Tag Archives: social security benefits

The Billy Joel Social Security Benefit

Billy Joel returns to SiriusXM Canada

Here’s something that you may not know.  Billy Joel, also known as the Piano Man, has had numerous wives and two children.  His latest wife was 33 and Billy Joel was 66 when they had a daughter.  This made the daughter, named Della Rose, eligible for Social Security benefits.

From the Social Security website:

When you qualify for Social Security retirement benefits, your children may also qualify to receive benefits on your record. Your eligible child can be your biological child, adopted child or stepchild. A dependent grandchild may also qualify.

To receive benefits, the child must:

  • be unmarried; and
  • be under age 18; or
  • be 18-19 years old and a full-time student (no higher than grade 12); or
  • be 18 or older and disabled from a disability that started before age 22.

Normally, benefits stop when children reach age 18 unless they are disabled. However, if the child is still a full-time student at a secondary (or elementary) school at age 18, benefits will continue until the child graduates or until two months after the child becomes age 19, whichever is first.

Benefits paid for your child will not decrease your retirement benefit. In fact, the value of the benefits they may receive, added to your own, may help you decide if taking your benefits sooner may be more advantageous.

Note that the child does not have to be your biological offspring.  An adopted child, a stepchild or dependent grandchild is also eligible.

There are limits to what Social Security pays.

The total varies, but generally the total amount you and your family can receive is about 150 to 180 percent of your full retirement benefit.

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Making Smart Decisions About Social Security

Social Security CardDeciding when to start collecting your Social Security retirement benefits is an important choice that will impact the income you receive for the rest of your life.  The decision can also affect the income and lifestyle of a surviving spouse.

When it comes to Social Security, you may be wondering whether you should: 

  • Start collecting early but receive a reduced benefit?
  • Wait until Full Retirement Age to start collecting your full benefit?
  • Delay past Full Retirement Age to maximize your benefit?

To help make an informed decision, you’ll want to consider a number of key factors, including your marital status, your health, your plans for retirement and your retirement income sources…just to name few.

Your Full Retirement Age (FRA) is the age at which you qualify for 100% of your Social Security benefits (known as your Primary Insurance Amount).  Your FRA is based on your year of birth.

When you’re ready to start collecting benefits, you should apply for Social Security no more than four months before the date you want your benefits to start.

If you start collecting Social Security benefits and then change your mind about your choice of start date, you may be able to withdraw your claim and re-apply at a future date, provided you do so within 12 months of your original application for benefits.  All benefits (including spousal and dependent benefits) must be repaid and you may only withdraw your application for benefits once in your lifetime.

You generally have three main options when it comes to choosing when to start collecting your benefits—often referred to as your Social Security “filing strategy.”

  • Start collecting early
  • Start collecting at Full Retirement Age
  • Start collecting after Full Retirement Age

Each filing strategy has advantages and disadvantages.

Order our white paper on Social Security claiming strategies by calling our office or going to our website.

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Will Retiring Force Cutbacks in Your Lifestyle?

For most people, retiring means the end of a paycheck.  When you retire, how will your lifestyle be affected?  If you don’t know the answer to that, shouldn’t you find out before it’s too late?  There are so many things to take into consideration.

Retirement age – Modern retirees face lots of choices that their parents did not have.  There is no longer a mandatory retirement age, so the question “when should I retire” gets more complicated.

Social Security – The age at which you apply for Social Security benefits has a big effect on your retirement income.  Apply early and you reduce your monthly benefits by 25% – 30%, depending on your age.  Wait until you’re 70 and you increase your monthly benefit by up to 32% (8% per year), depending on your age.  If you are married, the decisions get even more complicated.

Pension – If you are entitled to a pension, the amounts you receive usually depend on your length of service.  The formula used to calculate the pension benefit can get quite complicated.  Those who work for employers whose finances are questionable may want to consider whether they will get the benefits they are promised.  If you are married, you will need to decide how much of your pension will go to your spouse if you die first.

Second career – More and more people go back to work after retirement.  Quite a few people don’t want to stop working, but do something different.  Others use their skills to become consultants, or turn a hobby into a business.  A second career makes a big difference in your retirement lifestyle and how much income you will have in retirement.

Investment accounts – These are the funds you have saved for retirement: in IRAs, 401(k)s, 403(b)s, 457s, and individual accounts.  These funds are under your control.  Most retirees use them to supplement Social Security and pension income.  They are the key to determining how well people live in retirement.

To find out whether you will be forced to cut back after you retire, you need a plan that allows you to take all these factors into consideration.  A plan allows you to make mid-course corrections before it’s too late.

If you have questions, contact us.

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Social Security Benefit Changes

Changes in the Social Security law was signed into law November 2, 2015.  These changes affect certain strategies that were used to increase basic Social Security income for many people.

