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Is waiting to get your Social Security payments a good idea?

Understanding the basics of Social Security, even if your retirement is still decades away, is extremely vital. You simply must have a good understanding of not just when you can take out your funds but, more importantly, when you should.  If you’re already in the process of planning for retirement (and you should be, no matter how old you are) knowing this information can help you to determine how much money you actually need to  save.

In its simplest terms, during your working years you paid into Social Security through taxes, and built up benefits that you will receive once you reach retirement. While this may seem simple, effective that retirement age varies based on a number of things, including your birthday. Also, the amount of benefits that you get either increases or decreases based on when you actually start receiving them.

Specifically, each month past the specific retirement date that is assigned to you based on your birthday, the funds in your Social Security will grow, until you reach the age of 70.

Calculating your lifetime earnings

When Social Security is determining how much your monthly benefit checks will be, the first thing they consider is what they call your “lifetime earnings”. They also take into account your average life expectancy and the actual date that you begin to collect. Even though how long you live affects the best time for you to start collecting, since it can’t be predicted with certainty it’s very difficult to say.

Keep in mind is that, for every year that you wait until you reach the age of 70, your retirement monies from Social Security will increase by 8%.

What are the tax implications?

Another reason to delay getting your Social Security benefits is to avoid taxation. Some people that withdraw Social Security right away also withdraw money from their IRAs, 401(k)s and 403(b)s in order to have enough to cover their monthly expenses. These withdrawals however can actually push you into a higher tax bracket and cause more of your Social Security benefits to be taxed.

What are the drawbacks of waiting?

If you have a family history of early death, or perhaps are suffering from a disease process that may end your life sooner, then there’s really more of an incentive to take out your Social Security as fast as you can. You may also need the money to pay for basic needs like housing and food, in which case taking it out only makes sense.

The fact is that the decision rests on your shoulders as to when is the best time to start taking your Social Security payments but, whenever possible, it’s best to leave them alone as long as possible in order to build your funds higher.

Of course one of the smartest things that you can do is talk to a financial expert who has your best interests in mind and find out what their opinion happens to be. Everyone has different situations and circumstances and these will definitely play a role in whether to take your Social Security funds out quickly or leave them in longer.

Over 40? Never too Late to Save for Retirement

From a retirement planning perspective, the decade between your 40th and 50th birthday is a time when, if you haven’t started saving for retirement, you definitely should.  Of course anyone who started putting money away before then is going to be better positioned financially than you are to meet their long-term retirement goals, but the good news is that there’s still plenty of time to shore up your savings even if you’ve been hitting the “snooze button” on your retirement plans for the last 20-odd years.

Gregory Olsen, a certified financial planner with Lenox advisors, says that “for a lot of people, they celebrate their 40th birthday in earnest”. He also says that, luckily, most 40-somethings have the maturity and insight to be able to better project their future income needs and accurately predict what they’re going to need in order to keep up their lifestyle once they retire.

That actual numerical figure will differ for everyone, and depends on exactly when you plan to retire, what you are life expectancy is and whether you envision a “low-budget” retirement or have plans to take trips to Europe and eat dinner at the golf club every night.

On the Social Security Administration’s website you can find a Life Expectancy Calculator that will offer you general guidelines on how long you’ll possibly live, but the results you get from that calculator will need to be adjusted to reflect not only your present health but also any health risks or concerns that might be familial.

Once you start to actually estimate your expenses in retirement, you’ll need to remember to factor in the basics like food, housing, transportation and of course healthcare. While your home may be paid off by the time you retire, healthcare costs and other expenses won’t be, and may actually become higher the older you get.

Determining how much you’ll get from guaranteed sources of income, including Social Security, pensions and, for a few lucky people, trust funds, is your next step. Using the Social Security administration’s website you can determine what your future benefits are going to be quite easily, but the others may need more work.

Once you’ve determined the difference between what you’ll likely spend and what you have in guaranteed income, you’ll have a number that you can use to determine how much your savings will need to be in order to maintain your current standard of living. Most financial planners will tell you that you should save at least 15% of your income every year as well as maxing out any tax-deferred retirement savings plans that you have like IRAs, 401(k)s and Roth IRAs as well.

