Social Security Q&A: How Do the New Rules Affect File and Suspend?

23 Dec 2015 | Author: | No comments yet »

About Retirement and Social Security.

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. Splurge on gifts, fix up the house, take a vacation, pay bills, or stuff a little more cash into the retirement saving account you’ve been neglecting. If you are like many parents, you’ve been promising yourself for years that you will start saving for retirement in earnest once the children-related expenses end. 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. But instead of keeping promises to themselves, parents continue to let 401(k)s retirement savings plans lie fallow after the college bills stop, a new study by the Center for Retirement Research at Boston College shows. “Most households will not be able to maintain their pre-retirement standard of living,” said the center’s research economist Geoffrey Sanzenbacher. “People will be unhappy and uncomfortable.” “They won’t be in poverty because they will have Social Security,” said Sanzenbacher. 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. 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. The average Social Security check for retirees is $1,338 a month, according to the Social Security Administration. “This is concerning,” said Sanzenbacher. “There is a retirement crisis.

The strategies about to be eliminated generally allowed individuals to collect spousal benefits while their own benefits continued to grow 8 percent each year. But Sanzenbacher said his research disproves a common expectation among economists: That it doesn’t matter if parents didn’t save enough while raising children, because parents will pick up the pace of saving and make up for lost time when children are grown.

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. While the research doesn’t analyze specifically what parents buy after paying for college, Sanzenbacher said it appears that “after the kids are gone, people have a desire to splurge. 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. They spend on themselves.” Not only do parents fail to increase savings in their 401(k)s, but they also devote little extra money to paying off their mortgages.

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. 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. A 50-year-old who has $100,000 saved for retirement could grow those savings to about $900,000 by retirement if he devoted $20,000 a year to a 401(k) and earned 7 percent on investments.

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