Social Security Q&A

23 Dec 2015 | Author: | No comments yet »

About Retirement and Social Security.

For years, retirees have been able to squeeze tens of thousands of extra dollars from Social Security using two special tactics. 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.

The most painless way to go about such changes is to study now what’s necessary to keep Social Security operational for the next several decades and start making adjustments that are as gentle as possible but still have a significant effect on its long-range health. Congress says eliminating it closed an unintentional loophole, one that the Center for Retirement Research at Boston College says cost Social Security $9.5 billion a year. Social Security is not facing an immediate crisis, and it would be a shame if that were allowed to happen before lawmakers get started with solving the problem. The very first question is “Am I ready to stop working and retire?” You should also ask “Is my significant other also ready to retire?” You don’t have to retire just because you are 65 years old.

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. Currently, there are fewer than three people working for every person getting benefits, and in 20 years, there will be about two people working for every individual receiving Social Security benefits. 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. 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.

Determining where you are going to live and the costs associated with that location will be a key factor in establishing how to financially prepare for your retirement. 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. 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. One strategy allowed married retirees to file for benefits at their full retirement age, immediately suspend them, then begin collecting when they reached their highest value.

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. 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. Only a small percentage of workers make more than that, but if the payroll tax were extended to the entire wages of those who do, it would cover a lot of the expected Social Security shortfall. The Social Security Administration contended, and Congress ultimately agreed, that the rules enacted in 2000 created unintended loopholes that were being used by those wealthy enough to work with savvy financial pros. A less aggressive approach would be to increase the cutoff number — such as requiring payroll taxes for the first $175,000 of a worker’s salary and exempting the wages beyond that for the really high earners.

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. Do it the smart way, and begin the discussion now. ■ Our position: As Baby Boomers retire and leave the work force, it leaves fewer workers whose Social Security payroll taxes pay for the benefits of current Social Security recipients. 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.

That’s the new face of Social Security after this ‘file and suspend’ goes away.” David Fromme, 75, a retired IRS analyst in Farmington Hills, Mich., thinks it’s a horrible idea to wait to take Social Security. If you are healthy, you might travel more or participate in more hobbies, potentially increasing your expenses – particularly in your early retirement years. 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?”

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