One of the best ways to improve your financial prospects and be able to live longer on your retirement savings is to stay as healthy as possible, including eating well and exercising regularly. If you smoke you should quit and if you’re overweight you should definitely consider dieting, as one of the biggest retirement expenses is the cost of healthcare.

Finally, starting to save right now is vitally important as you got a lot of catching up to do. It will be impossible for enough away to retire comfortably, but you’re definitely going to need to put a lot of thought and work into it and stash as much money away as possible.

Guard Your Retirement Income with these Comprehensive Tips

One sad fact that all people nearing or already in retirement have to deal with today is that income during retirement is lower than it’s ever been in  the last 60 years.  What does this mean for people who are nearing retirement? It means that saving as much as possible (in all areas of their financial picture) is vital as well as having a plan to achieve realistic rates of return on all of their investments once they retire.

A reasonable rate of return is between 3 and 6% and, depending on whether you’d like to use everything that you have during retirement or pass some of that money on to your heirs, the steps below will help you to plan accordingly. Enjoy.

  • Focus on eliminating debt before you retire. In many cases this means living below your means, paying down credit cards and other floating-rate debt and paying off your mortgage. Frankly, if you can give up a little in the last few years before you retire, you’ll be able to afford a lot more during retirement.
  • On debt that you can’t pay off, fix the rate. Mortgage rates for example, while they have risen a little bit lately, are still very low. In many cases it makes sense to actually raise your monthly payment if that’s what it takes to secure a fixed rate.
  • Use Life Insurance to insure your earnings.  This is especially vital if you already know that you’re going to need more money in order to be able to sustain the lifestyle that you want during retirement. Using life insurance to ensure those earnings during the last few years that you work is a great idea.
  • Assess your Insurance Coverage. What you want to do here is to make sure that you’re not over insured with your life insurance and under insured on long-term healthcare. Also look into “co-insurance”, an insurance policy that, for example, will pay 30% to 70% of future costs rather than 100%  but will more than likely be a lot less expensive.  This is a good option if you have enough savings to cover some healthcare costs should you need them.
  • Fully analyze all of your income  streams. Social Security, your pension, your income from any real estate as well as from investments, interest and savings plans  should all be analyzed so that you know exactly what you have and can better plan for what you will need.
  • Don’t forget to consider your taxes. Social Security and real estate have a number of tax ramifications but tapping principle from a tax account that has no realized capital will cost you nothing. IRAs and other types of retirement distribution are generally taxed as ordinary income. Knowing how and when all of these different income streams are taxed is vital.
  • Convert your assets to liquid assets. Even if you have a substantial net worth you may have income trouble if you don’t have enough liquidity, especially if interest rates begin to rise.
  • Don’t be too keen on chasing yield. Hi grade municipal bonds, AAA rated corporate bonds and other government-backed bonds in the bond market can be susceptible to major corrections. “Chasing their yields” can be a bad idea since they’re sensitive to interest rates and, as rates rise, their value will go down.
  • Don’t be afraid to spend your savings. If you’ve accumulated enough savings and you have other income streams that will continue to bring in money during retirement, spending that saved money moderately is not a bad idea.

Hopefully these tips have been valuable and you’ll be able to use some of them to keep more of your hard-earned money where it belongs, in your bank account. If you have questions about retirement, individual retirement accounts or financial questions in general, please let us know and will answer your questions, give you the advice you need and bring you solutions that can help.

Best Tips for Increasing your Social Security Checks Part 2

Hello and welcome back for Part 2 of our 2 part blog series on the best tips for increasing your Social Security payments. In Part 1 we went over quite a few different tips that you can use to make sure that your Social Security check will be as high as possible and that you get the most benefit out of all those years you put in the workforce. Part 2 is more of the same and should help you to maximize your checks and minimize any chance that Uncle Sam takes too much. Enjoy.

Just like practically any income that you’ll make as an American today, your Social Security checks are taxable if you make too much income during your retirement years. For example if you’re an individual and you make between $25,000 and $34,000 a year in adjusted gross income, you will be subject to paying taxes on up to 50% of your Social Security benefits. (For couples the number is $32,000-$44,000.) If you make over $34,000 as an individual or, as a couple, $44,000, up to 85% of your check may become taxable. The point here is to make sure that, if you want to pay less taxes on your Social Security checks, you don’t earn too much during your retirement years.  Another option is to take the savings from social security and put them into a tax free savings account.  Let your social security earnings grow tax free, and you will have the ability to withdraw and deposit as you please.