There are two major changes to Social Security benefits under the new law. The first is your ability to file a “restricted application,” which is now limited to filers who were at least age 62 at the end of 2015 (born in 1953 or earlier). A restricted application allows you to first claim benefits from a spouse for a time (typically between full retirement age and age 70) and delay your own retirement benefit until age 70 to earn delayed retirement credits of 8% per year. But for folks born after 1953, this option no longer exists.

If you were born in 1953 or before, to submit a restricted application you must be at least full retirement age. That would be age 66 for anyone born between 1943 and 1954.

The second major change affects those who planned to use a “file and suspend” strategy. This tactic has allowed workers, once they have attained full retirement age, to file for benefits but not actually receive anything. The result before now has been this: 1) The worker’s own benefits have continued to earn delayed retirement credits of 8% per year until the worker was age 70, and 2) Because the worker’s benefit record had been activated, any beneficiaries eligible to claim benefits (i.e., spousal) could have begun collecting those dollars.

The new law changes all that. Family members (other than divorced spouses) are no longer able to receive benefits based on the earnings of workers with a suspended benefit. This part of the law takes effect April 30, 2016. The good news is that anyone who was already taking advantage of this strategy before the deadline will not be affected. 

Who is affected?

For questions, contact us.

 

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A Client Asks: What’s the Benefit of Inflation?

One of our retired clients sent us a question recently.

“I can’t understand the FED condoning and promoting any inflation rate. To me inflation means that the value of money is simply depreciating at the inflation rate. Further, any investment paying less than the inflation rate is losing money. A quick review of CD rates and government bonds show it is a rare one that even approaches the promoted 2% rate. It seems to me to be a de-facto admission of wanting to screw conservative investors and forcing them into riskier investments… Where is there any benefit to the financial well-being of the ordinary citizens?”

I suspect that there are a lot of people who feel the same way. It’s a good question. Who wants ever rising prices?

Here’s how I addressed his question.

Let me answer your inflation question first. My personal opinion is that 0% inflation is ideal, and I suspect that you agree. However, lots of people see “modest” rates of inflation (say 2%) as healthy because is indicated a growing economy. Here’s a quote from an article you may want to read:

Rising prices reflect a growing economy. Prices typically rise for one of two reasons: Either there’s a sudden shortage of supply, or demand goes up. Supply shocks—like a disruption in the flow of oil from Libya—are usually bad news, because prices rise with no corresponding increase in economic activity. That’s like a tax that takes money out of people’s pockets without providing any benefit in return. But when prices rise because demand increases, that means consumers are spending more money, economic activity is picking up, and hiring is likely to increase.

A case can be made that in a dynamic economy you can never get perfect stability (e.g. perfectly stable prices) so it’s better for there to be more demand than supply – driving prices up – rather than less demand than supply – causing prices to fall (deflation). Of course we have to realize that “prices” here includes the price of labor as well as goods and services. That’s why people can command raises in a growing economy – because employers have to bid for a limited supply of labor. On the other hand wages are stagnant or even decline when there are more people than jobs.

But for retirees on a fixed income inflation is mostly a negative. Your pension is fixed. Social Security is indexed for inflation but those official inflation numbers don’t take food and fuel costs into consideration and those have been going up faster than the “official” rate. The stock market also benefits from modest inflation.

Which gets us to the Federal Reserve which has kept interest rates near zero for quite a while. It’s doing this to encourage business borrowing which is supposed to lead to economic expansion but the actual effect has been muted. That’s because other government policies have not been helpful to private enterprise. In effect you have seen the results of two government policies in conflict. It’s really a testimony to the resilience of private industry that the economy is doing as well as it is.

The effect on conservative investors (the ones who prefer CDs or government bonds to stocks) has been bad. It’s absolutely true that after inflation and taxes the saver is losing purchasing power in today’s interest rate environment. The FED is not doing this to hurt conservative investors but that’s been the effect. The artificially low rates will not last forever and the Fed has indicated they want to raise rates. They key question is when, and by how much.

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Delaying Medicare Part B

When you turn 65 you become eligible for Medicare and are asked to sign up. Medicare has a number of parts.

Medicare Part A primarily covers hospital care as well as skilled nursing facilities, nursing homes, hospice and some other services. There is no cost to the individual for Part A.

Medicare Part B primarily covers services (like lab tests, surgeries, and doctor visits) and supplies (like wheelchairs and walkers) to treat a disease or condition. There is a monthly charge for Part B.

If people choose to continue working after age 65 and if they are covered by a group health plan they may not sign up for Part B.

If they do not sign up for Part B at age a 65, they may be subject to a “late enrollment penalty.” According to Medicare.gov

Your monthly premium for Part B may go up 10% for each full 12-month period that you could have had Part B, but didn’t sign up for it.”

However, this penalty does not apply of you can prove that you had medical insurance coverage for the time you declined the Part B.

