full retirement age http://www.wisebread.com/taxonomy/term/22899/all en-US Three of the Toughest Decisions You'll Face in Retirement http://www.wisebread.com/three-of-the-toughest-decisions-youll-face-in-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/three-of-the-toughest-decisions-youll-face-in-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/senior_couple_thave_a_breakfast_at_cafe.jpg" alt="Senior couple thave a breakfast at cafe" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>After spending a lifetime saving for retirement, you might think (or hope) the tough financial work is over. But in reality, retirement will bring several <em>new</em> financial challenges. Here are three of the key questions you'll need to address along with some recommendations.</p> <h2>1. When should I take Social Security?</h2> <p>There are many options here, especially when coordinating benefits with a spouse. Understanding the rules around three important age milestones can help you think through the best choice. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits?ref=seealso" target="_blank">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a>)</p> <h3>Age 62</h3> <p>This is when you first become eligible to receive Social Security benefits. If you opt to take them this early, you'll get the smallest monthly benefit. While it's true that you may end up collecting benefits for the longest period of time by starting at age 62, if you can afford to do so, it's generally best to wait at least until your full retirement age (FRA). At that point, your monthly benefit will increase by 30 percent.</p> <p>If you're planning to continue working to some degree in your early to mid 60s, this may be another reason to wait. Claiming Social Security benefits before your FRA will trigger an &quot;earnings test.&quot; After you earn a certain amount (about $17,000 in 2017), for every two dollars of income, your Social Security benefits will be reduced by one dollar.</p> <p>You can learn more about the <a href="https://www.ssa.gov/oact/cola/rtea.html" target="_blank">earnings test</a> on the Social Security Administration's website.</p> <h3>Full retirement age</h3> <p>If you were born in 1960 or later, your <a href="https://www.ssa.gov/planners/retire/retirechart.html" target="_blank">full retirement age is 67</a>. That's the age at which you become eligible to receive what the Social Security Administration deems to be your &quot;full&quot; benefit.</p> <p>An important consideration related to your FRA has to do with spousal benefits. If you earned significantly more than your spouse over your careers, his or her spousal benefit (half your full retirement age benefit) may be larger than his or her own benefit. While your spouse could file for spousal benefits as early as age 62, he or she will get the maximum amount only if you <em>both</em> wait until your full retirement ages before claiming benefits.</p> <h3>Age 70</h3> <p>While it may sound as if full retirement age is when you'll qualify for your maximum benefit, waiting until age 70 will actually give you more. When I checked my benefits on the Social Security Administration website, I found that waiting until age 70 would boost my monthly benefit amount by nearly <em>28 percent </em>versus claiming it at my FRA of 67.</p> <p>In addition to qualifying for this higher monthly benefit, another important reason to consider waiting this long has to do with the potential impact on your spouse. Let's say you're the husband and have been the higher earner. When you pass away, your wife will be able to trade her benefit for your larger benefit, which she will receive for the rest of her life. (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p> <h2>2. How much of my nest egg can I withdraw?</h2> <p>A long-standing rule of thumb is that you can safely withdraw 4 percent of your nest egg each year, bumping that amount up by the rate of inflation each year, without having to worry about depleting your savings before you die.</p> <p>However, there are many moving parts to this equation. Your cost of living will probably vary throughout retirement, and so will the stock market's performance.</p> <p>So, instead of adhering to a fixed formula, rerun the numbers each year using what some planners call a <em>dynamic withdrawal strategy</em>: Determine how much to withdraw based on the performance of your portfolio and your spending needs.</p> <h2>3. Which nest egg funds should I tap first?</h2> <p>If you have money in various accounts, such as a taxable account, a tax-deferred account (traditional IRA/401(k)), and a tax-free account (Roth IRA/401(k)), here's a recommended path for greatest tax efficiency.</p> <p>Generally, it's best to use money in your <em>taxable </em>accounts first, which allows funds in tax-advantaged accounts to continue growing on a tax-deferred or tax-free basis.</p> <p>Next, use money from your traditional IRA or 401(k) accounts. In fact, you <em>have to </em>start taking money from these accounts beginning at age 70&frac12;. That's when required minimum distribution (RMD) rules kick in. If you don't withdraw at least a specific minimum amount, you'll owe stiff penalties to the IRS.</p> <p>One factor to keep in mind is that if you have substantial balances in traditional IRA or 401(k) accounts, waiting to tap any of this money until age 70&frac12; may make your RMDs so large that they'll push you into a higher tax bracket. If that's the case, you may want to start taking some withdrawals from these accounts earlier than age 70&frac12;.</p> <p>It's usually best to save your Roth IRA money for last since they are not subject to RMD rules. If you don't need the money, you can let it continue growing tax-free.</p> <h2>Stay in the game</h2> <p>While retirement may be a time when you want to step away from some of the many responsibilities you had during your working years, it's important that you stay proactive with regard to your finances. Making well thought out decisions in the three areas discussed above will go a long way toward helping you enjoy financial peace of mind in your later years.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fthree-of-the-toughest-decisions-youll-face-in-retirement&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FThree%2520of%2520the%2520Toughest%2520Decisions%2520You%2527ll%2520Face%2520in%2520Retirement.jpg&amp;description=Three%20of%20the%20Toughest%20Decisions%20You'll%20Face%20in%20Retirement"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Three%20of%20the%20Toughest%20Decisions%20You%27ll%20Face%20in%20Retirement.jpg" alt="Three of the Toughest Decisions You'll Face in Retirement" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/three-of-the-toughest-decisions-youll-face-in-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Why Tax Day Is April 15 and Other Weird Financial Deadlines</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-age-milestones-that-impact-your-retirement">6 Age Milestones That Impact Your Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-face-these-7-scary-facts-about-retirement-saving">How to Face These 7 Scary Facts About Retirement Saving</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-signs-its-time-to-retire">8 Signs It&#039;s Time to Retire</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) benefits decisions full retirement age IRA questions required minimum distributions social security withdrawals Wed, 27 Sep 2017 08:00:06 +0000 Matt Bell 2025922 at http://www.wisebread.com 5 Questions to Ask Before You Start Claiming Your Social Security Benefits http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-511524588 (1).jpg" alt="Couple asking questions before claiming social security benefits" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>According to a 2016 poll conducted by Gallup, 59 percent of retirees rely on Social Security payments as a major source of income. Odds are that you, too, will need Social Security benefits to cover at least <em>some </em>of your living expenses after you retire. Because of this, you'll want these benefits to be as large as possible when retirement actually arrives.</p> <p>Here are five key questions to ask before you start taking your Social Security benefits.</p> <h2>1. Are you willing to take a smaller monthly benefit for the rest of your life?</h2> <p>Taking Social Security benefits before your full retirement age will cost you in the form of a lower monthly payout. This payout will remain at this lower level for the rest of your life.</p> <p>You can determine how much of a hit you'll take claiming benefits early by visiting the Social Security Administration's <a href="https://www.ssa.gov/planners/retire/retirechart.html" target="_blank">retirement planner site</a>. As the site shows, if you start taking your Social Security payments before you hit your full retirement age, your monthly benefit will be lower.</p> <p>How much lower? If your full retirement age is 67 and you start taking your benefits at 62, your monthly Social Security payment will be reduced by about 30 percent. If you start taking them at 64, they'll be lower by about 20 percent. Even if you start taking them one year earlier at 66, they'll still be lower &mdash; by about 6.7 percent a month. And remember, this is for the rest of your life.</p> <p>As you can see, claiming benefits early can significantly reduce the amount of money you receive each month. Let's say you are slated to receive $1,000 a month in Social Security benefits and your full retirement age is 67. If you started taking your benefits at age 62 &mdash; the earliest you can take them &mdash; your monthly benefit would fall to $700.</p> <h2>2. Can you continue working?</h2> <p>While retiring early reduces your monthly Social Security benefits, working past your full retirement age actually increases them.