Since widows and widowers are eligible for survivor benefits, waiting until you reach the age of 70 to start collecting your Social Security checks if you are the higher earner is a good idea. Doing this will help you to maximize any benefits that you are spouse will receive from Social Security after you pass on.

If you’d like to save on trips to the bank and avoid processing fees, signing up for direct deposit is your best bet. Once you do your Social Security payments will be deposited directly into your bank account or your credit union account. Keep in mind that Social Security no longer sends out paper checks through the mail. Instead, direct deposit is now needed or you can also get a Direct Express Debit MasterCard and have your funds loaded onto that every month.

On May 1 of 2013 the Social Security Administration started offering online statements to people wanting to keep track of their Social Security statement. Doing just that is quite important, especially if you want to make sure that the Social Security taxes  you paid into the program during your working life were recorded correctly. If you have your current tax information handy you can surf to the Social Security website, find your online statement and compare the two, making sure that there aren’t any errors or omissions. This is one of the best ways to make sure that you get complete credit for all of the taxes you paid into Social Security while you were working.

If you are part of a married couple who both worked and both of you have reached your full retirement age, it’s possible that you will be able to claim spousal benefits first and then, once you reach 70, switch back to your own record and increase the amount of your checks. For couples who wish to do this and wait until at least one of them reaches 70, it’s the best way to get some Social Security benefits between the time they turn 66 and then 70 years old while still maximizing the benefits of at one.

In the last 2 to 3 decades people have been waiting longer and longer to start a family and, if you find that you’re claiming Social Security while you still have dependent children living at home, it’s possible that you may be able to receive additional payments for those children. In order to do this your dependent child must be 19 years of age or younger and unmarried or, and lieu of those two, somehow disabled. Any biological children that you have, stepchildren or adopted children who fits that criteria will be qualified to get monthly payments of up to one half of whatever your full retirement benefits are (with a number of limits depending on the situation).

Lastly, even if you didn’t make it to retirement as a married person because of a divorce, if you were married for 10 years or more you can actually claim some Social Security benefits based on your ex-spouses work record. This certainly may not enamor you to them but hey, you’re already divorced so what the heck.

We hope that this 2 Part series was not only informative but give you some valuable information and insight into how to maximize the amount of money that you get through Social Security. If you have any questions about planning for your retirement or financial planning in general, please let us know and we’ll get back to you with advice, answers and solutions.

Best Tips for Increasing your Social Security Checks Part 1

Okay, let’s all take a minute and honestly look at where Social Security is going. Chances are that, if you are in your 30s or 40s, it might not even be around by the time you retire. Don’t get us wrong, we certainly hope that it is, but the fact is that it’s getting decimated every year and our lovely federal government is doing to decimating. Hopefully this will change but, frankly, not going to hold our collective breath.

Now that we’ve got that little bit of negativity out of the way we like to share with you some of the best ways that we know of to increase your retirement payments from Social Security as best as you can. For anyone that’s going to be retiring in the next few years, these tips and advice may well increase your checks by a substantial amount. Enjoy.

First a little history. The Social Security program continues to be one of the biggest sources of retirement income for many Americans and it recently turned 76 years old. Depending on what you made throughout your career and when you decide to start receiving your Social Security checks, the amount of money that you actually receive may vary greatly. There’s also a chance that you may be able to actually get additional Social Security payments for your spouse, any dependent children that you have and, after you pass on, you’re surviving relatives.

One of the best ways to maximize the amount of money you receive from Social Security is to work for at least 35 years, including making sure that you file taxes during those years as well. (If you don’t file taxes the feds consider that you didn’t work.) The reason that this is so important is that for any years that you haven’t worked the federal government will calculate zero dollars into the equation, something that will lower your payouts substantially.

Another excellent way to increase your payments is to substitute or replace your zero years or lower earning years with higher earning years that you have had later in your career, according to Jim Blankenship, the author of A Social Security Owner’s Manual and a certified financial planner for Blankenship Financial Planning in the city of New Berlin, Illinois.

