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How to get Social Security’s biggest bonuses
For those of you on the verge of retirement, deciding when to take Social Security is a big decision that is ultimately tied to your individual circumstance. One rule applies across the board: taking benefits early means you stand to leave a lot of money on the table. In 2014, early claimers will see their monthly benefits reduced by 25 percent compared to what they would have received if they waited claiming until age 66, the current full retirement age. Waiting until claiming benefits until age 70, and you’ll receive 132% of the benefits paid.
The handy chart from Forbes contributor John Wasik following shows the percentage of benefits paid as it relates to age — an excellent tool to share.
For most retirees with adequate savings, the best strategy has always been to wait until either full retirement age or until age 70. Too many retire at the wrong time — leaving some $120,000 in lifetime benefits on the table. Those who retire at 62 leave a lot of money on the table. The government wants you to wait as long as you can before collecting Social Security.
Yet Social Security planning is not as simple as making one decision. If you have a spouse, you have to consider their benefit. There are also survivor benefits. You need a strategy. a good place to start is the Social Security Web site, which has several calculators. Or, you may contact us (AIM) for some guidance.
A Government Accountability Office (GAO) study released last month showed why far too many Americans take Social Security early and the costs of doing so.
*Those who retire at the earliest-possible age tend to need Social Security to supplement their income. Those who wait are less reliant upon the program. One solid way to maximiz Social Security is to save more and fully fund your retirement plans.
According to the GAO: “Our analysis shows that the median income for those who delay was 45 percent higher after claiming benefits than for those who claimed early, and 33 percent higher at age 72. Although delayed claimers have higher median Social Security benefits, those benefits make up a smaller portion of household income than for early claimes,”
*Those who retire early can do so with greater health security. You may now obtain policies to fill the gap between age 62 and 65. That might allow you to wait at least until age 65 to collect Social Security. We can assist you in obtaining the best coverage for you.
Below is the chart showing the % of full benefits paid at different ages.
Age You Take Benefits % of benefits paid
Source: GAO analysis of Social Security Administration documentation. Note: The Primary Insurance Amount (PIA) is the benefit a person would receive if he/she elects to begin receiving Social Security retirement benets at his/her full retirement age.
Would a smartphone break improve productivity for your business? Think of a smartphone break as the new cigarette break. Allowing workers to take small breaks on their phones throughout the day could positively influence and performance and their perceived well-being at the end of the workday, accourding to new research from Kansas State University.
It certainly is worth a try.
For many Americans, Social Security is the bedrock of retirement income. Yet future retirees could find themselves on shaky ground. The Social Security Board of Trustees, in its laest annual report, estimated that the retiement program would only be able to pay out 75% of scheduled benefits starting in 2033.
You can’t control how the government might fix that problem. Inform yourself about Social Security to ensure that you claim the maximum amount of benefits wo which you are entitled. Here are some essentials you need to know. Check our client resources page to click on the Social Security web site or www.ssa.gov.
It’s an age Thing
Your age when you collect Social Security has a big impact on the amount of money you ultimately get from the program. The key age to know is your full retirement age. For people born between 1943 and 1954, full retirment age is 66. It gradually climbs toward 67 if your birthday falls between 1955 and 1959. For those born in 1960 or later, full retirement age is 67. You can collect Social Security as soon as you turn 62, but taking benefits before full retirement age results in a permanent reduction of as much as 25% of you full benefit.
Besides avoiding a cut in benefits, waiting until full retirement age to take benefits can open up a variety of claiming strategies for married couples. Age also comes into play with children: Minor children of Social Security beneficiaries can be eligible for benefits. Children up to age 18, or up to age 19, if they are full-time studens who haven’t graduated from high school, and disabled children older than 18 may be able to receive up to half of a parent’s Social Security benefit.
How benefits are factored
To be eligible for Social Security benefits, you must earn at least 40 “credits”. You can earn up to four credits a year, so it takes ten years of covered work to qualify for Social Security. In 2014, you must earn $1,200 to get one Social Security work credit and $4,800 to get th maximum four credits for the year.
Your benefit is based on the 35 years in which you earned the most money. If you have fewer than 35 years of earning, each year with no earnings will be factored in at zero. You can increase your benefit by replacing those zero years, say, by working longer, even if is part-time. No low earning year will replace a higher-eaning year. The benefit isn’t based on 35 consecutive years of work, but the highest-earning 35 years. If you decide to phase into retirement by going part-time, you won’t affect your benefit at all if you have 35 years of higher earnings. But if you make more money, benefit will be adjusted upward, even if you are still working while taking your benefit. There is a maximum benefit amount you can receive , though it depends on the age you retire. For someone at full retirement age in 2014, the maximumn monthly benefit is $2642. Yau can estimate your own benefit by using Social Security’s online Retirement Estimator.
