New Social Security strategies for couples

20 Jan 2016 | Author: | No comments yet »

About Retirement and Social Security.

With the Social Security changes in the budget deal, I am more confused than ever. STATES CHRONICLE – If you’re approaching retirement or maybe you just like to think ahead, here are some things to know about retirement and social security. After all, the Center for Retirement Research found that more than half of all working households are at risk of being unable to keep up their standard of living in retirement — just one of the many frightening statistics about retirement. One big problem with retirement savings – even for those who have enough – is that the cost of living increases over time, and at an unpredictable pace. This is why, even if you invest well and only withdraw 4% of your nest egg each year, you can only reasonably expect your savings to last for about 30 years, according to most experts.

But even under the new rules, the basic tenet for when to claim Social Security remains: Healthy people nearing retirement should often wait as long as they can to collect, particularly if they are the higher-earning spouse. Though retirees can claim benefits starting at age 62, the payoff for waiting can be huge, especially if they consider the benefit as a way to hedge against outliving their money. Those who wait until they are 70 — and only 2.2 percent of beneficiaries did in 2014 — will end up with a monthly check that is 76 percent more than if they start the moment they became eligible. “The big game is being patient,” said Laurence Kotlikoff, co-author of a book on Social Security strategies and creator of MaximizeMySocialSecurity.com. Here are a few tips to prepare you: “To me, it seems that the most important thing a person could do today is to get advice about Social Security planning,” says Terry Dunne, a managing director at Millennium Trust Co. in Oak Brook, Ill. “The choice of taking it at 62 or 65 or 70 matters.

However, the reality is rather different: If you’ve fallen behind in your saving, or haven’t started at all, it’s never too late to do something about it. There is still an opportunity for some couples and divorced people to collect extra money under the old rules, so they may want to evaluate whether they are eligible before the final window closes. After a grace period of six months from the law’s Nov. 2 signing, it will no longer be possible for a person to file and suspend so that the other can claim a spousal benefit.

The strategies about to be eliminated generally allowed individuals to collect spousal benefits while their own benefits continued to grow 8 percent each year. It could make a big difference.” “If anyone’s situation is unusual — if divorced, remarried or if someone wants to work — they want to get some advice,” Dunne says. “But make sure you are getting good advice.” A key part of any retirement plan is figuring out how much income you need.

You have until the April 15 tax deadline to make your contributions, so if you get started promptly, you can make two years’ worth of contributions in 2016 – one for the 2015 tax year and one for 2016. That helps you determine when, exactly, you need to receive Social Security. “Social Security is extremely complex,” says Germi Cloud, a financial adviser with Cloud Financial in Huntsville, Ala. “It’s kind of like dealing with the IRS.

To illustrate the concept that you can start late and still have an impact, let’s say that you and your spouse are both 50 years old and have absolutely no retirement savings. She would start her earned benefit of $800 at her full retirement age of 66 and then switch to the higher spousal benefit when you start collecting Social Security. If we consider retirement savings worth about $500,000 and the fact that you could easily have a longer lifespan, you should probably split your savings into about $15,000 to $25,000 a year. The restricted-application option is also being eliminated under the budget law, but people who are 62 or older at the end of this year are grandfathered in. That’s why the average monthly Social Security check is about $1,300. “Patience in benefit collection can pay off big time,” says Willie Schuette, a financial planner for the JL Smith Group, near Cleveland. “There is a 76 percent increase if you wait until 70, versus 62, in taking the benefit.” The early claimers are effectively locking themselves into a permanent reduction in benefits.

The prospect of saving enough to last throughout your retirement might seem like an impossible task, especially if you’re getting a late start; but if you’re still working, there’s still time to build a meaningful nest egg. If you retire later, your Social Security income will increase with about 8% for each year of delay, which will bring you instead of no more than $20,000, about at least $25,000. — Mary Klement, San Diego Social Security planning is important for survivors because many of them can boost their lifetime income by switching between retirement and survivor benefits.

There are many online tools that can help you calculate your retirement income based on your savings, you annual earnings and inflation so you could get a pretty accurate estimation of how your retirement bank account will look. In fact, one MarketWatch reporter argues that if more Americans knew about this, the government would have to shell out an extra $10 billion annually. Instead of claiming $2,000 monthly in Social Security benefits, they draw down $2,000 a month from their savings. “That’s a lot of money they are spending from their own dollars,” he says. “We run scenarios to see which gives them the most principal to pass on to their heirs,” he says. “You can’t pass Social Security on to the heirs. In this case, the catch is you are gambling on whether you will live long enough to recover the postponed benefits.” The real question, he says, is not “Will you receive more money after age 70?” but, “Will you be able to recover the money you did not take for four years?” Some of us have younger wives who may not have maxed out Social Security earnings and/or years of employment and who may therefore benefit from survivor benefits.

If I die one day after turning 70, my wife will have to wait at least 15 years until she is 60 to start collecting a reduced amount based on my benefit. During the 15-year “blackout period,” will my at-death $41,000 annual benefit be adjusted by the 15 intervening annual cost-of-living adjustments? — Bruce Colby, Avon, Ohio Tax law would allow you to roll money from your IRA to a 401(k), but your 401(k) plan may not allow that, says Ed Slott, a certified public accountant and IRA specialist in Rockville Centre, N.Y. Slott says he would generally recommend against such a move. “You have more investment options in your own IRA than in a typical 401(k) plan, and you have more control of your funds,” he says.

That would typically use insurance-company contracts or an insurer’s backing to pay higher interest than a money-market fund without the price fluctuations of a bond fund.

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