Earning more money during your working life will not only increase the spending power that you have now but will also increase the amount of your payments from Social Security once you hit retirement. In many cases that might mean switching jobs to get better pay or taking on more than one job at a time. The fact is, your benefits will increase for any year where you have more income than a year prior. The more you make during your working years the more you will receive during your retirement years.

Waiting until you reach your full retirement age is another brilliant way to increase your Social Security payments. For the average baby boomer the magic number is 66 and, for people born in 1960 or later, the number is 67. The reason that this is so important is simply that, if you sign up to start receiving benefits before you hit your full retirement age, the amount of money you receive from Social Security will be reduced permanently from then on. What this means is that claiming Social Security right away after you retire, if you haven’t reached your full retirement age, is a bad idea. A better one would be to make sure you have enough money reserves to get by until you reach 66 or 67 so that you don’t need to claim your Social Security benefits right away and thus maximize your payments.

Waiting until you reach the age of 70 to start collecting your Social Security payments is even better as, between your full retirement age and 70, your Social Security payments will increase by 8 percent per year. That’s a very high rate of return that most people will not be able to find with any other kind of investment. After age 70 however there are no additional benefits and so waiting longer doesn’t make any sense, at least financially.

You can also claim spousal payments based on the work record of whichever spouse has been the higher earner. You can do this based on your own work record or up to 50% of whichever of you had higher earnings, using whichever number is the highest. Keep in mind that spousal benefits will be reduced if you start claiming them before you reach your full retirement age.

Hopefully these excellent tips have already given you some valuable information on how to increase your Social Security checks. In Part 2 we’re going to be looking at some more strategies that you can use do the same so please make sure to come back and join us for that very soon. In the meantime, if you have any questions, comments or problems that need an answer, let us know and will get back to you with helpful advice ASAP.

The Basics of a 401K

If you have ever taken any sort of investment class you have heard about the power of compounding. Compounding allows a small amount of money, invested over a long period of time, to become a much larger amount of money, building wealth for the person wise enough to invest their money long-term. 

A 401(k) retirement plan is a special type of pension plan that, like many long-term investments, can pay-off handsomely down the road.  The funds that a person places in their 401(k) account can be used to invest in stocks, bonds and mutual funds as well as many other types of assets and, since they are funded by pre-tax payroll deductions, are not taxed until they are withdrawn. This allows them to take advantage of the fact that they aren’t dwindled by capital gains and dividends taxes as well as interest taxes and will make the investor much more money over the lifetime of the 401(k)

Indeed there are 5 benefits that make investing in a 401(K) a principally attractive option for investors.

  1. The tax advantage as mentioned above, means that the money invested in the 401(k) won’t be taxed until far in the future when it’s finally withdrawn to fund someone’s retirement. There are no taxes on capital gains, dividends or interest until that day, allowing the money invested to take full advantage of compounding interest.
  2. In order to attract and retain talented employees many companies offer employer match programs for 401(k)s, matching funds up to a certain percentage of what is deposited every year. This can add a substantial amount to the 401(k) over the long-term.
  3. 401(k) programs offer customization and flexibility that many other types of investment just can’t match.  This gives the person who owns the 401(k) a lot of opportunities to invest that otherwise would be closed to them.
  4. The fact that a 401(k) is portable, meaning that it can be taken from job to job as you move up or around in your industry, is very attractive.  Unlike a pension that stops if you stop working for a particular company a 401(k) can be take with you wherever you go.
  5. Being able to withdraw money for hardships and other loans is also a feature that makes 401(k) plans a favorite as other plans can sometimes force you to pay significant early withdrawal fees for taking your money out before they mature.

All told, 401(k) retirement plans are one of the best, safest and most flexible types of retirement plans that you can invest in, and can be very lucrative due to the power of compound interest.  If you have the opportunity (and the brains) they are definitely an option that you should take advantage of if you’d like to retire in style.

Retire Rich – Let Everyone Else Work

According to several recent surveys, 40% of people plan to delay retirement. Besides a stock market that would make an avid roller coaster rider turn white, lack of savings and poor investments are the primary culprits driving this statistic.