One of the most attractive features of Social Security benefits is the government adjusts the benefit for inflation. Known as a c0st-of-living-adjustment, or COLA, this inflation protection can help with rising living expenses during retirement. The COLA, which is automatic, is quite valuable, buying inflation protection on a private annuity can be expensive.
Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government. For example, in2009m beneficiaries receied a COLA of 5.8%. But, in 2010 and 2011 there was no COLA adjustment. In 2012 it was 3.6%, 1.7% for 2013 and 1.5% in 2014. The COLA for the following year is announced in October.
The extra benefit of a spouse
Marriage brings couples an advantage when it comes to Social Security. Namely, one spouse can take a spousal benefit up to 50% of the other spous’s benefit. e.g., if your benefit is worth $2,000 but your spouse’s is only worth $500, your spouse can switch to a spousal benefit of $1,000.
The calculation changes if benefits are claimed before full retiement age. If you claim your spousal benefit before your full retiement age you won’t get the full 50%. If you take your own benefit early and then later switchto a spousal benefit, your spousal benefit will still be reduced.
Note that you cannot apply for a spousal benefti until your spouse has applied for his/her own benefit.
Income for survivors
If your spouse dies before you, you can take a survivor benefit. If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his/her death (or 100% of what your spouse would have been eligible to receive if he or she had not yet taken benefits). A widow or widower can start taking a survivor benefit at age 60, but the benefit will be reduced because it’s taken before full retirement age.
If you remarry before age 60, you cannot get a survivor benefit. But if you remarry after age 60, you may be eligible to receive a survivor benefit based on your former spouse’s earnings record. Eligible children can also receive a survivor benefit worth up to 75% of the deceased’s benefit.
Divorce a spouse, not the benefit
What if you were married, but your spouse is now an ex-spouse? Just because you’re divorced doesn’t mean you’ve lost the ability to get a benefit based on your former spouse’s earnings record. You can still qualify to receive a benefit based on his/her record at least ten years and you are 62 or older.
Like a regular spousal benefit, you can get up to 50% of an e-spouse’s benefit — less if you claim before full retirement age. You ex-spouse never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex’s record has no effect on his or her benefit or the benefit of your ex’s new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still take a benefit on the ex’s record if you have been divorced for at least two years.
Note: Ex-spouses can also take a survivor benefit if their ex has died first, and like any survivor benefit, it will be worth 100% of what the ex-spouse received. If you remarry after age d60,. you will still be eligible for the survivor benefit.
It can pay to delay
Once you hit full retirement age, you can choose to wait to take your benefit. There’s a big bonus to delaying your claim. Your benefit will grow by 8% a year up until age 70. Any cost-of-living adjusments will be included too, so you don’t forgo those by waiting.
While a spousal benefit doesn’t include delayed retirement credits, the survivor benefit does. By waiting to take his benefit, a high-earning husband, for example, can ensure that a lower-earning wife will receive a much highter benefit in the event he dies before her. That extra 32% of income could make a big difference for a widow who has lost her husband’s stream of Social Security income.
One option for a spouse who is delaying his benefit but still wants to bring some Social Security income into the household is to restrict his application to a spousal benefit only. To use this strategy, the skpouse restricting his or her application must be at full retirement age. So the lower-earning spouse, say the wife, applies for benefits on their own record. The husband then applies for a spousal benefit only and he receives half of his wife’s benefit while his own benefit continues to grow. When he is 70, he can switch to his own, higher benefit. Exes at full retirement age can use the same stategy — they can apply to restrict their applicaion to a spousal benefit and let their own benefit grow.
File and then suspend
Here’s a Social Security claiming strategy that is perfectly legal and potentially lucrative. Let’s say a husband decides he wants to delay taking his benefits until age 70 to maximize the amount of his monthly check. But he wants his wife to be able to take a spousal benefit, because it would be higher than her own benefit.
To make that happen, the husband, who must be at full retirement age, can file for his benefits and then immediately suspend them. Because he has applied for benefits, his wife can now take a spousal benefit based on his record. And because he suspended his own benefit, his benefit will earn delayed retirement credits for each year he waits until age 70.