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Survivors’ Income

We are frequently asked to help people whose spouses have died to help settle the estate and plan for life as widows or widowers.  One of the big questions that they face is determining what it costs to live as a single instead of a couple and where the income is going to come from.

We wrote a book specifically designed to help answer those questions.

Below is from page 53 of BEFORE I GO – WORKBOOK

Keep in mind that it’s a lot easier to determine the answer to many of these questions ahead of time, while both husband and wife are still living, and access to information about survivors’ pension benefits, social security income and annuity income are easy to determine.

For a copy of BEFORE I GO and BEFORE I GO – WORKBOOK contact us or order it from Amazon.com

My Survivors’ Income:

“GUARANTEED” INCOME
Social Security:         $__________________
Pension income #1: $__________________ Source:_____________________
Pension income #2: $__________________ Source:_____________________
Pension income #3: $__________________ Source:_____________________
Annuity #1:                $__________________ Source:_____________________
Annuity #2:               $__________________ Source:_____________________
Other Guaranteed:   $__________________ Source:_____________________
SUBTOTAL GUARANTEED: $__________________

PORTFOLIO INCOME:
Interest Income:       $__________________ Source:_____________________
Dividend Income:    $__________________ Source:_____________________
Rental Income:         $__________________ Source:_____________________
Business Income:     $__________________ Source:_____________________
Other:                         $__________________ Source:_____________________
Other:                         $__________________ Source:_____________________
SUBTOTAL PORTFOLIO: $__________________
GRAND TOTAL:                   $__________________

 

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The retirement savings crisis

Banker’s Life commissioned a survey that’s troubling for baby boomers, people aged 50 to 68. The survey says that middle income boomers have saved too little. Only 13 percent have investable assets of $500,000 or more. More than half (54 percent) have less than $100,000, and one-third (34 percent) have assets of less than $25,000.

What does this mean for boomers? Many will have only Social Security income after retirement. Some will also have pensions. And over half expect to continue working after age 65.

This should be a wake-up call for people younger than baby boomers. When boomers entered the work force many of the big companies offered pension plans. That number is fast dwindling. So younger workers will be even more dependent that their elders on their own savings.

Social security is also a problem. The number of workers contributing to the system has been declining relative to those receiving benefits. At some point in the future, benefits will have to be cut or taxes will have to go up to levels that will be politically unsustainable.

The lesson for the children and grandchildren of the baby boomers is to save more and invest wisely. And begin now.

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6 things the middle class can’t afford anymore

A recent article in USA Today discussed the “middle class” and the ways it has been pinched financially. The middle class was defined as

…those [with a] reasonable amount of discretionary income. Middle-class people do not live from hand to mouth, job to job, season to season, as the poor do…. Perhaps, anyone who earns between the 25th percentile and 75th percentile is a member of the middle class …. Today’s bourgeoisie is composed of laborers and skilled workers, white collar and blue collar workers, many of whom face financial challenges.

So what are the things that the middle class has a problem paying for?

Vacations
At least not without saving on other things like dining out, movies or purchasing big ticket items like TV sets.

New cars
Middle class people buy new cars but it’s usually not a wise decision. “Just because you can manage the monthly payment doesn’t mean you should let a $30,000 or $40,000 ride gobble up all such a huge share of your paycheck.”

To pay off debt
According to one source the average family has at least three credit cards and owes them over $15,000. In addition there are student loans, mortgages, car loans and medical debt.

“In 2013, consumer debt was $9,800 per person, which was 13.4% of the average household income of $72,600.”

Emergency savings
Do you have an emergency fund in case something breaks or you lose your job? Having six months of earnings in an emergency fund is considered a minimal requirement. A Bankrate survey found that only one in four households had this amount set aside.

Retirement savings
Saving for retirement is one of those things that people find easy to put off. If you do, unless you are fortunate enough to have a pension, your income will be what Social Security provides or what you can earn as you pass the traditional retirement age. It’s estimated the one in five people near 65 have not saved anything for retirement, and many more worry that they have not saved enough.

Medical and Dental care
Medical care is becoming increasingly expensive, insurance premiums are going up and so are the deductibles. Given the cost, the government is seeking to reduce the amount it allows the doctor and hospital to charge. There are also changes in the kinds of procedures that are going to be covered by programs such as Medicare. An increasing number of people are simply forgoing medical and dental procedures to save on costs.

Many people have financial issues. We can’t help with all of them, but if you have a financial issue that is troubling you, give us a call to see if we can help.

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2015 Guide to Social Security

For many people, the decision they make about Social Security is the most important decision they will make about retirement.

Get the new 2015 Guide to Social Security if you are making retirement plans.

  • Who is covered?
  • Who Receives Benefits?
  • What are the Benefits?
  • Early Retirement, Full Retirement, Delayed Retirement.
  • And much, much more.

This is a special discount offer.  The first 25 replies will receive this booklet for $5.  The regular price is $7.99.

To order your copy:

 

 

 

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