Delayed retirement, or retirement on a cat food diet, doesn’t have to include you. According to, with a few steps, retirement glory days can be had by someone as simple as myself.
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Retirement for Small Biz Owners

Retirement plans for small business owners include Koegh, SEP-IRA, and a Simple IRA. These plans are offshoots of their typical 401(k) brethren. But have you heard of a cash-balance retirement plan? BankRate peeked inside these not so new retirement vehicles.

A cash-balance plan is a hybrid of a traditional pension plan and a defined contribution plan like a 401(k). The account grows annually in two ways: first, a contribution, and second, an interest credit, which is guaranteed rather than being dependent on the plan’s investment performance.

Unlike traditional retirement plans, the cash-balance plans are more complicated to setup and maintain. And, as a result, they cost more to jumpstart.

This is not do-it-yourself retirement planning. Cash-balance plans are complicated and expensive to set up and maintain. You really need expert help. Even the accountant who handles your routine tax filings may not be able to adequately puzzle through one of these.

And what do you get for the expense of setting up one of these retirement account?

The result is that a high-earning individual, member of a small partnership, or a husband-and-wife team can create a cash-balance plan that lets them reach a predetermined retirement savings goal in a relatively few years, sheltering everything they save and earn in the plan from current taxes. The concept isn’t new, but it hasn’t been really clear how the IRS viewed these plans until the last year or two.

But, you may want to stick with the less complicated, easier to setup plans described earlier.

How much do you have to earn to make a cash-balance plan make sense? $250,000 annually is probably the minimum — either as a partner or a solo practitioner, or possibly, as a husband-and-wife team in the same or related businesses.


What is Retirement anyway?

A few weeks ago a friend came over and prepared a financial analysis statement for my wife and me. One question that stumped me—surprisingly—was, “At what age do you plan to retire?”

Retire? Retire? What does that mean? After chuckling, my friend asked, “At what age do you want to have enough money to not have to earn money to live on?” Of course, the basic assumption is to amass a certain amount of cash by a certain age. Work work work. Save save save.

I still didn’t get it. His question sounded more like, “How long do you think you’ll need to work in your crappy job until you can do the stuff you really want to do?”
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I Wanna Retire Rich

When someone says “rich”, what number hits your mind? And by rich I mean having enough money not to have to work unless you choose to do so, presumably because you actually love what you’re doing. I’ve always thought one million as a lot of us do. But now that doesn’t seem quite so, what’s the word…lasting? asked the question, “how rich is rich?” and came up with some very interesting answers.

First, rich must be defined. What do we really mean when rich comes out of our mouths?

Wealth is a subjective concept, but one thing is universal in most definitions: being able to live a comfortable life without having to work.

But a life of comfort is certainly subjective. If I didn’t have a mortgage, I know for certain I could live on $2,500 per month. That’s me, my wife, and our three kids. How do I know? I’ve done the math. That would give us plenty to live on and save. But that doesn’t mean I’m anywhere close to others:

“I’d like to have enough money so my family and I wouldn’t have to work anymore or worry about the necessities, and maybe travel a bit,” said Deborah Veale, a Southern California resident visiting New York City.

So, what’s it going to take to not “have to work anymore or worry about necessities”?

Veale said she’d need about $10 million to consider herself set.

Really? Does this shock anyone else as much as it did me? $10 million? I can’t begin to wrap my mind around that figure. If you thought everyone’s definition of comfort was the same, that last figure should make you doubt at least a little. Luckily, a few other respondents came in lower.

One woman from Seattle put it at a “couple thousand dollars a month.”

Experts (always nameless of course) came up with a range of $2 million to $12 million in savings to be able to retire in the comfort zone. Why the disparity? It’s a simple equation of geography.

On the high end of that range, a single person living in an expensive part of the country (say, New York City), wanting to retire at 35 would need at least $300,000 a year to feel rich, according to Steven Kaye, president of Watchung, N.J.-based wealth management firm American Economic Planning Group.

This would give said person a twelve grand monthly spending allowance after paying for a modest apartment in Manhattan. I’m not knocking the twelve grand. I’m simply pointing out that what constitutes comfortable for one person might be extraordinarily comfortable for another.

What do you think? Does your “comfortable” number continue to rise? Think about your retirement in terms of geography. You may need less to retire on than you think if you’re willing to move to a lower cost of living area.

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