</p> <p>The Social Security Administration says that if you delay receiving your Social Security benefits until you hit 70, your monthly payment will be 32 percent higher than if you had retired at full retirement age.</p> <p>Say your full retirement age is 66, and you'd receive $1,000 from Social Security every month starting at that age. If you wait to start claiming your benefits until you turn 70, your monthly payment would rise significantly to $1,320. You'd just have to determine whether you could hold off on receiving those payments until your 70th birthday.</p> <h2>3. How much have you saved for retirement?</h2> <p>Most people can't survive on Social Security benefits alone during their retirement years. Instead, they rely on a mix of savings from different sources &mdash; everything from 401(k) plans, to IRAs, to annuities.</p> <p>How much you've saved for retirement will play a key role in how early you should take your Social Security benefits. If you've saved a significant amount of money for retirement, you might not need as large a monthly Social Security payment to meet your retirement goals. But if you haven't saved much, you might need that larger benefit payment. At the same time, working for a few extra years might help you boost your retirement nest egg, at least by a bit.</p> <h2>4. How healthy are you?</h2> <p>While there are financial upsides to waiting to claim your Social Security benefits, there are also times when this doesn't make sense. Often, this depends on your health.</p> <p>If you're not healthy, you might need to retire early for your physical wellbeing. And while it's impossible to predict how long you'll live after retiring, if you're suffering from health problems, your post-retirement life might not last as long. Retiring as early as possible, and claiming those Social Security benefits earlier, might then be the best choice. (See also: <a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age?ref=seealso" target="_blank">3 Reasons to Claim Social Security Before Your Retirement Age</a>)</p> <h2>5. What kind of retirement do you want?</h2> <p>How do you plan to spend your retirement years? Are you looking forward to quiet days spent with your grandchildren, reading books, and pursuing a hobby? Or do you want to travel the world?</p> <p>If you're looking for a lower-key, less-costly retirement, taking your benefits early &mdash; and receiving smaller Social Security payments &mdash; might make sense. But if you want a busier, more extravagant retirement, holding off until full retirement age, or later, might be the smarter choice.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age">3 Reasons to Claim Social Security Before Your Retirement Age</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/three-of-the-toughest-decisions-youll-face-in-retirement">Three of the Toughest Decisions You&#039;ll Face in Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-you-should-budget-your-social-security-checks">Here&#039;s How You Should Budget Your Social Security Checks</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement benefits early retirement full retirement age health Teaser: income social security Mon, 08 May 2017 09:00:08 +0000 Dan Rafter 1940328 at http://www.wisebread.com 5 Sobering Facts About Social Security You Shouldn't Panic Over http://www.wisebread.com/5-sobering-facts-about-social-security-you-shouldnt-panic-over <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-sobering-facts-about-social-security-you-shouldnt-panic-over" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-639428420.jpg" alt="Learning social security facts you shouldn&#039;t panic over" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Most people tend not to think about Social Security until they are in a position to collect benefits. Unfortunately, letting Social Security be something you worry about &quot;later&quot; can cause costly problems &mdash; both for you as a beneficiary, and for the program as a whole.</p> <p>Here are five sobering facts about Social Security that you should know now so that you will be prepared for potential issues in the future. (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p> <h2>1. The Social Security Trust Fund may be entirely depleted by 2034</h2> <p>Social Security is set up as a direct transfer of funds from current workers to current beneficiaries. However, when the taxes coming in to pay for Social Security exceed the expenses for the program, the surplus is placed in the Social Security Trust Fund, where it earns interest. As of 2010, Social Security expenses have exceeded the tax revenue, and the Social Security Administration has had to dip into the Trust Fund in order to pay out all promised benefits. As of 2013, the Trust Fund began losing value, and it is projected to be <a href="https://www.ssa.gov/oact/trsum/" target="_blank">entirely depleted by the year 2034</a>.</p> <p>When the Trust Fund runs out of money, the projected tax revenue will cover only 79 percent of promised benefits. This means anyone who is entitled to a $1,500 monthly benefit will only receive $1,185.</p> <h3>Why you shouldn't panic</h3> <p>While the coming depletion of the Social Security Trust Fund is troubling, the problem is neither new nor imminent. It's also important to note that the United States is the only country in the world that attempts to predict the 75-year longevity of its social insurance funds, which means we are in a position to do something about the anticipated shortfall. Over the next couple of decades, it is likely that our government will make relatively small changes to the Social Security program in order to make up the 21 percent anticipated shortfall that will occur once the Trust Fund has run dry.</p> <p>However, it is smart for current workers to recognize that Social Security should not be heavily relied upon for a financially secure retirement.</p> <h2>2. The average Social Security retirement benefit is $1,360 per month</h2> <p>As of January, 2017, the average benefit for a retired beneficiary is <a href="https://www.ssa.gov/news/press/factsheets/colafacts2017.pdf" target="_blank">$1,360 per month</a>, which doesn't go very far if that is your only source of income. In addition, beneficiaries who are signed up for Medicare Part B (which is the Medicare medical insurance) will see $134 deducted from their Social Security benefit check for the Part B premium.</p> <p>While very few retirees live solely on their Social Security benefits, these benefits do constitute at least half the income of 71 percent of single seniors and 48 percent of couples. And for a whopping 43 percent of singles and 21 percent of married couples, Social Security benefits represent 90 percent or more of total income.</p> <h3>Why you shouldn't panic</h3> <p>What you need to remember is that you have a great deal of control over how much of your budget your Social Security benefit will represent. If you diligently save for retirement, then receiving an &quot;average&quot; benefit of $1,360 will provide a nice financial cushion on top of your retirement portfolio. While $1,360 is tough to live on by itself, having it available on top of your necessary expenditures would be a wonderful supplement.</p> <h2>3. Cuts to Social Security benefits may be coming</h2> <p>President Trump promised during his campaign that there would be no cuts to current payments for Social Security or Medicare beneficiaries. However, although the White House has made it clear that current beneficiaries' payments are safe, it will not rule out the possibility of making cuts that will affect future beneficiaries. Some of the changes that have been proposed include:</p> <ul> <li>Raise the full retirement age for workers who reach age 62 in 2023, gradually increasing it from the current age of 66 to age 69.<br /> &nbsp;</li> <li>Change the formula for calculating benefits for retirees becoming newly eligible in 2023 in phases over 10 years. The changes would slightly increase benefits for below-average earners and slightly decrease benefits for above-average earners.<br /> &nbsp;</li> <li>Beginning December 2018, change the calculation of the cost-of-living adjustment (COLA) to a chained consumer price index (CPI) calculation, which will reduce the amount of money beneficiaries receive in their annual COLA. The current formula for determining the COLA uses something called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W is a useful index for tracking the inflation of all goods, but it does not take into account the fact that many consumers make substitutions when prices go up. (For instance, if the price of beef rises, many consumers will buy chicken or pork instead.) A chained CPI calculation takes these sorts of substitutions into account, so its inflation rate is calculated at approximately 0.3 percentage points lower than the CPI-W rate.<br /> &nbsp;</li> <li>Eliminate the earnings test beginning in January 2019. This test reduces benefits for beneficiaries who are younger than Social Security's full retirement age (currently age 66), are currently receiving Social Security benefit payments, and have income from wages or self-employment that exceed $16,920 per year in 2017.<br /> &nbsp;</li> <li>Eliminate federal income taxation of Social Security retirement benefits as of 2054 and later, phased in from 2045 to 2053.</li> </ul> <h3>Why you shouldn't panic</h3> <p>Although making cuts to future beneficiaries' payments is hardly something to cheer about, we do need to recognize that it is much more important to protect the benefits of current beneficiaries. Since current beneficiaries generally cannot go back to work or cut expenses, they are much more vulnerable to cuts in payments than current workers are. In fact, the proposed switch to a chained CPI calculation for COLA may be burdensome to current beneficiaries, since it has been proposed for December 2018, thereby affecting those who have already retired.