Tags Posts tagged with "Social Security"

Social Security

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By Michael R. Sceiford

If you’re married and nearing retirement, you’ll want to review how Social Security claiming strategies for spouses are changing. Two popular spousal strategies known as File and Suspend and Restricted Application will be going away for most individuals. Here’s what you need to know:

File and Suspend
How it works: Let’s say Robert has reached his full retirement age (FRA) according to the Social Security Administration, and his wife, Judy, is ready to claim her spousal benefits. Robert could file for benefits but then suspend receiving them. Judy could begin receiving Social Security spousal benefits while Robert’s benefit would continue to grow.
What’s changing: If Robert suspends his benefit, Judy’s spousal benefit will also be suspended.
What this means for you: You can’t suspend your benefit without also suspending any benefit based on your benefit, such as the spousal benefit. However, if you’ve already set up this strategy, you can continue to use it. If you have reached your FRA and are considering File and Suspend, you must do so before April 30, 2016.

Restricted Application
How it works: In this example, Judy reaches her FRA but chooses to take the spousal benefit instead of her own (assuming Robert has already filed for his benefits). This would allow Judy’s benefit to continue to grow while she receives the spousal benefit.
What’s changing: Judy can no longer choose which benefit she wants to receive. She will automatically receive her own benefit first and then the spousal benefit if she is eligible.
What this means for you: If you were born after 1953 and delay filing for your own benefit past your FRA, you can no longer get the spousal benefit in the interim. That said, those born in 1953 or earlier still have this strategy available.

No COLA in 2016
One thing that is not changing this year is the cost of living adjustment (COLA) for Social Security benefits. Because the inflation rate for 2015 was 0 percent, those who are already receiving Social Security will see no change to their benefit level in 2016.

When you decide to file for benefits involves a number of factors, including your life expectancy, if you plan to continue working, if you need the money to support your retirement and the effect on your spouse. Before making any decisions, consult with your qualified tax advisor. Your financial advisor can then work with you to see how Social Security filing strategy and your investments fit together within your overall retirement income picture.

Michael R. Sceiford is an Edward Jones financial advisor in Port Jefferson.

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By Nancy Burner

Retirement can be an exciting new chapter in someone’s life, but it can also be stressful. The change of lifestyle and income source can lead to anxiety for many individuals reaching retirement. There may be a fear that there is not sufficient income to meet monthly needs or sufficient resources to last the remainder of his or her life.

The reality is that people are living longer and require stable income to meet their daily expenses. A person can maximize benefits and income while preserving assets for the next generation provided that the proper planning has been put into place.

One key strategy in planning for retirement income is maximizing your benefit under the Social Security system. Social Security income will play a major role in monthly income for many retired seniors and should not be overlooked or ignored. Knowing the appropriate time to start taking the benefit will impact the amount of income a person will receive.  “Full retirement age” will depend on when the individual was born.

For those born in 1954 or before, the full retirement age is 66 years old. For those born after 1954 but prior to 1960, the full retirement age gradually rises a few months at a time. For example, someone born in 1957 has a full retirement age of 66 years and 6 months. Anyone born in 1960 and later has a full retirement age of 67 years old.

Taking Social Security prior to the “full retirement age” can result in reduction penalties that could potentially cost the individual almost half of what might have been earned if the individual had waited. Once a person reaches “full retirement age,” it may be advantageous to wait a few years longer until 70 years old to begin collecting Social Security. Unfortunately, the only way to determine if waiting until age 70 is beneficial would be to know how long you are going to live.

Social Security Administration determines your benefit based on the average life expectancy. If the person outlives the average life expectancy, then it was a better choice to wait until 70 to begin the benefit. Nevertheless, no one knows how long they will live, but the reality is that people are living longer and it is essential to make sure you have sufficient income to support your daily needs regardless of how long you live.

It may be much easier said than done to wait to take Social Security. In a perfect world, everyone could wait until the perfect age to start taking Social Security in order to maximize their benefit. The reality may be that income is needed sooner than the ideal age. In this circumstance, there are several tactics that can be used in order to get income, but preserve your Social Security income and allow it to grow until you reach 70 years old.

