Should You Apply for Social Security Now or Later?

Posted by on Apr 23, 2017 in 401k, 403b, Boomers. Millenials, college planning, credit card statements, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, insurance, Investing, IRA, IRS, Medicaid Planning, Retirement, retirement planning, social security, tax returns, taxes | 0 comments

When should you apply for benefits? Consider a few factors first.   Provided by Frederick Saide, Ph.D.   Now or later? When it comes to the question of Social Security income, the choice looms large. Should you apply now to get earlier payments? Or wait for a few years to get larger checks?   Consider what you know (and don’t know). You know how much retirement money you have; you may have a clear projection of retirement income from other potential sources. Other factors aren’t as foreseeable. You don’t know exactly how long you will live, so you can’t predict your lifetime Social Security payout. You may even end up returning to work again.   When are you eligible to receive full benefits? The answer may be found online at   How much smaller will your check be if you start receiving benefits at 62? The answer varies. As an example, let’s take someone born in 1955. For this baby boomer, the full retirement age is 66 years and 2 months. If that boomer decides to retire in 2017 at 62, his or her monthly Social Security benefit will be reduced about 26%. That boomer’s spouse would see a 30% reduction in monthly benefits.1,2   Should that boomer elect to work past full retirement age, his or her benefit checks will increase by 8.0% for every additional full year spent in the workforce. So, it really may pay to work longer.2   Remember the earnings limit. Let’s put our hypothetical baby boomer through another example. Our boomer decides to apply for Social Security at age 62 in 2017, yet stays in the workforce. If he/she earns more than $16,920 in 2017, the Social Security Administration will withhold $1 of every $2 earned over that amount.3   How does the SSA define “income”? If you work for yourself, the SSA considers your net earnings from self-employment to be your income. If you work for an employer, your wages equal your earned income.3   Please note that the SSA does not count investment earnings, interest, pensions, annuity income, and government or military retirement benefits toward the current $16,920 earnings limit.3   Some fine print worth noticing. If you are self-employed, did you know that the SSA may define you as retired even if you aren’t? (This amounts to the SSA giving you a break.)   For example, if you are eligible to receive Social Security benefits in 2017, yet remain under full retirement age for the whole year, the SSA will consider you “retired” if a) you work 45 hours or less per month at your business or work between 15-45 hours a month at a business in a highly...

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How Will You Spend Your Retirement Savings?

Posted by on Apr 16, 2017 in Uncategorized | 0 comments

Keep an eye on where it goes, as some destinations may be better than others.   Provided by Frederick Saide, Ph.D.   You can probably envision how most of your retirement money will be spent. Much of it will be used on living expenses, health care expenses, and, perhaps, debt reduction. Beyond the basics, you will unquestionably reserve some of those dollars for grand adventures and great experiences. If your financial situation permits, you may also contribute to charity. You just have to remember that your retirement fund is not a bottomless well. If outflows begin to exceed inflows (that is, you repeatedly withdraw more than you make back), you will face a serious financial problem. With that hazard in mind, be wary of these four spending sieves. Some retirees fall prey to them, and all four can potentially reduce a retirement fund at an alarming rate. Spending some of your retirement money on your adult children. According to the Federal Reserve Bank of New York, the average indebted college graduate is shouldering $34,000 in student loans. No wonder some millennials live without a car, live with a couple of roommates, or live with their parents. It is easy to feel empathy for a son or daughter in this situation, but you need not bail them out.1   You may be tempted to pay off some bills for an adult child, even some education debt – but should your retirement dollars be used for that? Frankly, no. (If you face the prospect of retiring with outstanding student loans, attack yours instead of ones linked to your kids.) Spending some of your retirement money on your home. Should the mortgage be paid off? Does the landscaping need work? Should you put in solar panels? In asking such questions, question whether you want to assign your retirement dollars to such expenses. Making a big lump-sum payment to erase your mortgage balance can also erase that money right out of your retirement savings. Some retirees find it better just to carry their home loans a little longer, enjoying the associated mortgage interest tax break. Certain home improvements might raise the value of your residence; others might not be cost effective. Spending some of your retirement money at casinos. It is amazing how many retirees flock to gaming establishments. As AARP noted last year, about half of visitors to U.S. casinos are aged 50 or older. Gambling addiction is, fortunately, rare, but even casual gamblers can have a hard time walking away due to the comfort and conditions of the casino experience. Would any retiree be able to defend such spending as purposeful?2   Spending too much of your retirement money at the...