</p> <p>What current workers need to do is plan for their Social Security to be an addition to their retirement savings. Then, if these changes and cuts do come to pass, you will not be worried about losing important income.</p> <h2>4. High earners don't pay as much into Social Security</h2> <p>Social Security is paid for through a payroll tax of 6.2 percent for workers and 6.2 percent for their employers, making the total tax contribution 12.4 percent of gross income. However, workers and their employers do not pay Social Security taxes on earnings above $127,200.</p> <p>While $127,200 is a pretty significant chunk of change, it does mean that very high earners get a break once they are earning that amount. The reasoning behind this earnings cap is to maintain the connection between contributions paid in and benefits received. Since Social Security benefits are paid progressively, lower-income beneficiaries receive a higher percentage of their pre-retirement income in benefits than do high-income beneficiaries. The more money that high-income earners pay into Social Security, the less of a return they see on their contributions.</p> <p>The progressive nature of Social Security benefits is the reason why it is unlikely that there will ever be a complete elimination of this earnings cap, even though the program could certainly use the funds that such a cap elimination would represent. However, even if we were to increase the earnings cap to $229,500 &mdash; which would return taxation to the same level it was in the early 1980s &mdash; we could make a major dent in the coming benefits shortfall.</p> <h3>Why you shouldn't panic</h3> <p>Although raising taxes is never popular, there is some indication that our government is working to bring the earnings cap closer to early 1980s levels. In 2016, the earnings cap was set at $118,500, which was the same as the 2015 earnings cap. Raising it to $127,200 represents a 7 percent increase.</p> <h2>5. 10,000 baby boomers are retiring every day</h2> <p>Social Security works pretty well when the ratio of workers to retirees is balanced. Unfortunately, the extra-big generation known as the baby boomers is putting the program out of whack. The 76 million members of that generation began reaching age 62 (the earliest you may take Social Security benefits) as of 2008, and they are just going to keep retiring &mdash; at a rate of <a href="https://www.washingtonpost.com/news/fact-checker/wp/2014/07/24/do-10000-baby-boomers-retire-every-day/?utm_term=.56b6dff4374c" target="_blank">10,000 per day</a>.</p> <p>This huge retirement boom could potentially put an enormous burden on our Social Security program, especially considering the increased life expectancy of this generation as compared to their parents and grandparents.</p> <h3>Why you shouldn't panic</h3> <p>While it's true that approximately 10,000 baby boomers are going to be retiring every day until 2034 (when the last of the boomers will reach age 70, which is the latest you would want to start taking Social Security benefits), there is more to this story than just their retirement.</p> <p>First, it's important to remember that we've known the boomers would be retiring en masse for quite some time. Policymakers began to plan as early as 1983, when Congress raised the full retirement age.</p> <p>Second, the boomers are the workers who built up the Social Security Trust Fund, so they will be beneficiaries of the money they themselves contributed through taxes.</p> <p>Finally, as of 2015, <a href="http://www.pewresearch.org/fact-tank/2016/04/25/millennials-overtake-baby-boomers/" target="_blank">millennials had overtaken the boomers</a> as the largest living generation in the U.S. With such a large group of young workers in the workforce, we should be able to handle the financial cost of 10,000 boomers retiring each day.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/5-sobering-facts-about-social-security-you-shouldnt-panic-over">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-falling-for-these-6-social-security-myths">Stop Falling for These 6 Social Security Myths</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/three-of-the-toughest-decisions-youll-face-in-retirement">Three of the Toughest Decisions You&#039;ll Face in Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-you-should-budget-your-social-security-checks">Here&#039;s How You Should Budget Your Social Security Checks</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement beneficiaries benefits facts full retirement age government social security ssa supplemental income taxes trust fund Thu, 04 May 2017 08:00:08 +0000 Emily Guy Birken 1938308 at http://www.wisebread.com How to Face 4 Ugly Truths About Retirement Planning http://www.wisebread.com/how-to-face-4-ugly-truths-about-retirement-planning <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-face-4-ugly-truths-about-retirement-planning" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-155373418.jpg" alt="Learning ugly truths about retirement planning" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Most working Americans still have a long way to go to ensure a comfortable, financially secure retirement. But, with consistency and dedication, retirement planning can be a feasible project. Let's review some of the ugly truths of retirement planning, and the strategies you can use to conquer them. (See also: <a href="http://www.wisebread.com/7-things-financial-advisers-wish-you-knew-about-retirement?ref=seealso" target="_blank">7 Things Financial Advisers Wish You Knew About Retirement</a>)</p> <h2>1. Employer matches require work</h2> <p>While people often like to think of employer matches as free money, the truth is that you do need to do some &quot;work&quot; to earn those matches.</p> <p>First, your employer may require a minimum period of employment or contribution to your retirement account before you become eligible for employer contributions. According to a Vanguard analysis of 1,900 401(k) plans with 3.6 million participants, 27 percent of employers <a href="http://money.usnews.com/money/retirement/articles/2015/06/29/how-does-your-401-k-stack-up" target="_blank">require a year of service</a> before providing any matching contributions. And that waiting period may be on top of the waiting period to be eligible for an employer-sponsored 401(k) in the first place.</p> <p>Second, once you're eligible for the employer match, you may have to contribute a minimum percentage from each paycheck yourself to get it. According to Vanguard, 44 percent of employers required a 6 percent employee contribution to get the entire 401(k) match on offer.</p> <p>Third, only 47 percent of surveyed employers provide immediate vesting of employer contributions. Since only moneys in your retirement account that are fully vested truly belong to you, you may have to wait up to six years to get to keep it all. If you part ways with your employer earlier than that, you may have to say goodbye to some or all of those employer contributions. (See also: <a href="http://www.wisebread.com/15-retirement-terms-every-new-investor-needs-to-know?ref=seealso" target="_blank">15 Retirement Terms Every New Investor Needs to Know</a>)</p> <h3>How to handle it</h3> <p>Find out the applicable rules for employer contributions under your employer-sponsored retirement account. Ask about the waiting period for eligibility, how much you should contribute to get the full employer match, and what is the applicable vesting schedule for employer contributions. This way you'll know how to make the most (and keep the most!) of any employer contributions.</p> <h2>2. Full retirement age is higher than many of us think</h2> <p>According to the 2016 Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI), one in every two American workers expected to retire <a href="https://www.ebri.org/pdf/briefspdf/ebri_ib_422.mar16.rcs.pdf" target="_blank">no later than age 65</a>.</p> <p>The problem with that plan is that only those with born in 1937 or earlier have a full retirement age of 65. Your full retirement age is the age at which you first become entitled to full or unreduced retirement benefits from the Social Security Administration (SSA). Retiring earlier than your full retirement age decreases your retirement benefit from the SSA.</p> <p>For those born 1960 or later, full retirement age is 67. If this were your case, retiring at age 62 or age 65 would <a href="https://www.ssa.gov/planners/retire/retirechart.html#chart" target="_blank">decrease your monthly benefit</a> by about 30 percent or 13.3 percent, respectively. (See also: <a href="http://www.wisebread.com/13-crucial-social-security-terms-everyone-needs-to-know?ref=seealso" target="_blank">13 Crucial Social Security Terms Everyone Needs to Know</a>)</p> <h3>How to handle it</h3> <p>If you're one of the 84 percent of American workers expecting Social Security to be a source of income in retirement, then you need to keep track of your retirement benefits. There are two ways do this.</p> <p>First, since September 2014, the SSA mails Social Security statements to workers at ages 25, 30, 35, 40, 45, 50, 55, and 60 and over, who aren't yet receiving Social Security benefits and don't have an online &quot;my Social Security&quot; account. Here is a <a href="https://www.ssa.gov/myaccount/materials/pdfs/SSA-7005-SM-SI%20Wanda%20Worker%20Near%20retirement.pdf" target="_blank">sample of what those letters look like</a>. Second, you could sign up for a my Social Security account at <a href="http://www.ssa.gov/myaccount" target="_blank">www.ssa.gov/myaccount</a> and have access to your Social Security statement on an ongoing basis.