Uncle Sam wants his take
Bringing in too much money can cost you if you take Social Security benefits early while you are still working. With what is commonly known as the earnings test, you will forfeit $1 in benefits for every $2 you make over the earning limit, which in 2014 is $15,480. Once you are past full retiement age, the earnings test disappears and you can make as much money as you want with no impact on benefits.
The good news is that any benefits forfeited because earning exceed the limits are not lost forever. At full retirement age, the Social Security Administration will refigure your benefits going forward to take into account benefits lost to the test. For example, if you claim benefits at age 62 and over the next four years lose on full year of benefits to the earning test, at age 66 your benefits will be recomputed — and increased — as if you had taken benefits 3 years early, instead of four. That basically means the lifetime reduction in benefits will be 20% rather than 25%.
What you should know about Medicare
Heading into your retirement years brings a host of new topics to learn. One may be Medicare. Figuring out when to enroll, what coverage will be best for you and can be daunting without the assistance of a knowledgeable insurance advisor. Here are ten essential things you should know about Medicare.
Medicare comes with a cost.
Medicare is divided into parts. Part A, which pays for hospital services, is “free” if either you or your spouse paid Medicare payroll taxes for t least ten years. (People who aren’t eligible for “free” Part A can pay a monthly premium of several hundred dollars.) Part B covers doctor visits and outpatient services and has cost of $104.90 for most people. Part D, covers prescription drug costs, also has a monthly charge that varies depending on which plan you choose. In addition to premium costs, you will also be subject to co-payments, deductibles and other out-of-pocket costs.
You can fill the gap
Benificiaries of traditional Medicare will likely sign up for a medigap or medicare supplemental insurance plan offered by private insurance companies to help cover deductibles, co-payments and other gaps. You can switch medigap plans at any time, but you could be carged more or denied coverage based on your health if you choose or change plans more than six months after you first signed up for Part B. The waiver of pre-existing conditions are not exempted by the ACA. Part B Medigap policies are identified by letters A through N. Each policy that goes by the same letter must offer the same basic benefits, and usually the only difference between same-letter policies is the companies. Plan F is the most popular policy because of its comprehensive coverage.
There is an All-in-One option
You can choose to sign up for tradional Medicare — Parts A, B, and D, and a supplemental policy. Or you can go to a Medicare Advantage plan which offers comprehensive coverage through private insurance companies. Part C Medicare Advantage has a monthly cost, in addition to the Part B premium, that varies depending on which plan you chose. With Medicare Advantage, you don’t need to sign up for Part D or buy a medigap policy. Like traditional Medicare, you’ll be subject to co-payments, deductibles and other out-of-pocket costs. The total costs be lower than for traditional Medicare. Your choice of providers may be more limited with Medicare Advantage than with traditional Medicare. It is prudent to consult with a trusted advisor that has completed the CMS mandorty training (annually) and also the training for the company’s policy offered.
High Income earners pay more
If you choose traditional Medicare and your income exceeds a certain threshold, you will pay more for Parts B and D. Premiums for bothe parts can come with a surcharge when your adjusted gross income (plus tax-exempt interest) is more than $85,000 for a single or $170,000 if married filing jointly. In 2014, high income earners pay from $146.90 to $335.70 per month per person for Part B coverage. They also pay extra for Part D coverage, ranging from $12.10 to $69.30 per month in addition to their regular premiums.
When to sign up
You are eligible for Medicare when you turn 65. If you are already taking Social Security benefits, you will be automatically enrolled in Parts A and B. You can choose to turn down Part B since it has monthly cost; if you keep it the cost will be deducted from Social Security if you have already claimed benefits.
For those who have not started Social Security, you will have to sign up for Parts A and B, or Medicare Advantage. The seven-month initial enrollment period begins three months before the month you turn 65 and ends three months after your birthday month. To ensure coverage starts by the time you turn 65, sign up in the first three months.
People still working may want to delay signing up for Medicare, but they will need to follow the rules carefully to avoid significant penalties when the do eventually enroll.
A quartet of enrollment periods
There are several enrollment periods, in addition to the seven-month initial enrollment period. If you missed signing up for Part B during that initial enrollment period and you aren’t working, you can sign up for Part B during the general enrollment period that runs from January 1 to March 31 and coverage will begin on July 1. But you will have to pay a 10% penalty for life for each 12 -month period you delay in signing up for Part B. Those who are still working can sign up later without penalty during a special enrollment period, which lasts for eight months after you stop working (regardlesssd of whether you have retiree health benefits or COBRA). If you miss your special enrollment period, you will need to wait for the next general enrollment period to sign up. Open enrollment, which runs from October 15 to December 7 every year, allows you to change Part D plans or Medicare Advantage plans for the following year. (People can now change Medicare Advantage plans outside of open enrollment if they switch into a plan given a five-star quality rating by the government.)
