiving just an average of $1,185 per month.

Only 11 percent of current retirees used an online calculator to estimate their benefit; however, among Baby Boomers approaching retirement, the use of these tools is becoming much more prevalent. More than four in 10 future retirees (42 percent) have used a Social Security calculator to estimate their benefit.

While the development of Social Security calculators is helping close the Social Security knowledge gap, Americans should work with a financial advisor to create a holistic retirement income plan that includes Social Security. Retirees who work with an advisor are much less likely than those who don’t to say health care costs keep them from living the retirement they expected (11 percent vs. 29 percent).

Boomer: With the increase in the cost of living and inflation in retirement what should future retirees be doing now to support the increase?

Giertz: Nearly two in five Americans nearing retirement (38 percent) expect their living expenses will go down in retirement.

However, changes in the cost of living and inflation are the top reasons expenses increase in retirement, according to the retirees we surveyed. Of those retired 10+ years say the cost of living (79 percent) and inflation (62 percent) are the leading factors impacting their living expenses retirement.

In addition to saving more, maximizing your Social Security benefit is key to coping with cost of living increases and inflation.

Boomer: How can Boomers maximize their Social Security benefit?

Giertz: Eighty-six percent of future retirees cannot correctly identify the three basic factors that the Social Security Administration uses to determine their benefit amount, and, as a result, many retirees do not know how to maximize their Social Security. Understanding how your age, benefit start date and marital status work together to determine the amount in your benefit check every month is a great start.

However, the combinations of different ages, benefit start dates and marital statuses make every individual or family’s ideal filing strategy different – and many Baby Boomers may want to consider a variety of strategies with different benefit start dates.

While life events force many Americans to take Social Security early, those who are willing or able to wait get rewarded for their patience. According to the Social Security Administration, American workers receive and extra 8 percent per year for every year they postpone collecting benefits beyond their full retirement age amount – up to age 70.

Can You Afford to Live Longer?

retirement-exit-2My Comments: Many of you know that I’ve recently started a series of workshops that focuses on how the Social Security system works. It’s an attempt to help those who will soon become eligible, or are already eligible, better understand a very complex and not user friendly institution in American life.

One assumption that is new to me, but but critical to the planning process, is to assume everyone will live to be 100. Obviously that’s not going to happen, but it’s a conservative approach to making the necessary decisions about your future life style and how you are going to pay for it.

This article from Casey Dowd might be helpful if any of you think this applies to you.

By Casey Dowd, Published June 16, 2016

According to the National Institute on Aging, in 1950 a man retiring at age 65 could expect to live another 13 years and a 65-year-old woman another 15 years. Today, according to data from the Society of Actuaries, there is a 43 percent chance that retirees could live to at least age 95.

Allianz Life conducted a study with the Stanford Center on Longevity to explore the topic of longevity, what it means for retirement planning and how advances are leading people to consider alternative life-path possibilities.

“As Americans come to terms with the fact that they’ll likely live an extra 30 years, they have the opportunity to look back and evaluate their past decisions and consider the newfound possibilities for the future afforded by time,” said Katie Libbe, Allianz Life Vice President of Consumer Insights.
While it’s good news that you can expect to live longer in retirement, can you financially afford it? Libbe discussed with FOXBusiness.com what you need to know.

Boomer: How can Baby Boomers plan for living 30 more years in retirement, both socially and financially?

Libbe: We found that people are incredibly optimistic about longevity and also that they have interest in alternative life paths that differ from the traditional and linear “school-work/marriage/kids-retirement” track that has been the de facto life template for generations. When asked to design their ideal longer life, nearly half of Americans said they would prefer a nontraditional model that is unique to their interests – where they might work, take career breaks, go back to school, volunteer and try different things in no set order.

Although boomers may not have as great an opportunity to make widespread changes to their life path as younger generations, they can still use the conversation about longevity to consider new possibilities for their retirement years, including encore careers or continuing education. As they explore these new possibilities, they should also think about their financial plan and what it may take to build a strategy that supports an alternative to a traditional retirement.

Boomer: What regrets are boomers finding about chances not taken and dreams not realized?

Libbe: Although the topic of longevity was met with extreme optimism by the majority of boomers – 94% were positive on the prospect of living 30 extra years – the process of thinking about longer life caused many boomers to look back and identify some regrets about choices made and opportunities missed.

