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    • MICHAEL LOFTUS
      • May 28, 2019
      • 3 min read

    Social Security - Should I Delay My Payout?


    Social Security is a great topic why? Because for most Americans, Social Security is essential for #retirement. Some of our most watch videos on our Youtube channel are about Social Security.


    So digging a little bit deeper, I'd like to answer the question, when should you start Social Security? Should you delay? What are some of the different options? Well the answer is pretty simple. It depends. There are so many different factors but we're going to present a few different options and hopefully help your decision making process.


    You can start collecting benefits any time from the ages of 62 to 70, although there's some legislation right now that's close to getting approved that's going to change the numbers.) However, as of today, if you start at 62 you're taking at a reduced number. FRA (full retirement age) is 66 to 67, based on the year that you were born. Then of course you have age 70, which is when you reach your maximum payout.


    Let's look at age 62; if you delay a year you get an 8 percent bump, delay another year another 8 percent bump. That is very significant. Now the Delay rule came in about 2009, right around the crash, an interesting time. You had to decide if you wanted to take it then, after your investments have lost so much money, or do you want to delay and get that 8 percent which clearly the market was not giving us at that time. So, if you delay your benefits from age 62-70, it's a 32 percent increase.



    One of the things you want to look at, and we get asked a lot, is the break even point. Let's look at a scenario here where somebody is taking $1,200 a month at age 62 and if they delay to FRA it becomes $1,700 a month. Over the year it's $14,400 vs $20,400, you go out over five years that person at age 62 is taking $72,000. We then divide that by the $6,000 difference, we come out with 12 years. So if you delay until age 70 or 67 full retirement age, you're going to be seventy nine years old. You know for some people that obviously is late in life. It just depends on some different circumstances so let's look at those circumstances.



    So you've got single, married, and then health. You also have to consider pensions. In addition, investments obviously make a big determination factor when we are going through this decision process.


    So first your single, meaning never married. (If you're divorced or if your spouse has passed there are other options) You have to look at your investments, are you collecting a pension and does it make sense for you to delay or not? It depends on the financial plan and your monthly income. Obviously, if you can delay, delay. Having a financial plan will help you determine what your income will look like when the time to collect nears and you can plan accordingly.


    Next we have married couples, there's a couple of different scenarios. I always try to have the spouse collecting the higher number (what they're collecting every month and year) delay and have the other person start early, Why? Because if one passes you're always going to get the highest number not both. That is the ideal scenario, but again that will depend on what your financial plan looks like.


    One consideration to always take into consideration, regardless of the scenario, is health and longevity. We talked about the numbers, 12 years to break even. So when you look at that if there are any health issues then you would start sooner than later. If you don't have them now then you also look at delaying. I think those are the different scenarios that I see on a regular basis as always.


    This is why it's important to talk to an advisor to give you that advice to help you. Creating or having a financial plan is a great place to start so you know what your best options are when the times comes. If you want to learn more about our process for creating financial plans then click here.




    • Weekend Wisdom
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    • Financial Planning
    390 views0 comments
    • MICHAEL LOFTUS
      • Feb 11, 2019
      • 1 min read

    How Is Social Security Taxed?

    Updated: Feb 14, 2019


    SOCIAL SECURITY TAX
    CLICK IMAGE TO PLAY VIDEO

    Social Security is always a topic of interest. We've covered claiming strategies in the past but now let's look at the tax implications that come along with collecting social security. As much as 85% of your Social Security benefits could be taxable if you have other sources of income, such as earnings from work or withdrawals from tax-deferred retirement accounts. #socialsecurity #socialsecuritytax #retirementplanning #socialsecuritystrategies



     



    • Weekend Wisdom
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    819 views0 comments
    • MICHAEL LOFTUS
      • Apr 10, 2018
      • 3 min read

    The Retirement Mindgame


    man playing chess
    Your outlook may influence your financial outcome.

    What kind of retirement do you think you’ll have? Qualitatively speaking, what if the success or failure of your #retirement begins with your perception of retirement?

    A whole field of study has emerged on the psychology of #saving, #spending, and #investing: behavioral #finance. Since retirement saving is a behavior (and since other behaviors influence it), it is worth considering ways to adjust behavior and presumptions to encourage a better retirement.


    Delayed gratification or instant gratification? Financially speaking, retiring earlier has its drawbacks and may lead you into the next phase of your life with less income and savings.


    If you don’t love what you do for a living, you may see only the downside of working longer rather than the potential boost it could provide to your retirement planning (i.e., claiming #Social #Security later or tapping retirement account balances later and letting them compound more). If you see work as a daily set of unfulfilling tasks and retirement as an endless Saturday, Saturday will win out, and your mindset will lead you to retire earlier with less money.


    On the other hand, if you change your outlook to associate working longer with retiring more comfortably, you may leave work later with a bigger retirement nest egg – and who wouldn’t want that?


    If you don’t earmark 66 or 70 as your retirement year, you can become that much more susceptible to retiring as soon as possible. You’re 62, you can get Social Security; who cares if you get less money than you get at 66 or 70 if it’s available now?


    Resist that temptation if you can. While some retirees claim Social Security at age 62 out of necessity, others do out of inclination, perhaps not realizing that inflation pressures and long-term care costs may render that a poor decision in the long run.


    Social Security wants you to wait until you reach what it calls Full Retirement Age (FRA) to claim your #benefits. For those born after 1942, FRA is 66, 67, or somewhere in between. When you take benefits earlier than that, your monthly benefit payments are reduced by as much as 25%. That reduction is permanent.1


    Some people are misinformed about this. In a 2017 Fidelity Investments poll, 38% of respondents thought the reduction was temporary and that their monthly benefits would suddenly increase when they reached their FRA.2


    Setting a target age for retirement – say, 65, 66, or even 70 – before you turn 60 can help mentally encourage you to keep working to that age. Providing your health and employment hold up and you can work longer, patience can lead you to have more Social Security income rather than less.


    Take a step back from your own experience. For some perspective on what your retirement might be like, consider the lives of others. You undoubtedly know some #retirees; think about how their retirements have gone. Who planned well, and who didn’t? What happened that was unexpected? Financial professionals and other consultants to retirees can also share input, as they have seen numerous retirements unfold.


    Reduce your debt. Rather than assume new consumer #debts, which advertisers encourage us to take on, commensurate with salary and career growth, pay down your debts as best you can with the outlook that you are leaving yourself more money for the future (or for unexpected situations).


    Save and invest consistently. See if you can increase your savings rate on the way toward retirement. Don’t look at it as stripping money out of your present. Look at it as paying yourself first on behalf of your future.


    Citations.

    1 - gobankingrates.com/investing/mistakes-even-smart-people-make-retirement/ [1/8/18]

    2 - fool.com/retirement/2017/12/14/why-do-so-many-people-claim-social-security-at-62.aspx [12/14/17]

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