Costs in the “Doughnut Hole” shrinking
One cost for Medicare is decreasing — “the dreaded” Part D “doughnut hole.” That is the period during which you must pay out of pocket for your drugs. For 2014, the coverage gap begins when a beneficiary’s total drug costs reach $2,850. Catastrophic coverage, with the government picking up most costs, begins when a patient’s out-of-pocket costs reach $4,550. Because pf tje health care law, the amount a beneficiary pays while in the doughnut hole is gradually decreasing, Some plans retain the low co-insurance for generic drugs through the doughnut hole. By 2020 beneficiaries will pay just 25% of the costs of their generic and brand-name drugs while in the coverage gap. For 2014, the discount on brand-name drugs in the coverage gap remains at 52.5%, and the federal subsidy for generics will rise to 28%, from 21%.
You get more free preventive services
Health care “reform” also increased the number of free preventive services available to Medicare beneficiaries. You get an annual free “wellness” visit to develop or update a personalized prevention plan. Beneficiaries also get a free cardiovascular screening every five years, annual mammograms, annual flu shot, and screenings for cervical, prostate and colorectal cancers.
What Medicare does not cover
While Medicare covers your health care, it generally does not cover long-term care — an important distinction. Under certain conditions, particularly after a hospitalization to treat an acute-care episode, Medicare will pay for medically necessary skilled-nursing facility or home health care. [Note the 3 day stay must be in-patient and not just for observation.] But Medicare does not cover costs for “custodial care” — that is, care that helps you with activities of daily living, such as dressing and bathing. To cover those costs, you will have to pay out of pocket or have long-term-care insurance. Trational Medicare also does not cover routine dental or eye care and some items such as dentures or hearing aids. For more on tests, items or services that Medicare does not cover, check www.medicare.gov/coverage/your-medicare-coverage.html.
Have the right to appeal
If you disagree with a coverage or payment decision made by Medicare or a Medicare health plan, you can file an appeal. The appeals process has five levels, and you can generally go up a level if your appeal is denied at a previous level. Gather any information that may help your case from your doctor, health care provider or supplier. If you think your health would be seriously harmed by waiting for a decision, you can ask for a fast decision to be made and if your doctor or Medicare plan agrees, the plan must make a decision within 72 hours.
We have a full line of Medicare Supplement and Medigap plans available.
How do you blunt the high cost of Long Term Care? If you have priced the cost of Long Term Care Insurance (LTCI) you have found how expensive it is. Whether in a Nursing Facility or for Home Care, the LTCI premium is prohibitive for most middle income families. We have a Short Term Care policy that can help prevent financial disaster.
Most nursing or home care is less than one year. See how affordable a STC policy can be. The alternative can destroy your life time of saving. Covering both spouses offers a 10% discount. Call or e-mail us.
Did you know the purpose of Critical Illlness Insurance is not because you are going to die but because you are going to survive? Do you know anyone who has had a heart attack, stroke, cancer, coronary artery or kidney failure and did not die but survived? Do you know how great the expenses not covered by their medical insurance or savings were? With the advances in medicine inreasing our survival rates, the burden of non-covered expenses is a major concern.
The importance of protecting yourself and your family from a $25,000, $50,000 or greater mountain of debt created before any disability coverage starts is apparent. We can show you cost effective options to help avoid a financial disaster.
Nearly every working American pays into the Social Security program, but not everyone understands the benefits they qualify for due to their contributions. And most workers will no longer get paper statements that explain how much they have paid into the system and what benefits they are likely to receive in retirement. Here are 10 things everyone should know about Social Security:
You contribute 6.2 percent of your income. Workers pay 6.2 percent of their earnings into the Social Security system, up to $113,700 in 2013. Employers pay a matching 6.2 percent for each worker. Self-employed workers must contribute 12.4 percent of their income annually.
How your benefit is calculated. Social Security payments are calculated based on your 35 highest-earning years in the workforce, and are also adjusted for inflation. If you don’t have 35 years of earnings, zeros are averaged in for the years you didn’t pay into Social Security.