Nearly 20% of boomers noted they would “take more risks in life,” a common theme among the one-third of Americans who said they regretted many of their major life decisions. Included among those top regrets for boomers are not following their dreams, not taking risks with their career and not taking risks with their lives in general (new jobs, going back to school, etc.). Nearly a third also said they wish they’d been more gutsy in their choices and done things they really wanted to do.

Boomer: How does this change traditional retirement planning?

Libbe: For many Americans, including boomers, having more time opens the door to new opportunities. Boomer respondents confirmed a desire to explore different life paths: pursuing a dream like starting a new business, having a second career doing something they truly enjoy, volunteering/supporting the environment, or retiring later by working fewer hours but for more years overall. Nearly half of all respondents feel a longer life can enable a totally different view of how and when major life choices are made.

While many Americans expressed interest in embracing the possibilities of a longer life, they also understand the need for better planning in order to fund those different goals/life paths. More than nine in 10 boomer respondents agreed that people will need to be more thoughtful about how they plan for longer lives, and nearly the same percentage agreed that major changes would be needed in how people think about funding longer lives. In addition, a full 94% of boomers agreed that, with 30 extra years, it’s not enough to just put aside money for retirement – people would need a much broader, more goal-specific plan – a longevity plan, that falls outside the confines of traditional financial planning.

Boomer: Is our parents’ “traditional” retirement gone forever?

Libbe:
Traditional retirement is not gone forever, but new conversations about longevity are forcing people to consider whether a traditional retirement is truly right for them. Of course, if you prefer spending time on a beach or at the golf course, there is nothing wrong with developing a plan to help you achieve those more traditional retirement goals. But it’s important to understand that there are many other possibilities that come with longer life – from extending your working years doing something you love, to taking a sabbatical now in order to pursue a passion project while you still have the time and energy to make it a reality.

It certainly takes careful planning to achieve these objectives, and most Americans seem to understand that a new paradigm is needed to think about, plan for and fund a longer life. A good first step is to meet with a financial professional and discuss how you may be able to achieve different short- and mid-term goals while saving for retirement, opening up the freedom to try different things, pursue passions and explore alternative life plans.

Claiming Social Security at Full Retirement Age is Often a Mistake

SSA-image-2My Comments: The headline above should probably read ‘Sometimes’ instead of ‘Often’. It depends to some extent on when you die.

Since that date is completely unknown, the only solution is to play the odds, and my recommendation these days is to assume you will live to be 100. That’s the conservative approach.

Unless you plan to die soon, you’ve going to need money from somewhere, and for many of us, our Social Security payments will make up the bulk of our retirement income. So it might make sense to spend down what little you’ve saved and then rely on a larger check from Social Security when you reach age 70.

Mike Piper June 13, 2016

Imagine for a moment that I am an insurance company, and you are a married retiree. And, as an insurance company, I offer to sell you either (or both) of two annuities:
• With Annuity A, for every $100 of the annuity you purchase, I promise to pay you $7 per year for as long as you or your spouse is alive.
• With Annuity B, for every $100 of the annuity you purchase, I promise to pay you $7 per year for as long as both you and your spouse are still alive.

But I will only sell you, at most, $10,000 of either annuity.

There would be a number of reasonable decisions you could make here. You might purchase $10,000 of each annuity. Or you might purchase neither. Or you might purchase $10,000 of Annuity A and $2,000 of Annuity B. And so on.

But you wouldn’t, for instance, purchase $10,000 of Annuity B and $2,000 of Annuity A. Nor would you purchase $5,000 of each. And that’s because Annuity B is worse than Annuity A.

In short, you wouldn’t spend a dime on Annuity B unless you had already purchased the maximum amount of Annuity A and you still wanted to purchase more annuities.

What Does This Have to Do with Retirement Planning?

In our hypothetical example above, Annuity A is essentially what you get when the higher earner in a married couple delays claiming his/her Social Security retirement benefit. And Annuity B is what you get when the lower earner in a married couple delays claiming benefits. The percentages are slightly off, but the concept is the same — delaying the benefit of the spouse with the higher primary insurance amount increases the amount the couple receives as long as either spouse is still alive, while delaying the low-PIA spouse’s benefit increases the amount the couple receives while both spouses are alive.

In our example above, it doesn’t make sense to buy any of Annuity B unless you’re already buying the maximum amount of Annuity A. And, with Social Security, the low-PIA spouse shouldn’t be doing any waiting unless the high-PIA spouse is already planning to wait until 70.

Unfortunately, it’s common to see couples in which both spouses start taking Social Security at full retirement age (or close to it), despite the fact that there would have been a strictly-superior strategy available to them.