Deciding when to begin receiving Social Security benefits is a major financial issue for anyone approaching retirement because the age at which you apply for benefits will affect the amount you'll receive.
If you're married, deciding when to retire can be especially complicated because you and your spouse will need to plan together. Fortunately, there are a couple of strategies that are available to married couples that you can use to boost both your Social Security retirement income and income for your surviving spouse.
Generally, a husband or wife is entitled to receive the higher of his or her own Social Security retirement benefit (a worker's benefit) or as much as 50% of what his or her spouse is entitled to receive at full retirement age (a spousal benefit). But here's the catch--under Social Security rules, a husband or wife who is eligible to file for spousal benefits based on his or her spouse's record cannot do so until his or her spouse begins collecting retirement benefits. However, there is an exception--someone who has reached full retirement age but who doesn't want to begin collecting retirement benefits right away may choose to file an application for retirement benefits, then immediately request to have those benefits suspended, so that his or her eligible spouse can file for spousal benefits.
The file-and-suspend strategy is most commonly used when one spouse has much lower lifetime earnings, and thus will receive a higher retirement benefit based on his or her spouse's earnings record than on his or her own earnings record. Using this strategy can potentially boost retirement income in three ways: 1) the spouse with higher earnings who has suspended his or her benefits can accrue delayed retirement credits at a rate of 8% per year (the rate for anyone born in 1943 or later) up until age 70, thereby increasing his or her retirement benefit by as much as 32%; 2) the spouse with lower earnings can immediately claim a higher (spousal) benefit; and 3) any survivor's benefit available to the lower-earning spouse will also increase because a surviving spouse generally receives a benefit equal to 100% of the monthly retirement benefit the other spouse was receiving (or was entitled to receive) at the time of his or her death.
Here's a hypothetical example. Leslie is about to reach her full retirement age of 66, but she wants to postpone filing for Social Security benefits so that she can increase her monthly retirement benefit from $2,000 at full retirement age to $2,640 at age 70 (32% more). However, her husband Lou (who has had substantially lower lifetime earnings) wants to retire in a few months at his full retirement age (also 66). He will be eligible for a higher monthly spousal benefit based on Leslie's work record than on his own--$1,000 vs. $700. So that Lou can receive the higher spousal benefit as soon as he retires, Leslie files an application for benefits, but immediately suspends it. Leslie can then earn delayed retirement credits, resulting in a higher retirement benefit for her at age 70 and a higher widower's benefit for Lou in the event of her death.
Another strategy that can be used to increase household income for retirees is to have one spouse file for spousal benefits first, then switch to his or her own higher retirement benefit later.
Once a spouse reaches full retirement age and is eligible for a spousal benefit based on his or her spouse's earnings record and a retirement benefit based on his or her own earnings record, he or she can choose to file a restricted application for spousal benefits, then delay applying for retirement benefits on his or her own earnings record (up until age 70) in order to earn delayed retirement credits. This may help to maximize survivor's income as well as retirement income, because the surviving spouse will be eligible for the greater of his or her own benefit or 100% of the spouse's benefit.
This strategy can be used in a variety of scenarios, but here's one hypothetical example that illustrates how it might be used when both spouses have substantial earnings but don't want to postpone applying for benefits altogether. Liz files for her Social Security retirement benefit of $2,400 per month at age 66 (based on her own earnings record), but her husband Tim wants to wait until age 70 to file. At age 66 (his full retirement age) Tim applies for spousal benefits based on Liz's earnings record (Liz has already filed for benefits) and receives 50% of Liz's benefit amount ($1,200 per month). He then delays applying for benefits based on his own earnings record ($2,100 per month at full retirement age) so that he can earn delayed retirement credits. At age 70, Tim switches from collecting a spousal benefit to his own larger worker's retirement benefit of $2,772 per month (32% higher than at age 66). This not only increases Liz and Tim's household income but also enables Liz to receive a larger survivor's benefit in the event of Tim's death.
Every situation is unique, and these strategies may not be appropriate for all couples.