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Getting Your Financial Paperwork in Good Order

Posted by on Apr 9, 2017 in 401k, 403b, atuos, bank statements, Boomers. Millenials, college planning, estate planning, family finances, financial planning, Fixed Income Investing, insurance, Investing, IRA, Medicaid Planning, Medicaid Recovery, Medicare Planning, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA | 0 comments

 Help make things easier for your loved ones when you leave this world.   Provided by Frederick Saide, Ph.D.   Who wants to leave this world with their financial affairs in good order? We all do, right? None of us wants to leave a collection of financial mysteries for our spouse or our children to solve. What we want and what we do can differ, however. Many heirs spend days, weeks, or months searching for a decedent’s financial and legal documents. They may even discover a savings bond, a certificate of deposit, or a life insurance policy years after their loved one passes. Certainly, you want to spare your heirs from this predicament. One helpful step is to create a “final file.” Maybe it is an actual accordion or manila folder; maybe it is a file on a computer desktop; or maybe it is secured within an online vault. The form matters less than the function. The function this file will serve is to provide your heirs with the documentation and direction they need to help them settle your estate. What should be in your “final file?” Definitely a copy of your will and copies of any trust documents. Place a durable power of attorney and a health care proxy in there too, as this folder’s contents may need to be accessed before you die. Copies of insurance policies should go into the “final file” – not only your life insurance policy, but home and auto coverage. A list of all the financial accounts in your name should be kept in the file – and, to be complete, why not include sample account statements with account numbers, or, at least, usernames and passwords, so that these accounts can be easily accessed online. Social Security benefit information should also be compiled. That information will be essential for your spouse (and, perhaps, for a former spouse). If you happen to receive a pension from a former employer, your heirs need to know the particulars about that. They should also be able to access documentation pertaining to real estate you own. If you have a safe deposit box, at least one of your heirs should know where the key is – otherwise, your heirs will have to pay a locksmith, directly or indirectly, to open it. Along those lines, the combination to a home safe should be disclosed. If you have trust issues with some of your heirs, you can only disclose such information to the trusted ones or to an attorney. Contact information should be inside the “final file” as well. Your heirs will need to look up the email address or phone number of the financial professionals you have consulted,...

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The 60 Day IRA Rollover Rule

Posted by on Apr 6, 2017 in 401k, 403b, Boomers. Millenials, Elder Care, family finances, financial planning, Fixed Income Investing, Investing, IRA, social security, tax returns, taxes, TSA | 0 comments