</p> <p>Through either one of these two ways, you'll get an estimate of your retirement benefit if you were to stop working at age 62 (earliest age you're eligible to receive retirement benefits), full retirement age, and age 70 (latest age that you can continue delaying retirement to receive delayed retirement credits). That way you can plan ahead for when it would make the most sense to start taking your retirement credits.</p> <h2>3. Retirement accounts have fees</h2> <p>One of the most common myths about 401(k) plans is that they don't have any fees. The reality is that both you and your employer pay fees to plan providers offering and managing 401(k) plans. One study estimates that 71 percent of 401(k) plan holders <a href="http://www.aarp.org/work/retirement-planning/info-02-2011/401k-fees-awareness-11.html" target="_blank">aren't aware that they pay fees</a>.</p> <p>While an annual fee of 1 to 2 percent of your account balance may not sound like much, it can greatly reduce your nest egg. If you were to contribute $10,000 per year for 30 years in a plan with a 7 percent annual rate of return and an 0.5 percent annual expense ratio, you would end up with a balance of $920,000 at the end of the 30-year period. If the annual expense ratio were to increase to 1 percent or 2 percent, your final balance would be $840,000 or just under $700,000, respectively.</p> <h3>How to handle it</h3> <p>One way to start minimizing investment fees is to pay attention to the annual expense ratio of the funds that you select.</p> <ul> <li>When deciding between two comparable funds, choose the one with the lower annual expense ratio. Research has shown that funds with a lower expense ratio tend to better performers, so you would be minimizing fees <em>and </em>increasing your chances of higher returns.<br /> &nbsp;</li> <li>Explore index funds. For example, the Vanguard 500 Index Investor Shares fund [<a href="https://finance.yahoo.com/q?s=vfinx" target="_blank">Nasdaq: VFINX</a>] has an annual expense ratio of 0.14 percent, which is around 84 percent lower than the average expense ratio of funds with similar holdings. The Admiral version of this equity index fund has an even lower annual expense ratio of 0.05 percent.<br /> &nbsp;</li> <li>Check the prospectus of your funds for a schedule of fees. From redemption fees to 12b-1 fees, there are plenty of potential charges. Review the fine print of any fund that you're considering investing in and understand the rules to avoid triggering fees. For example, you may need to hold a fund for at least 65 days to prevent triggering a redemption fee. (See also: <a href="http://www.wisebread.com/watch-out-for-these-5-sneaky-401k-fees?ref=seealso" target="_blank">Watch Out for These 5 Sneaky 401(k) Fees</a>)</li> </ul> <h2>4. 401(k) loans are eating away nest eggs</h2> <p>According to the latest data from the EBRI, 23 percent of American workers <a href="https://www.ebri.org/pdf/briefspdf/ebri_ib_422.mar16.rcs.pdf" target="_blank">took a loan</a> from their retirement savings plans in 2016. On top of the applicable interest rate on your loan, you'll also be liable for an origination fee and an ongoing maintenance fee. Given that origination fees range from <a href="http://www.nber.org/papers/w17118.pdf" target="_blank">$25 to $100</a> and maintenance fees can go up to $75, 401(k) loans are one expensive form of financing. (See also: <a href="http://www.wisebread.com/5-questions-to-ask-before-you-borrow-from-your-retirement-account?ref=seealso" target="_blank">5 Questions to Ask Before You Borrow From Your Retirement Account</a>)</p> <p>Additionally, when you separate from your employer, the full unpaid balance is due within 60 days from your departure. If you don't pay back in time, that balance becomes taxable income, triggering potential penalties at the federal, state, and local level. One penalty that always applies is the 10 percent early distribution tax for retirement savers under age 59-1/2.</p> <h3>How to handle it</h3> <p>Don't borrow from your retirement account. Studies have shown that 401(k) borrowers tend to come back for additional loans, increasing their chances of default. One study found that 25 percent of 401(k) borrowers came back for a <a href="http://www.nytimes.com/2013/08/17/your-money/one-dip-into-401-k-savings-often-leads-to-another.html" target="_blank">third or fourth loan</a>, and 20 percent of 401(k) borrowers came back for <em>five </em>or more loans. Borrowing from your retirement account should be a very last-resort option because there are few instances when it's worth it. (See also: <a href="http://www.wisebread.com/this-is-when-you-should-borrow-from-your-retirement-account?ref=seealso" target="_blank">This Is When You Should Borrow From Your Retirement Account</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/how-to-face-4-ugly-truths-about-retirement-planning">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-traps-to-avoid-with-your-401k">7 Traps to Avoid With Your 401(k)</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-to-get-the-most-from-your-employer-s-automated-retirement-plan">5 Ways to Get the Most From Your Employer’s Automated Retirement Plan</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-early-retirement-might-be-financially-risky">4 Reasons Early Retirement Might Be Financially Risky</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/three-of-the-toughest-decisions-youll-face-in-retirement">Three of the Toughest Decisions You&#039;ll Face in Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-age-milestones-that-impact-your-retirement">6 Age Milestones That Impact Your Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401(k) contributions employer match fees full retirement age loans nest egg social security ugly truths Fri, 07 Apr 2017 08:00:13 +0000 Damian Davila 1922316 at http://www.wisebread.com Why Tax Day Is April 15 and Other Weird Financial Deadlines http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/why-tax-day-is-april-15-and-other-weird-financial-deadlines" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-175261184.jpg" alt="Learning why Tax Day is on April 15" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>April is one of the finest months of the year. The sun breaks through the clouds, the cherry blossoms bloom, and the promise of warm weather beckons.</p> <p>So of course, the IRS, in its infinite wisdom, decided to place Tax Day right smack dab in the middle of all of this riotous spring beauty.</p> <p>Though I have always believed that the placement of Tax Day in mid-April is proof of the federal government's grim sense of humor, there is actually some method to their madness &mdash; both for this, and all other seemingly arbitrary financial dates and deadlines.</p> <p>Here are the reasons behind some of the most head-scratching financial dates in the United States.</p> <h2>Why is Tax Day on April 15?</h2> <p>Paying federal income taxes is actually a relatively new phenomenon in American history. The first time an income tax was levied on Americans was in 1861 in order to help pay for the Civil War. In 1872, the law surrounding the tax was repealed after opponents successfully argued that federal income tax was unconstitutional.</p> <p>Fast forward to February 3, 1913, when Congress adopted the 16th amendment to the constitution, which allows for federal income tax. Congress also determined the first due date for filing 1913 taxes would be March 1, 1914 &mdash; one year and a couple of weeks later. March 1 offered an easy-to-remember due date that gave citizens just over a full year to get used to being taxpayers, gather up their receipts into the early 20th century version of a shoe box, and file their first returns.</p> <p>Then in 1918, the due date was moved to March 15, for reasons that no one in Congress saw fit to explain or write down.</p> <p>Congress again moved the filing due date in 1955, this time to the now-familiar date of April 15. According to the IRS, the date change helped to spread out the tax season workload for IRS employees.</p> <p>However, there may be a slightly more mercenary reason for the date change: According to Ed McCaffery, a University of Southern California law professor and tax guru, by the mid 1950s, the income tax was applying to increasing numbers of middle class workers, which meant the government had to issue more refunds. &quot;Pushing the deadline back gives the government more time to hold on to the money,&quot; McCaffery claimed in Fortune magazine. And the longer the government holds onto taxes that have been withheld but are destined to be refunded, the more interest it earns on the money.</p> <h3>Okay, so why is Tax Day on April 18 this year?</h3> <p>If you look at an April calendar for 2017, you'll see that April 15 falls on a Saturday this year, which means we get a little extension, since Tax Day can't fall on a weekend. However, you might be confused as to why we get an extension to Tuesday, April 18, instead of Monday, April 17.</p> <p>The reason for our extra day is a Washington, D.C. holiday known as Emancipation Day. Though only Washington, D.C. observes this holiday, a federal statute enacted decades ago states that holidays observed in our nation's capital have a nationwide impact.</p> <h2>Why was 65 chosen as full retirement age for Social Security?</h2> <p>When the Social Security Act was officially adopted in 1935, the age of 65 was chosen as the standard retirement age for beneficiaries. Why was that age chosen as the proper time for full retirement? Why not 63 or 67 or 70?