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September 4 - October 29, 2016
Socialization of risk, on the other hand, simply means that certain risks are shared by society as a whole, rather than by individuals.
We as a nation can decide to end Social Security, but the program can’t fail in the way that a pension fund could.
Despite the persistent myths to the contrary, members of Congress, the president and vice president, and all other high-level federal employees pay into Social Security and have done so since 1983.)
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. Pay-for-what-you-get fairness does not have a place in such a program.
If T.C. applies for benefits, he will also receive a monthly benefit check representing a portion of Janie’s full benefits. (Since he is below his full retirement age, he will not yet receive half of Janie’s benefit.)
the changes to the Social Security rules now stipulate that no dependent beneficiary can take benefits based on a worker’s record if that worker’s benefits have been suspended.
If you have reached full retirement age, then your survivor benefit is equal to the full amount of what your spouse’s retirement benefit would be.
But the very month that you reach your full retirement age, you will be allowed to keep every penny of your benefits, no matter how much money you are earning through other work.
Unless your retirement income is less than a certain amount, you can expect to pay taxes on anywhere from 50 percent to 85 percent of a portion your Social Security benefits.
tax-free distributions from a Roth IRA or Roth 401(k) are not.)
Here is a list of the documentation that you will need: Your Social Security number Your original birth certificate or other proof of birth Proof of U.S. citizenship or lawful alien status if you were not born in the United States Your military discharge papers, if you served A copy of either your W-2 forms or your self-employment tax return for the previous year
bank account information and routing number.
The requirements for eligibility for Social Security Disability are so stringent that 65 percent of applications are initially denied,
Social Security needs to determine that you are not only unable to perform your own job, but that you are also unable to perform any job that might be related to your field of expertise and education.
In addition, your condition must either have lasted or be expected to last for at least one year, or your condition must be expected to result in your death.
the break-even analysis has been found to predispose pre-retirees into choosing an earlier retirement age based upon a single piece of information
that does not account for a number of other important factors that may have a much larger impact on the quality of their retirement.
even retirees who can afford to live off their portfolios early in retirement may find themselves using up the money they had hoped to leave their families or favorite charities when they die. Indeed, signing up for early retirement benefits can potentially help to preserve a nest egg, particularly if your retirement coincides with a market downturn.
Although expenses generally go down once you retire, the rule-of-thumb is that retirees need to replace 70–80 percent of their income in retirement in order to live comfortably.
The tax torpedo occurs when you take a distribution from your IRA or 401(k), which increases your provisional income, making your Social Security benefits taxable.
The tax torpedo can be a double whammy for retirees who take early Social Security benefits because they will be taxed on a larger portion of a reduced benefit. In addition, the tax torpedo can continue to affect a retiree’s portfolio and tax burden throughout her retirement.
Had the Peabodys either worked longer or taken larger distributions from their IRA (and delayed their Social Security benefits), their current tax burden would be reduced by nearly 40 percent.
“The reduced benefit means the retiree will have to withdraw more from his IRA, and since every dollar withdrawn is taxed, he’ll have to withdraw even more to cover the tax bill.” This only gets worse as the retiree ages and potentially needs to take more money from her IRA or 401(k) to cover healthcare, making more of her benefits taxable.
In particular, retirees with portfolios between $200,000 and $600,000 are the most vulnerable to the tax torpedo and are best served by delaying Social Security benefits,
(You can use IRS Worksheet 1—Figuring Your Taxable Benefits to help make these calculations.
delaying Social Security benefits is an important strategy for mitigating the possibility that you outlive your savings.
the most common reason the very elderly become impoverished is failing health and the associated medical costs.
Social Security benefits come out ahead on both counts compared to other investments. Not only is there no volatility of Social Security benefits—they will be there for you no matter what, backed by the full faith and credit of the United States government—but the cost-of-living adjustment (COLA) ensures that the buying power of your benefits will remain the same throughout your entire life. There is no investment that can offer such a guaranteed, inflation-protected return.
In addition, every year that you wait for Social Security benefits between the ages of sixty-two and seventy will give you approximately 8 percent more annually in your benefits. There are no investments that can guarantee that kind of return within any given eight-year period.
“If you’re excited about an investment, then it’s probably a bad idea. Because excitement is not the affect [mood] under which you make your best decisions.
“The better known and more frequently quoted [experts] are, the less reliable their guesses about the future are likely to be.” This sounds ridiculous until you examine the role of media in experts’ predictions. First, the experts who manage to make it onto a national stage are the ones who have built a reputation that they want to hold on to. They will likely play up any prediction they have made that came true, and gloss over any mistakes.
The other common mindset for taking Social Security is to look at your benefits as a type of insurance. This is a helpful mindset to use, since it takes the break-even analysis off the table.
Treating Social Security benefits as a type of insurance policy is a way to protect yourself from another type of catastrophe. Specifically—the catastrophe of outliving your savings.
Treating Social Security as a type of insurance—meaning you want to maximize your protection, rather than your profit—will allow you to better shield yourself and your family from the danger of falling into poverty.
survivor benefits change depending upon when the deceased beneficiary took Social Security.
The longer Jack waits to take his retirement benefit, the better off Winifred will be if he predeceases her. This is true even if he passes away without taking his retirement benefit (provided she waits to take her survivor benefit until her full retirement age).
survivor benefit will be worth however much Jack would have collected in retirement benefits had he applied for them on the day he died.
Because it’s foolhardy to assume that all thirty (plus or minus) years of your retirement will see market gains, the bucket method is a savvy way to prepare for the times when your portfolio takes a hit. In addition, it helps you plan ahead for your early retirement living expenses, which can help you prepare for delaying Social Security benefits.
divide their portfolios into separate income “buckets.” Each of these buckets is intended to handle a different time period in retirement. The most common way to allocate buckets is to separate them into three time periods and asset classes:
Cash equivalents include CDs, U.S. Treasury bills, and money market funds.
the second bucket typically consists of a mix of bonds and stock, leaning more toward the safety of bonds.
The third bucket is where you will be most aggressive in your investments, because you will not be accessing the money in this portion of your portfolio until after you have been retired about fifteen years.
As the years go by, retirees using the bucket method will need to redistribute their assets from one bucket to another in order to continue to meet the goals of each portion.
The bucket method allows for a great deal more flexibility than the 4 percent rule. You can make the bucket method work for you, even if you are forced to retire early or you got a late start in saving. Just remember that there are no guarantees—so even if you are willing to let compound interest do its magic on your third bucket of investments, always hedge your bets.
Set up a second income stream. This is an important strategy for ensuring your income, no matter the status of your career. Many second income streams are active—second jobs, consulting work, and the like—
For instance, you may find that living without cable TV or a cell phone data plan can actually improve your quality of life, while you also reduce your expenses. Cutting your expenses now may help you realize you simply don’t need many of the things you have long thought of as necessities.
Your goal is not to agonize over what you won’t be able to afford, but to discover the things most important to you that will actually be possible even under the worst-case financial scenario.
You can only collect spousal benefits if your spouse has filed for RIB.
When you file for any benefit, you will be deemed to file for all the benefits you are eligible to receive.
Beneficiaries born in 1953 or earlier will only receive their unreduced spousal insurance benefits (SIB) if they wait until they have reached full retirement to file restricted applications for SIB, and if their spouses have already filed for RIB.