When deciding when to apply for Social Security benefits, START WITH YOUR SOCIAL SECURITY MAXIMIZATION REPORT – simply ask me, and make sure to consider a number of scenarios that take into account factors such as both spouses' ages, estimated benefit entitlements and life expectancies.
For more information about your options and the benefit application process, contact the Social Security Administration at 800-772-1213 or visit www.socialsecurity.gov.
Retirement is a time when you get to enjoy your life and spend the time doing what you want to do. But the trick is to know exactly where you will do it. Here are some tips to help you figure that out.
The climate of a place can have a significant impact on an individual’s quality of life. You might want to consider the region’s average temperature, humidity levels, and precipitation rates before settling on a location.
A town's culture is a reflection of the people who inhabit it. The day-to-day life in a town is heavily influenced by the morals, values and traditions practiced by the majority of its inhabitants. In the United States, there are many cities that have a great retirement culture, with some focusing more on developing retirement communities while others focus more on the services they offer. Factors to consider when choosing which city to retire in include affordability, proximity to family and friends, and entertainment.
Healthcare is essential to living a good life. A crucial aspect of living well is having access to quality healthcare. However, what makes the difference between good healthcare and bad? There are many factors that influence the quality of services, such as available doctors and medical specialists, cost of treatment and availability of emergency services.
Here are some good places to look at first:
The term “cost of living” refers to the amount of money required to cover living expenses in a certain geographical location. This number typically includes housing costs, health care, food prices and taxes. Cost of living is most commonly used to compare living in one city to another as a way to gauge affordability and what type of lifestyle you can reasonably achieve based on your income. It can also help you determine the right salary if you’re considering relocating to a new city for a job.
While there are quite a few cost of living calculators online that will allow you to compare two different locations, you can also do the calculation yourself. With the cost of living index for each area, the formula is relatively simple.
[(City B – City A)/City A] x 100
Let’s say you currently live in City A, which has an index of 90.9, and want to move to City B, which has an index of 115.1. To compare the cost of living between these two cities, you would complete the following steps:
So, in order to maintain your current standard of living after moving from City A to City B, you would need about a 27% increase in your income.
Every year, more and more people are retiring in Florida. With its gorgeous beaches, diverse wildlife, and laid-back lifestyle, it's no wonder why.
For those who prefer an entire community of neighbors of a certain age, Florida offers plenty of 55 and older communities, most notably The Villages in Central Florida.
One of the reasons why many retirees settle in Florida (besides the weather) is that property taxes are relatively low and there is no state income tax. You can even deduct property taxes from your second home as well as interest on the mortgage.
For seniors wishing to continue working in retirement, this is the place to be. While the cost of living in California is generally higher than the rest of the country, so is the income. The median household income in California is $8,000 per year higher than the national average.
Most of California stays in the 70s year round with no chance of snow for most of the state. The mild climate draws seniors from all over the country, promising sunshine filled days of exploring California’s stunning natural beauty.
Retiring in Arizona brings major tax breaks because Arizona does not tax on social security income. There is also no gift tax, estate tax, or inheritance tax. This can make a huge impact for seniors living off of their savings. On other taxable income, the rates are low, around 2.59% for married filers with $20,690 of taxable income to 4.54% for married filers with more than $310,317 of taxable income. It is important to note that private pensions are fully taxed. For those receiving a federal government or military pension, only the first $2,500 is exempt from Arizona state taxes.
The entire state was meant to be explored – and it’s not all desert. From skiing in Flagstaff to fishing the Colorado River to bouldering in northern Phoenix, Arizona is the place to feed an adventurous soul. Camp or hike at one of the state’s national parks, catch a cheap spring training baseball game, ski, boat, take a Jeep off-roading, or spend the day fishing – Arizona has it all.
When you choose to retire in Colorado, you enjoy immense tax benefits, which include a large deduction on all retirement income and the state boasts some of the lowest property taxes in the country. The average effective rate in the state is 0.57%. Additionally, food and medicine are exempt from sales tax. Colorado is considered to be tax-friendly for retirees, allowing a deduction of $24,000 per year on all retirement income for taxpayers 65 years old and older.