</p> <p>There are a couple of persistent myths out there about this choice, but they are nothing more than misconceptions:</p> <h3>Myth #1: People would die before collecting</h3> <p>The age of 65 was chosen so that people would not live long enough to collect benefits. According to life expectancy actuarial tables from 1930, the average life span was 58 for men and 62 for women, which would make it seem as if Social Security was designed to never make a payout to beneficiaries. However, this myth stems from an unfamiliarity with actuarial tables, which offer an average of <em>all </em>life spans, starting from birth. High infant mortality in the 1930s lowered the overall rate of life expectancy, but anyone who made it to adulthood had a much better chance of reaching age 65 and collecting benefits.</p> <h3>Myth #2: Bismarck was 65</h3> <p>The age of 65 was chosen because Otto von Bismarck &mdash; the author of the world's first old-age social insurance program upon which our Social Security program was partially based &mdash; was 65 when Germany adopted his program. This myth is false on several counts. Bismarck was actually 74 when the German system was adopted, and Germany initially set the retirement age at 70. Germany's retirement age was not lowered to 65 until 1916, at which point Bismarck had been dead for nearly two decades.</p> <h3>The truth behind 65</h3> <p>The actual reason why 65 was chosen as the initial full retirement age for Social Security is pretty boring. The Committee on Economic Security, which Franklin D. Roosevelt created to propose Social Security legislation, conducted a comprehensive analysis of actuarial studies, domestic private pension systems in America, and the social insurance experience in other countries. Based upon that research, the committee recommended 65 as the standard retirement age for Social Security.</p> <h2>Why is 59&frac12; the minimum age to take distributions from tax-deferred retirement accounts?</h2> <p>When it comes to tax-deferred accounts like 401(k)s and traditional IRAs, you are not allowed to take distributions until you have reached the magical age of 59&frac12;. Otherwise, you will owe a 10 percent early withdrawal penalty on the amount you withdraw, in addition to the ordinary income tax you'll owe whenever you take a distribution.</p> <p>So why is the IRS asking you to celebrate half-birthdays when you're nearly 60 years old? Congress used the age of 59&frac12; as the earliest withdrawal age because life insurance actuarial tables consider you to be 60 years old once you have reached the age of 59 and six months &mdash; and at the time that the rules were put in place, 60 was a relatively common age for retirement.</p> <h2>Why must you begin taking required minimum distributions from tax-deferred retirement accounts at age 70&frac12;?</h2> <p>Of course, the IRS is not just about picking random minimum ages for when you <em>can </em>take distributions from tax-deferred retirement accounts &mdash; they also have a random age for when you <em>must </em>take distributions from those accounts.</p> <p>Since the money in your tax-deferred account was placed there before you paid taxes on it, Uncle Sam does want you to eventually pull the money out again so he can get his cut of the money in the form of taxes. That means the IRS requires each account holder to begin withdrawing money during the year that they reach age 70&frac12;. This is called the required minimum distribution (RMD).</p> <p>But unlike the 59&frac12; rule, 70&frac12; does not actually mean your half-birthday. The IRS makes a distinction between those individuals born in the first half of the year and those born in the second half. If your birthday falls between January 1 and June 30, you have to take your first RMD during the calendar year you turn 70. But if your birthday falls between July 1 and December 31, then you don't officially have to take your first RMD until the calendar year you turn 71.</p> <p>Describing this year as being when you are 70&frac12; is actually shorthand, since some folks will be taking their first RMD the year they turn 70, and some will be taking their first RMD the year they turn 71.</p> <h2>Why does Social Security think New Year's babies were born in the previous year?</h2> <p>Unless you happen to have a January 1 birthday, you might not know about this odd piece of Social Security dating. But according to the Social Security Administration, individuals born on the first of the year are considered to have birthdays in the previous year. So Social Security will group someone with a January 1, 1954 birthday with beneficiaries who were born in 1953.</p> <p>This can actually make a big difference when it comes to some Social Security benefits, particularly when those benefits are eliminated. For instance, in 2015 Congress ended the restricted application strategy for any beneficiary born after 1953. The restricted application let applicants specify which Social Security benefits they did <em>not</em> want to apply for, even if they were eligible for all of them. So, for example, beneficiaries who reached full retirement age could claim a spousal benefit while continuing to let their own grow. Beneficiaries who were born on January 1, 1954 were grouped with those with 1953 births &mdash; which means anyone born on January 2, 1954 had rotten luck in terms of using the restricted application.</p> <p>Why does Social Security extend a year 24 hours past the time the rest of us do? This odd birth year dating occurs because the Social Security Administration groups beneficiaries who have birthdays on the first of the month with beneficiaries born in the previous month. This grouping allows first-of-the-month babies to have a little more leeway when it comes to deadlines and other requirements. In order to be completely fair with the first-of-the-month grouping, January 1 babies are then considered to have been born in the previous year.</p> <h2>The government is not entirely lacking in sweet rhyme and pure reason</h2> <p>The financial dates that we all must adhere to may seem like ridiculous and arbitrary decisions, but there was some thought put into them. Those thoughts might only make sense to the people that made the decisions, but at least we know they weren't throwing darts at a calendar.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/why-tax-day-is-april-15-and-other-weird-financial-deadlines">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/three-of-the-toughest-decisions-youll-face-in-retirement">Three of the Toughest Decisions You&#039;ll Face in Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-your-taxes-will-change-when-you-retire">Here&#039;s How Your Taxes Will Change When You Retire</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-age-milestones-that-impact-your-retirement">6 Age Milestones That Impact Your Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you">3 Ways More Money in Retirement Might Cost You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement Taxes 401(k) ages benefits dates distributions finance facts full retirement age IRA IRS social security tax day trivia Wed, 29 Mar 2017 08:00:22 +0000 Emily Guy Birken 1914689 at http://www.wisebread.com 3 Reasons to Claim Social Security Before Your Retirement Age http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-reasons-to-claim-social-security-before-your-retirement-age" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-538053186.jpg" alt="Man claiming social security before retirement age" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>When it comes to Social Security, the usual advice is to hold off on taking benefits as long as possible. While most people could claim benefits as early as age 62, your monthly benefit amount will grow each year that you wait up to age 70. (See also: <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement?ref=seealso" target="_blank">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a>)</p> <p>However, there are some situations where taking benefits as soon as possible may be the better way to go. Here are three such scenarios.</p> <h2>1. You Need the Money</h2> <p>If you can't find a job, or simply don't have enough savings to live on, claiming Social Security benefits at age 62 may be your only option.</p> <p>Just keep in mind that if you do find a job, there are <a href="https://www.ssa.gov/planners/retire/whileworking.html" target="_blank">limits to how much you can earn</a> without impacting your Social Security benefits. In years when you are younger than your &quot;full retirement age&quot; (65&ndash;67, depending on when you were born), for every $2 you earn above $16,920, your Social Security benefits will be reduced by $1.</p> <h2>2. Longevity Doesn't Run in Your Family</h2> <p>One way to evaluate the impact of claiming Social Security benefits at various ages is to run what's known as a break-even analysis.</p> <p>When you claim as early as possible, your monthly benefit amount will be smaller than it would have been if you claimed later. However, the head start that early claiming provides means that if you claim benefits at a later age, even though the monthly amount is higher, it'll take a number of years before you've broken even with the total amount you would have received by claiming earlier.</p> <p>For example, here's a look at a friend's estimated monthly Social Security benefits and how they vary depending on when he claims benefits:</p> <ul> <li>$1,529 if claimed at age 62</li> <li>$2,273 if claimed at his full retirement age of 67</li> <li>$2,873 if claimed at age 70</li> </ul> <p>If he claims benefits beginning at age 62, by the end of the year that he turns 67, he will have received a total of over $100,000. If he waits until age 67 to begin taking benefits, it will take him until approximately age 78 before his accumulated benefits would overtake the total he would have received if he had started taking benefits at age 62.