Will it apply to your retirement savings distribution?   Provided by Frederick Saide, Ph.D.   If you receive a distribution from your IRA or workplace retirement plan, what will you do with it? You will probably want to arrange an IRA rollover – a common and useful financial move designed to take these invested assets from one retirement account to another, without tax consequences. The I.R.S. may give you just 60 days to do it, however. The clock starts ticking on the day you receive the distribution. If assets from your employee retirement plan account or your IRA are paid directly to you, you have 60 calendar days to transfer those funds into an IRA or workplace retirement plan. If you fail to do that, the I.R.S. will characterize the entire distribution as taxable income. (It may also tack on a 10% early withdrawal penalty if you take possession of such funds before age 59½.)1   Your goal is to make this indirect rollover by the deadline. It is called an indirect rollover because its mechanics can be a bit involved. If the assets are coming out of an employee retirement plan, your employer may withhold 20% of them in accordance with tax laws. Unfortunately, you do not have the option of depositing only 80% of the distribution into an IRA or another employee retirement plan – you must deposit 100% of it by the deadline. You have to come up with the remaining 20%, yourself, from your own savings. The withheld 20% should be returned to you at tax time if the rollover completes smoothly.2 Can you make multiple IRA rollovers using funds from a single IRA? You can, but the I.R.S. says the rollovers must occur at least 12 months apart. Additionally, the I.R.S. prohibits you from making a rollover out of the “new” IRA that receives the transferred assets for a year following that transfer.1 This 12-month limit does not apply to every kind of retirement plan rollover. Trustee-to-trustee transfers, where the investment company (acting as custodian of your IRA or retirement plan account) simply sends a check for the assets to the brokerage firm that will eventually receive them, are exempt from the 60-day deadline. So are rollovers between workplace retirement plans, IRA-to-plan rollovers, and plan-to-IRA rollovers. If you are converting a traditional IRA to a Roth IRA, the 60-day rule is also irrelevant.1,2    Some retirement savers simply opt for a trustee-to-trustee transfer – a direct rollover – rather than an indirect one. A direct rollover of retirement assets is routine, and it can be coordinated with the help of a financial professional. If you do prefer to perform an indirect rollover on your...

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Could Insurance Rescue You in Retirement?

Posted by on Apr 2, 2017 in 401k, 402k, 403b, atuos, bank statements, Boomers. Millenials, cars, college planning, credit card statements, Elder Care, estate planning, family finances, financial planning, Fixed Income Investing, insurance, Investing, IRA, Medicaid Planning, Medicare Planning, Retirement, retirement planning, sales, social security, tax returns, taxes, TSA, Uncategorized | 0 comments

Certain kinds of coverage may help to sustain you financially in an emergency.   Provided by Frederick Saide, Ph.D.   You plan for retirement with expectations in mind. You hope to enjoy a certain quality of life, with sufficient income resulting from smart financial choices. Ideally, your future unfolds as planned. What if the unexpected happens? Will you have the right insurance in place to deal with it?   Insurance matters more in retirement planning than you may think. It is seldom “top of mind” in retirement planning conversations, but the right coverage could help you maintain some financial equilibrium in the face of sudden money pressures.   A life insurance payout could provide income for a surviving spouse. Thanks to late-night TV commercials marketing small funeral insurance policies, many retirees associate life insurance benefits with paying off burial costs. Benefits from larger policies can potentially accomplish much more. Suppose a 75-year-old widow receives a $500,000 death benefit from a policy purchased by her late spouse. An income stream could be arranged from that death benefit, with the widow receiving $20,000 annually from that lump sum (or more) into her nineties. The payout could also be invested.       Liability insurance could help you out in retirement. As an example, say you are one of three drivers involved in a multi-car accident that leaves a teenager with a disability. You are the only driver cited for a traffic violation, and you happen to be in your seventies. You could now be a target for “predators and creditors.” Say you have some neighbors over for a barbecue, and one of them stumbles on your patio and breaks an arm or a hip; a lawsuit may be next. Few retirees think about or carry umbrella liability policies, but more may want to consider them.   What if you or your spouse needs long-term care? Genworth’s 2016 Cost of Care Survey says that the median cost of a semi-private nursing home room was $6,844 last year. How many years of such care would you be willing to pay for out of your savings? True, long-term care insurance has grown costlier. True, some people may never need it. Even so, three or four years of such care – for you, your spouse, or your elderly parents – might draw down your retirement savings more quickly than you would imagine. Think of how large those costs might be ten or twenty years from now. Long-term care coverage may end up being worth every penny.1   Insuring yourself against the above possibilities is only prudent. With such coverage in place, you may go a long way toward insuring the quality of your retirement as well....

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