It is essential to understand that a person may be entitled to Social Security benefits based on a spouse, ex-spouse, deceased spouse or deceased ex-spouse’s earning record. Once a person reaches “full retirement age,” but has not reached age 70, it may be advantageous to use a restricted application and apply only to claim a spousal (or ex-spousal) benefit and wait until 70 to collect your own benefit. This would enable you to start getting Social Security income, but preserve your benefit to allow for the possibility of a higher income. It is important to consult a professional in your area regarding different tactics that can be used to maximize your retirement benefits.

Retirement should be the time in your life where you can relax. The stress of not having enough income to meet necessary daily expenses can be avoided with having the proper plan in place to meet your income needs and give you peace of mind.

Nancy Burner, Esq. has practiced elder law and estate planning for 25 years. The opinions of columnists are their own. They do not speak for the paper.

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By Jonathan S. Kuttin

As more baby boomers reach retirement age, they’re realizing the valuable role Social Security will play as a source of lifetime income. Claiming Social Security benefits can be far more complex than you may realize. Here are seven essential things about Social Security to understand as you determine how Social Security will fit into your overall retirement income strategy:

You can start claiming benefits any time between ages 62 and 70: When you’re working and paying Social Security taxes (via your paycheck), you earn credit toward your Social Security retirement benefits. To qualify for these benefits, you need to contribute at least 40 credits to the system, which is typically 10 working years (although it does vary). Alternatively, if you have never worked and you’re married to someone who qualifies, you may earn a spousal benefit. When claiming your own benefit, you can begin receiving Social Security at age 62 or delay receiving Social Security up to your 70th birthday.

Full retirement age is changing: The age to qualify for a “full” retirement benefit from Social Security used to be 65. Now it is up to 66 (for those born between 1943 and 1954). It increases by two months per year for those born between 1955 and 1959. For those born in 1960 or later, full retirement age is currently defined as 67.

The longer you wait, the larger your benefit: The amount of your benefit depends on the age you choose to first begin receiving Social Security. For example, if you collect beginning at 62 and your full retirement age is 66, your benefit will be about 25 percent lower. On the flip side, your benefit will increase by about 8 percent each year you delay taking Social Security after your full retirement age up to your 70th birthday.

Spousal benefits give married couples extra flexibility: If both spouses worked, they each can receive benefits based on their own earnings history. However, a lower earning spouse can choose to base a benefit on the higher earning spouse’s income. A spousal benefit equals 50 percent of the other spouse’s benefit. Note that if you claim a spousal benefit before full retirement age, it will be reduced. The maximum spousal benefit you can collect is by taking the benefit at your full retirement age (based on the benefit your spouse would earn at his or her full retirement age).
You also can choose to collect a spousal benefit initially and delay taking your own benefit, allowing your benefit amount to increase. Then you can claim your benefit when you turn 70.

There may be a long-term advantage if a higher earning spouse delays Social Security: If the higher earning spouse is older (or has more health concerns that could affect longevity), it may make sense to delay taking Social Security as long as possible up to age 70. When the spouse with the higher benefit dies, the surviving spouse will collect the higher benefit that was earned by the deceased spouse. The higher the deceased spouse’s benefit, the larger the monthly check for the surviving spouse.

Claiming benefits early while still working can reduce your benefit: If you begin claiming Social Security before your full retirement age but continue to earn income, your Social Security benefit could be reduced. If your earnings are above a certain level ($15,720 in 2015), your Social Security checks will be reduced by $1 for every $2 you earned in income above that threshold. In the year you reach full retirement age, that threshold amount changes. $1 is deducted for every $3 earned above $41,880 up to the month you reach full retirement age. Once you reach full retirement age, you can earn as much income as you want with no reduction in your Social Security benefits.

Benefits you earn may be subject to tax: According to the Social Security Administration, about one-third of people who receive Social Security have to pay income tax on their benefits. You may want to consult a tax professional to determine what impacts this will have on your overall benefits.
These essential points are just a beginning. There’s much more to consider. Consult with your financial advisor, tax professional, your local Social Security office and/or Social Security’s website, www.ssa.gov, to find out more before you make your final decisions about when to first claim Social Security benefits.

Jonathan S. Kuttin is a  private wealth advisor with Kuttin-Metis Wealth Management, a private advisory practice of Ameriprise Financial Services, Inc. in Melville, NY. He specializes in fee-based financial planning and asset management strategies and has been in practice for 19 years.