</p> <p>If he didn't expect to live to age 78, it would make sense to claim benefits earlier. Of course, that's a tough call. Even in families when one or both parents die early, some of their kids live far longer.</p> <p>To find out your own estimated Social Security benefits, create an account on the Social Security Administration's website.</p> <h3>Run Your Own Break-Even Analysis</h3> <p>Unfortunately, there isn't an easy way to run your own break-even analysis. The Social Security Administration used to have a calculator on its site designed for this purpose, but took it down because they felt it was encouraging too many people to claim early.</p> <p>One workaround is to run various scenarios with <a href="https://www.calcxml.com/do/ins07" target="_blank">this calculator</a>. As a starting point, enter your &quot;current age&quot; as 62, enter your estimated age of death in the &quot;retirement age&quot; field, enter the annual age-62 benefit amount in the &quot;your current annual income&quot; field (the SSA website lists benefits in monthly amounts, so be sure to multiply by 12), and then use the &quot;annual salary increase&quot; field to enter an estimated inflation rate (Social Security benefits are adjusted for inflation each year; use a relatively low amount &mdash; somewhere between 1% and 2%).</p> <p>Then run the same analysis, but change your &quot;current age&quot; to your full retirement age and change &quot;your current annual income&quot; to the annual amount of your full retirement age benefit.</p> <h2>3. You Have Plenty of Money Already Saved for Retirement</h2> <p>If you have enough money to live on regardless of your Social Security benefits, that may be another reason to take Social Security benefits as early as possible. You could use the money to invest, buy a <a href="http://www.wisebread.com/is-long-term-care-insurance-worth-it?ref=internal" target="_blank">long-term care insurance policy</a>, or buy a <a href="http://www.wisebread.com/term-vs-whole-life-insurance-heres-how-to-choose?ref=internal" target="_blank">life insurance policy</a>.</p> <p>It's true that you should think very carefully before claiming Social Security benefits at age 62. There's a hefty increase in the monthly benefit amount for each year that you wait. And if you're married, keep this in mind: When you die, your spouse will be able to choose to take the higher of their benefit or your benefit. If you had been the higher earner, by waiting as long as possible before claiming your benefit, that will be very helpful to your spouse once you're gone.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-american-cities-where-you-can-retire-on-just-social-security">5 American Cities Where You Can Retire On Just Social Security</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/three-of-the-toughest-decisions-youll-face-in-retirement">Three of the Toughest Decisions You&#039;ll Face in Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-you-should-budget-your-social-security-checks">Here&#039;s How You Should Budget Your Social Security Checks</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement benefits full retirement age income longevity savings social security Wed, 01 Mar 2017 10:30:37 +0000 Matt Bell 1898659 at http://www.wisebread.com 5 Financial Moves Now That You'll Regret When You Retire http://www.wisebread.com/5-financial-moves-now-that-youll-regret-when-you-retire <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-financial-moves-now-that-youll-regret-when-you-retire" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/money_uh_oh_175531215.jpg" alt="Learning financial moves now that you&#039;ll regret when you retire" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>We all make thousands of decisions every day. Come tomorrow, many of them won't matter much at all. But some decisions do have long-lasting implications. Here are five choices that may leave you longing for a do-over in retirement.</p> <h2>1. Borrowing From Your 401K</h2> <p>It's relatively easy to borrow from most 401K plans. However, the purpose of your 401K isn't to save for a down payment on a house or college bills. It's to build a nest egg for retirement. The more you nibble away at that, the less you'll have for your later years. The best approach? Consider your workplace retirement funds to be off limits &mdash; until retirement.</p> <h2>2. Resetting Your Mortgage Clock Past Your Retirement Age</h2> <p>Interest rates are very low, which has prompted many people to refinance their mortgages. It can be wise to swap out a high interest rate loan for one at a lower rate. However, if this is the home you plan to live in during retirement, make sure your new mortgage will be retired by the time you are. That may mean opting for a shorter term (15 or 20 years instead of 30) or committing to making extra monthly payments. (Use <a href="http://financialmentor.com/calculator/mortgage-payoff-calculator">this calculator</a> to help you figure out how much extra to pay.)</p> <h2>3. Claiming Social Security Too Early</h2> <p>There are some people who may benefit by claiming their Social Security benefits at the earliest possible age &mdash; 62. If longevity doesn't run in your family or if you absolutely have no other options but to take the money sooner than later, go ahead. But good things come to those who wait. When it comes to delaying the start of Social Security, those who can hold off will get quite a boost in benefits.</p> <p>When I looked up my own benefits (<a href="https://secure.ssa.gov/SiView.do">here's where to look up yours</a>), I saw that I'm eligible for $1,780 per month if I claim benefits at age 62. If I wait until my Full Retirement Age of 67, that amount jumps to $2,694 &mdash; a 51% increase. And if I wait until age 70, I would receive $3,441 per month &mdash; nearly twice as much as my age-62 benefit.</p> <p>And here's the other benefit from waiting. Men, I hope I'm not the first to break this to you, but you're probably going to die before your wife, unless she's a lot older than you are. And if your Social Security benefit is larger than hers, the more you can maximize yours, the more it'll benefit your wife once you're gone. That's because upon your death, she'll have the choice of continuing to take her benefit or yours.</p> <p>Social Security claiming strategies are so varied, complex, and important that it would probably benefit you to seek additional guidance via <a href="http://www.socialsecuritysolutions.com/">Social Security Solutions</a> or <a href="http://maximizemysocialsecurity.com/">Maximize My Social Security</a>.</p> <h2>4. Ignoring Inflation</h2> <p>I talked with a newly-retired woman recently who thought she was set for life. She took her savings, divided by her estimated number of years remaining, and was satisfied with her answer. Until I rained on her parade by asking how she planned to account for inflation.</p> <p>She didn't like the idea of investing any of her money in the stock market because she thought that was too risky. And yet, keeping all of her money in a bank savings account virtually guarantees that her buying power will steadily decline. Even a modest annual inflation rate of 2% will cut buying power nearly in half over the course of a 30-year retirement.</p> <p>Most retirees will need to accept the idea of maintaining some level of exposure to the stock market with their investment portfolio in order to make sure their money lasts as long as they do.</p> <h2>5. Counting on Paid Work in Your Later Years</h2> <p>One of today's most significant retirement-related disconnects is the difference between the number of today's workers who are planning to work in retirement (I know, it sounds like an oxymoron) and the number of retirees who actually do still work.</p> <p>An increasing number of people still in the workforce are pushing back their retirement date &mdash; some because they want the mental stimulation that comes from work, some because they realize they'll need the money. And yet, nearly half of people who are now retired left the workforce sooner than intended, many times because of health issues.</p> <p>By the same token, nearly two-thirds of today's workers expect to work for pay to some degree after retiring from their main career, whereas less than one-third of those who are now retired have worked for pay since ending their main career.</p> <p>The best advice? Plan physically, emotionally, and vocationally to work longer than you might prefer while you plan financially to retire earlier than you think you will.</p> <p>Clearly, what you don't do as you prepare for a successful retirement is just as important as what you do. Avoiding the five miscues just discussed will help you prepare well.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/matt-bell">Matt Bell</a> of <a href="http://www.wisebread.com/5-financial-moves-now-that-youll-regret-when-you-retire">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/three-of-the-toughest-decisions-youll-face-in-retirement">Three of the Toughest Decisions You&#039;ll Face in Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-retiring-with-debt-isnt-the-end-of-the-world">Why Retiring With Debt Isn&#039;t the End of the World</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-more-money-in-retirement-might-cost-you">3 Ways More Money in Retirement Might Cost You</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-your-taxes-will-change-when-you-retire">Here&#039;s How Your Taxes Will Change When You Retire</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement 401k full retirement age inflation Mistakes money moves mortgages regrets social security Thu, 01 Dec 2016 11:00:08 +0000 Matt Bell 1843961 at http://www.wisebread.com Stop Falling for These 6 Social Security Myths http://www.wisebread.com/stop-falling-for-these-6-social-security-myths <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/stop-falling-for-these-6-social-security-myths" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/social_security_card_76556001.jpg" alt="Learning to stop falling for social security myths" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Over 166 million taxpayers pay into Social Security, which pays benefits to over 65 million Americans. As with any program as large and sprawling as Social Security, myths about how it works can run rampant &mdash; and since the facts tend to require more than a sound bite to explain, those myths become entrenched in our collective consciousness as fact.