Colorado has the second lowest obesity rate in the country and draws retirees from all over the country with an active lifestyle encouraged by outdoor recreation and the state’s mild climate. The state is ranked 8th in the nation for good health by the United Health Foundation. Choosing to retire in Colorado means choosing health and wellness.
Some people know what they want to accomplish with their lives even as children. They are driven, are preparing for their future, and have chosen rewarding occupations. However, not everyone is that fortunate. Perhaps you aspired to be a doctor but were unable to pass advanced chemistry. Maybe you played football until you were tackled by a 300-pound opponent. Perhaps you didn't know what you wanted to do and settled for a job that was accessible at the time, paid the bills, and was rewarding enough to keep you going.
You don't have to work for a living after you retire. It's time to quit settling and start pursuing your hobbies in retirement. What if you don't have a passion or aren't sure what it is? Here are some simple tips to figure out what you actually want to do after you retire. Answer the questions honestly to aid in the discovery of fun ways to spend your time after retirement.
What aspects of your job did you enjoy and which did you despise? Perhaps you detested sitting at your desk but delighted in planning and attending meetings. If that's the case, your church or community center can benefit from your assistance as a volunteer who plans programs and trips. If you enjoy collaborating with people to achieve a shared objective, and if you didn't like to travel for work maybe consider hobbies closer to home.
What would you want to know more about? Obtain a catalog from your local adult education program or your community college's continuing education section. Take a look at the course descriptions. Maybe you've always wanted to learn more about history, yoga, technology, or another language. Even if you don't want to attend a course, this activity might help you figure out where your interests are and where you should focus your efforts.
Do you prefer to work alone or in a group setting? If you enjoy being a part of a group, you definitely don't want to spend hours writing your memoirs in your home office or doing crafts in your garage. Remember to organize social events on a regular basis, or choose a volunteer or part-time employment with a social component. If you love spending time alone, a schedule jam-packed with volunteer responsibilities is probably not for you.
Do you enjoy being outside? If you do, you might want to consider relocating to a warmer area where you can go hiking, kayaking, or play golf or tennis all year. Joining a league that provides a competitive outlet or helps you set a goal to focus your activities could be appealing. If you enjoy a four- or five-mile trek in your neighborhood park, the Appalachian Trail or the Camino de Santiago in Spain can be the perfect challenge for you.
Do you prefer physical or mental exertion? You are aware that you should exercise, but be honest with yourself. If working out isn't your thing, establish plans to obtain the bare minimum of exercise to maintain your health, and then focus your efforts on what you truly like. You might go for a stroll before going to a bridge or chess club, or after your volunteer work at the town historical society, you may go to a yoga session.
Do you enjoy assisting others? In retirement, there are several chances to volunteer. You may assist elderly with food or transportation, or you could tutor youngsters to help them improve their reading and writing abilities. Check your local listings on volunteermatch.org or ask around at your church or community center.
Do you prefer familiar surroundings or do you want continual change? If you've spent your whole life in one area and have solid roots in the community, chances are you'll be content to age in there. However, you may have a long-held longing to break out and explore new territory. You might rent a motor home and try out the RV lifestyle for a bit, or you could travel abroad to see whether you enjoy the adventure of seeing a new country.
Try out a few other hobbies. Take a photography class, go camping for three days, or volunteer with Meals on Wheels. Take note of what piques your curiosity and what makes you uninterested. Experimenting with several activities, particularly early in retirement, might help you discover your passion. And one pastime may not be sufficient to meet all of your requirements. In the afternoon, you may interact with a walking group before retiring to the solitude of your own house to snuggle up with a book or Netflix.
The IRS allows for a remarkable, safe, conservative retirement planning vehicle. It is one of, if not THE most tax-effective asset classes in existence.
I call it a 12-layer cake because of its many layers of benefits to both the product owner and one’s family.
Here are twelve sweet layers of genuine benefits:
To learn more, reach out to me and receive a complimentary and easy Color Of Money self-assessment or Social Security Maximization Report.
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