Your full retirement age. You can collect the full amount of Social Security you have earned at what the Social Security Administration calls your full retirement age, which varies based on your birth year. The full retirement age used to be 65 for people born in 1937 or earlier. But the full retirement age was gradually increased in two-month increments from 65 and two months for people born in 1938 to 65 and 10 months for those born in 1942. The full retirement age is 66 for baby boomers born between 1943 and 1954. It’s scheduled to further increase from 66 and two months for Americans born in 1955 to 66 and 10 months for people born in 1959. And the full retirement age is 67 for everyone born in 1960 or later. Workers who begin receiving Social Security benefits before their full retirement age will receive reduced payments for the rest of their lives.
You get bigger checks if you delay claiming. You can increase your Social Security checks by delaying when you sign up for Social Security. For example, people born in 1943 or later will get 8 percent larger payments for each year they delay claiming after their full retirement age, up until age 70. After age 70, there is no additional benefit to delaying claiming Social Security. “If you’re going to err, err on taking in later,” says William Reichenstein, a Baylor University professor and principal of Social Security Solutions. “The risk of running out of money in your lifetime is obviously greatest if one or both of you live a long time, and if that’s the case, then it pays to wait. You can’t outlive the Social Security benefit.”
Married couples have additional claiming options. Married couples are entitled to claim Social Security based on their own work record, or payments worth up to 50 percent of the higher earner’s benefit. And when one spouse dies, the surviving spouse will receive an amount equal to the higher earner’s benefit. “The higher earner should base his benefits decision on the age he would be when the second spouse dies,” says Reichenstein. “What would probably be the best strategy is for him to wait until he turns 70 because after the death of the first spouse, the survivor keeps the higher benefits.” Ex-spouses are also eligible for Social Security benefits if the marriage lasted at least 10 years.
Couples who have reached their full retirement age can even claim spousal payments, and then later switch to payments based on their own work record, which will then be higher due to delayed claiming. “The spouse with the higher salary can file and suspend and the other could receive 50 percent of that one’s benefit for four years and then still get the delayed retirement credit,” says Jim Blankenship, a certified financial planner for Blankenship Financial Planning in New Berlin, Ill., and author of A Social Security Owner’s Manual.
Payments are adjusted for inflation. Social Security payments are adjusted each year to keep up with inflation, as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers. Since automatic cost-of-living adjustments were added to Social Security in 1975, they have ranged from 14.3 percent in 1980 to zero in 2010 and 2011.
Insurance benefits for younger people. Social Security isn’t just for retirees. Working-age people who become disabled and are no longer able to work can qualify for Social Security payments. And when a worker dies, his or her spouse and children are often eligible for monthly payments.
Electronic payments are now required. Your Social Security check probably won’t come via mail. New Social Security recipients have been required to select an electronic payment option since May 2011, and approximately 93 percent of Social Security and Supplemental Security Income payments are already directly deposited into a bank or credit union account or loaded onto a prepaid debit card. “It costs the government and ultimately taxpayers a little over a dollar for paper checks and about 10 cents for each electronic transaction,” says Walt Henderson, director of the electronic fund transfer strategy division at the Treasury Department.
You can view your Social Security statement online. The Social Security Administration has stopped mailing paper Social Security statements to most workers to cut costs. If you want to view your complete earnings history, taxes paid into the system, and get a personalized estimate of your expected payments, you’ll need to create a Social Security online account and log in to view your statement. It’s a good idea to periodically check your statement to make sure your information is being recorded correctly and to make decisions about when to claim Social Security. “I recommend that everyone get in the habit of checking their online statement each year, around their birthday, for example,” says Michael Astrue, the former Commissioner of Social Security. You can also now sign up to receive benefits, change your direct-deposit information, and access a benefit verification letter online.
The trust fund has a projected deficit. The assets in the Social Security trust funds are expected to be exhausted in 2033, according to the Social Security Board of Trustees’ annual report. After that, incoming tax revenue will provide enough income to pay out about three-quarters of promised benefits. “If nothing else is done, certainly payments would be reduced dramatically to just what the tax rolls were bringing in each year, but we can always increase the Social Security tax,” says Blankenship. Possible changes that might correct the problem include tax increases, benefit cuts, or a combination of the two approaches. The trustees found that an immediate payroll tax increase of about 1.3 percent for workers and employers or an immediate benefit reduction of 16.2 percent would both correct the projected deficit and restore the program to solvency for the next 75 years.