</p> <p>But not only are these Social Security myths untrue, believing them can cause you to make poor decisions about your Social Security benefits. Here are six of the most common and harmful myths about Social Security, debunked:</p> <h2>1. The Government Is Raiding the Social Security Trust Fund</h2> <p>You will often hear people complain about how untrustworthy our government is, and offer the fact that Congress &quot;raids&quot; the Social Security Trust Fund as proof. While it is true that the Trust Fund is where excess Social Security taxes are placed for future beneficiaries, and it is also true that the government uses money in this account to pay for government programs, it is simply not true that the fund is being &quot;raided.&quot;</p> <p>Here's what's going on. Money placed in the Social Security Trust Fund may sound like it is being put in a vault somewhere for the safekeeping of future beneficiaries. But that's not how money works. Not only would that be a security risk, but the money in such a vault would lose value to inflation. In order to maintain and increase the value of the trust fund, the money must be invested in government programs.</p> <p>Think of it this way: Any time you invest money commercially &mdash; whether by putting it in an interest-bearing bank account or by buying stocks or bonds &mdash; you are probably aware that the institution is immediately spending the money you have invested. The private institution spends your investment with the understanding that it will earn profits and be able to pay you back, with interest.</p> <p>The government is no different. It spends money invested in the Social Security Trust Fund on infrastructure, military spending, government salaries, welfare, and the like, knowing that those investments will earn interest. But unlike a private institution, this kind of government spending is backed by the full faith and credit of the U.S. government.</p> <p>The government's spending of money from the Social Security Trust Fund is just as valid a use of invested money as is the lending and spending that a bank or corporation does with investors' money.</p> <h2>2. Social Security Is Going Bankrupt</h2> <p>This myth is based on a kernel of truth &mdash; specifically, Social Security benefit payments exceed payroll tax revenues and have done so since 2010. In order to maintain promised benefits, Social Security has had to dip into the Social Security Trust Fund. As of 2013, the Trust Fund began losing value, and it will become entirely depleted by 2037.</p> <p>This is the point at which most analysis stops, and that is why you will often hear the myth that Social Security is circling the drain. But it is impossible for Social Security to go bankrupt, because it was always designed as an immediate transfer of funds from current workers to current beneficiaries. (When there were more workers than beneficiaries, excess taxes were placed in the Trust Fund. This was the case until 2009). The program does not count on a specific pool of money, but on the tax revenue of current workers.</p> <p>That being said, once the Trust Fund is depleted, tax revenue is only expected to pay for approximately 79% of promised benefits. This is the shortfall you will hear experts referring to when discussing the future of Social Security. But it does not spell the end of the program. It is just a shortfall that we need to find a way to make up.</p> <p>Social Security was created specifically so it could be changed and tweaked to meet the changing needs of Americans &mdash; changing needs like this anticipated shortfall. We might have little faith in Washington right now, but it is specifically the job of our government to make changes to Social Security to deal with this coming shortfall. Eventually, they'll get around to it.</p> <h2>3. It's the Baby Boomers' Fault We're in This Mess</h2> <p>There are plenty of articles out there that place the blame for Social Security's financial woes squarely at the feet of the baby boomer generation &mdash; the largest-ever generation of Americans, born between 1946 and 1964. There are 76 million baby boomers, and having that many people retire over a couple of decades places an enormous burden on Social Security. Since our system is based upon an immediate transfer from current workers to current retirees, having the boomers retire all at once puts too many retirees into the equation.</p> <p>But the boomers' retirement is hardly a surprise. They've been around for six or seven decades now, and we have seen this mass boomer retirement phase coming for many years. According to Virginia P. Reno and Joni Lavery in the Social Security brief <a href="https://www.nasi.org/usr_doc/SS_Brief_022.pdf">Can We Afford Social Security When Baby Boomers Retire?</a>, &quot;Policymakers began to plan as early as 1983, when Congress lowered the cost of Social Security benefits for boomers and later generations by raising the age at which unreduced retirement benefits will be paid.&quot;</p> <p>Believe it or not, our government has been trying for quite some time to prepare for this moment. Part of the reason we had such a surplus in the Social Security Trust Fund was because of our preparation for the mass retirement of the boomer generation. We are far better prepared for the boomers than many doomsayers might have you believe.</p> <h2>4. Waiting for Benefits Means You Risk Not Getting Your Fair Share</h2> <p>It is possible to take Social Security benefits as early as age 62, although your benefits will be permanently reduced by up to 25% to 30 percent by taking them early. Wait until your full retirement age (66 for individuals born between 1943 and 1954, rising to age 67 for anyone born in 1960 or later), and you will receive your full benefits. If you can wait until age 70, you will receive delayed retirement credit equal to approximately 8% per year between your full retirement age and 70.</p> <p>If you calculate the break-even analysis on your Social Security benefits, it often looks like you're better off by taking early benefits. Early, reduced benefits offer you more lifetime benefits for nearly 15 years into the break-even analysis.</p> <p>The problem with this thinking is that the only way for you to &quot;win&quot; these calculations is to die young. It would actually be far worse for you to take early benefits and then live a long life on a reduced income. It is much smarter to delay your benefits as long as possible to provide yourself with the largest benefit you can get.</p> <h2>5. Immigrants Are Taking Social Security Benefits They Didn't Pay For</h2> <p>This myth is an election year favorite, and it conflates Social Security benefits with Supplemental Security Income (SSI) benefits. Social Security benefits are only available to beneficiaries who either paid into the system themselves, or who are the dependents of those who paid into the system. If you have not paid any Social Security payroll taxes (or you haven't been the dependent of someone who has), you are not getting Social Security benefits. Period.</p> <p>SSI, on the other hand, is a welfare program designed to provide aid to the elderly and disabled, and SSI benefits are paid through general governmental revenues. Immigrants are eligible to collect SSI benefits, but only if they show the same level of extreme need as any other SSI beneficiary.</p> <h2>6. Privatizing Social Security Would Make the System Fairer</h2> <p>The possibility of privatizing Social Security is a common suggestion for fixing many of the problems inherent in such a large government program. These suggestions often promise that privatization will be cheaper for the government, more lucrative for beneficiaries, and fairer for everyone since you will get out what you put in.</p> <p>Unfortunately, none of those three promises would be true. Social Security is a very efficiently run program, with administrative expenses totaling less than 1% of the program's budget. But creating and maintaining individual investment accounts would be incredibly expensive, since it would incur broker commission fees and/or mutual fund management fees, which would either come from the program budget or individual investors.</p> <p>In addition, it is unlikely that the majority of beneficiaries would be able to improve upon their Social Security &quot;return on investment&quot; through investment accounts, since humans are notoriously irrational investors. Social Security benefits are guaranteed, while investment returns are not.</p> <p>Finally, attempting to create pay-for-what-you-get fairness in a social insurance program like Social Security is a non-starter. The intention of Social Security is to provide guaranteed income to the elderly, the disabled, and their families, by spreading the cost of that income over all of society. Strict fairness in such a system would leave our most vulnerable citizens in abject poverty or worse. It's also important to note that the transition costs of privatizing Social Security have been estimated at nearly <a href="http://www.ncpssm.org/Document/ArticleID/14">$5 trillion over the first two decades</a>. Those costs would need to be paid by current workers, who would potentially be paying into their privatized accounts and still be paying taxes that go toward current beneficiaries &mdash; which would feel incredibly unfair.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/stop-falling-for-these-6-social-security-myths">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-sobering-facts-about-social-security-you-shouldnt-panic-over">5 Sobering Facts About Social Security You Shouldn&#039;t Panic Over</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">6 Smart Ways to Boost Your Social Security Payout Before Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/three-of-the-toughest-decisions-youll-face-in-retirement">Three of the Toughest Decisions You&#039;ll Face in Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-plan-for-retirement-when-you-re-ready-to-retire">How to Plan for Retirement When You’re Ready to Retire</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Retirement baby boomers benefits Congress full retirement age government immigrants myths privatized social security ssi Mon, 07 Nov 2016 10:30:29 +0000 Emily Guy Birken 1827091 at http://www.wisebread.com 6 Smart Ways to Boost Your Social Security Payout Before Retirement http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-smart-ways-to-boost-your-social-security-payout-before-retirement" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/old_couple_retirement_78209735.jpg" alt="Couple boosting their social security payout before retirement" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>According to the Employee Benefit Research Institute, <a href="https://www.ebri.org/pdf/briefspdf/EBRI_IB_422.Mar16.RCS.pdf">84% of U.S. workers</a> expect their Social Security benefit to be a significant source income during retirement. So, let's plan ahead with these six smart ways to boost that monthly Social Security check before retirement:</p> <h2>1. Check Reported Earnings on Your Social Security Statements</h2> <p>In September 2014, the Social Security Administration (SSA) began mailing Social Security Statements to workers at ages 25, 30, 35, 40, 45, 50, 55, and 60 and over, who aren't yet receiving Social Security benefits and don't have a <em>my Social Security</em> account. You should receive those statements about three months before your birthday at each one of those ages.</p> <p>Once you receive one, check your reported earnings for each year to make sure they match your W-2 forms. The SSA uses your average earnings over your lifetime to calculate your benefit amount, so any errors on reported earnings may alter the benefit to which you're entitled. Since you may have many employers during your lifetime, you're the only person who can look at your earnings history and know whether it's complete and correct.</p> <p>If any earnings before the previous year are missing or shown incorrectly, contact the SSA right away at 1-800-772-1213 (7 a.m. to 7 p.m. on your local time). Have your W-2 or tax return for those years available when you call.</p> <h2>2. Sign Up for a my Social Security Account</h2> <p>There's no need to wait five years before getting your next Social Security Statement. By creating you're my Social Security account at <a href="http://www.ssa.gov/myaccount">www.ssa.gov/myaccount</a>, you'll be able to check your reported earnings once a year to verify that those posted amounts are correct.</p> <p>Additionally, you'll receive updated estimates of your future retirement, disability, and survivors benefits. If you meet certain requirements, you'll also be able to request a replacement Social Security card through the my Social Security online portal.</p> <h2>3. Reach Full Retirement Age</h2> <p>When you have earned the necessary 40 credits (individuals with disabilities, recipients of survivor benefits, and some minors may need fewer credits) to qualify for retirement benefits, you can start receiving those benefits as early as age 62. Whether you receive a digital or paper copy of your Social Security statement, you'll receive an estimated benefit of your retirement benefits at age 62.</p> <p>You'll quickly realize that the estimated benefit at age 62 is much lower than the one at your full retirement age. For example, if you were born between 1943 and 1954, your full retirement age would be 66. If you were to start getting retirement benefits at age 62, they would be <a href="https://www.ssa.gov/planners/retire/1943.html">reduced to 75%</a> of what they would be four years later. For every month that you delay retirement past age 62, you would gain an additional 0.4% in retirement benefits until you reach your full retirement age. Depending on your birth year, your full retirement age ranges from <a href="https://www.ssa.gov/planners/retire/retirechart.html">65 to 67</a>.</p> <h2>4. Obtain Delayed Retirement Credits</h2> <p>According to estimates from the SSA, about <a href="https://www.ssa.gov/planners/lifeexpectancy.html">one out of every four</a> 65-year-olds today will live past age 90, and one out of 10 will live past age 95. If you have a family history of longevity, consider delaying retirement until age 70.</p> <p>Individuals born 1943 or later receive an extra <a href="https://www.ssa.gov/planners/retire/delayret.html">2/3 of 1% increase</a> on their retirement benefits for every month that they delay retirement past full retirement age. If your full retirement age were 67, you would increase your retirement benefit to 132% by waiting until age 70. You can only gain delayed retirement credits until age 70.</p> <h2>5. Evaluate Spousal Benefits</h2> <p>Spouses can claim retirement benefits based on their own earnings record or receive up to 50% of the higher earner's benefit, whichever is higher. For example, if your own retirement benefit and your spouse's were $600 and $1,800, respectively, you would receive $900 (50% of $1,800).</p> <p>However, taking the spousal benefit as early as age 62 reduces your payout. A spousal benefit is reduced 25/36 of 1% for each month before full retirement age, up to 36 months. If the number of months exceeds 36, then the benefit is further reduced 5/12 of 1% per month. For those born 1960 or later, a $900 spousal benefit would be reduced to $585 when taking it at age 62.</p> <p>If you're divorced from a marriage <a href="https://www.ssa.gov/planners/retire/divspouse.html">lasting 10 years or longer</a>, remain unmarried, and have a retirement benefit smaller than the one you would receive from your ex-spouse, then you can receive spousal benefits on your ex-spouse's record even if he or she has remarried. However, you'll only be able to keep collecting benefits if you keep single. To learn more details about spousal benefits for divorced spouses, consult the SSA website.</p> <h2>6. Plan Ahead With Your Dependents</h2> <p>Talking about relationship updates later on in life, keep in mind that you can receive additional Social Security payments when you have dependent children <a href="https://www.ssa.gov/planners/retire/yourchildren.html">under age 19</a> living with you during retirement.</p> <p>As long as your biological child, adopted child, stepchild, or dependent grandchild is unmarried and under age 18, then he or she can receive up to one half of your monthly retirement benefit. The benefit can extend until graduation date or two months after the 19th birthday of a dependent who is a full-time student (no higher than grade 12), whichever is earlier.</p> <p>While each one of your qualifying dependent children can receive a benefit, generally the total amount you and your family can receive is about <a href="https://www.ssa.gov/planners/retire/yourchildren.html">150% to 180%</a> of your full retirement benefit. Depending on your child's age, you may find it advantageous to retire earlier than you originally planned to take advantage of a higher total family benefit.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F6-smart-ways-to-boost-your-social-security-payout-before-retirement&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F6%2520Smart%2520Ways%2520to%2520Boost%2520Your%2520Social%2520Security%2520Payout%2520Before%2520Retirement.jpg&amp;description=6%20Smart%20Ways%20to%20Boost%20Your%20Social%20Security%20Payout%20Before%20Retirement"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/6%20Smart%20Ways%20to%20Boost%20Your%20Social%20Security%20Payout%20Before%20Retirement.jpg" alt="6 Smart Ways to Boost Your Social Security Payout Before Retirement" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/damian-davila">Damian Davila</a> of <a href="http://www.wisebread.com/6-smart-ways-to-boost-your-social-security-payout-before-retirement">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-sobering-facts-about-social-security-you-shouldnt-panic-over">5 Sobering Facts About Social Security You Shouldn&#039;t Panic Over</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/three-of-the-toughest-decisions-youll-face-in-retirement">Three of the Toughest Decisions You&#039;ll Face in Retirement</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-you-start-claiming-your-social-security-benefits">5 Questions to Ask Before You Start Claiming Your Social Security Benefits</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-reasons-to-claim-social-security-before-your-retirement-age">3 Reasons to Claim Social Security Before Your Retirement Age</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-falling-for-these-6-social-security-myths">Stop Falling for These 6 Social Security Myths</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement benefits dependents full retirement age marriage payout social security spouses ssa Wed, 12 Oct 2016 09:00:06 +0000 Damian Davila 1810488 at http://www.wisebread.com