Retirement Planning: Claiming Social Security Benefits


In our most recent blog post, we discussed the import role that Social Security benefits play in the retirement income plan of most Americans, and provided a framework for understanding the various types of benefits. While sometimes dismissed as inconsequential, Social Security benefits provide a critical source of guaranteed income for most retirees. To wit, Social Security benefits comprise over fifty percent of the retirement income for two-thirds of current retirees and, critically, allow many seniors to live independently. In this blog post, we review how Social Security benefits are taxed and provide guidance on how and when to claim benefits. We encourage readers to review our previous blog post, A Primer on Social Security Benefits, as it provides important information that will aid in your understanding of the strategies outlined below. You can find that blog entry by clicking here.

To begin, an understanding of Social Security retirement benefits requires reviewing a few common terms that are key to making informed claiming decisions.

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Retirement Planning: A Primer on Social Security Benefits

social_security_626Social Security benefits represent an important, but often overlooked, component of retirement income planning. As a source of guaranteed income that cannot be liquidated, it is not often thought of as an asset. In fact, it is the single largest financial asset for many retirees, providing benefits for approximately nine in ten individuals age sixty-five and older and covering ninety-six percent of working-age adults.

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Protecting Yourself From Identity Theft


While certainly not a new problem, identity theft is a growing concern and has gained the dubious distinction of being the number one consumer complaint addressed to the Federal Trade Commission.

As our lives become increasingly busy and complex, and more information than ever is stored and transmitted on line, it is more important than ever to protect our personal information. Here are some simple and effective ways for you to do that.

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Understanding Frailty Risk & Its Impact On Retirement Planning


Aging gracefully is a nearly universal goal. Continuing to enjoy life, having a low risk of disease or disability, and maintaining a high level of physical activity and mental acuity are the hallmarks of successful aging. The process of aging, however, impacts people differently, and leaves a significant portion of older adults vulnerable to deteriorating physical or mental health, rendering some unable to continue to manage their personal and financial affairs. In some unfortunate cases, this can lead to elder abuse. While unpleasant to contemplate, one-third of those age sixty five or older suffer some degree of frailty and these risks increase with age. The good news is that many of the risks associated with aging can be addressed with good planning.

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Rethinking Retirement Age


The age at which we retire has traditionally been linked to cultural norms and external factors such as the availability of a company pension, health care and Social Security retirement benefits. Pensions were designed to incentivize long-service with a single employer while also establishing formulas that would provide reliable incentives for employees to eventually retire. While there has been a dramatic shift from a manufacturing economy to one based on the delivery of goods and services, the decision to retire based on attaining a set age remains stubbornly persistent. As the self-funded and self-managed retirement replaces traditional lifetime pensions, fresh thinking has emerged on how to manage the risk of outliving one’s assets. Rethinking retirement as a ratio of working years to leisure years is beginning to gain acceptance as a more thoughtful way of addressing this and other retirement risks.

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How To Rescue Your Retirement Plan From A Shortfall


Americans are facing a retirement crisis. And they know it. The story is not a new one, but as larger numbers of the baby-boom generation approach retirement age the extent of the problem is becoming more clear. The 2014 Employee Benefit Research Institute’s Retirement Confidence Survey reports that a mere 13% of workers feel very confident that they have enough money saved for a comfortable retirement. What’s more, these respondents came almost exclusively from higher income households- defined as having an annual income of $75,000 or more. Moving further down the income scale, the results are far worse- 36% of survey respondents with earning under $35,000 per year reported having less than $1,000 saved. Social Security, which makes up the sole source of income for approximately 1 in 5 retirees, and more than 50% of income for 2 in 3 retirees, will become an increasingly important component in the retirement plan of many Americans.

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Buckets, Flooring And Structured Withdrawals: Creating A Dynamic Income Plan

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Turning accumulated assets into a reliable income stream is THE critical issue facing retirees. A growing body of research, and memorable terminology, has provided financial planners with the ability to help our clients create a dynamic income plan that best suits their needs.

While each client has a unique set of circumstances, having adequate income to maintain a given lifestyle in retirement is a near universally shared goal. Likewise, many clients will face similar obstacles and challenges throughout retirement. Our job as advisors is to assist clients in identifying their retirement goals, risks, income sources and expenses, and to combine these to help create an income plan that can be revised and adapted over time. In this blog, we will outline three distinct approaches to retirement income planning.

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Identifying Your Retirement Income Sources

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Retirement income planning has seen a dramatic shift in focus in recent years from an accumulation of assets approach to one focused on how best to create income streams in retirement. Shifts in demography and an emphasis on employee-directed savings programs will result in an increasing number of retirees bearing the responsibility of developing and managing their own retirement income plans. With this in mind, it is important for workers to accurately identify the sources of income available to them in retirement.

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Avoiding The Middle Class Retirement Maelstrom

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As financial advisors we devote an enormous amount of time and energy crafting financial and estate planning strategies for our high net worth clients. While our wealthier clients provide us with interesting problems to solve, many of us take great enjoyment in helping clients with fewer resources and options to realize their retirement dreams. Unfortunately, most middle income clients are ill-prepared to retire and are not a target market for the majority of financial advisors.

Middle class clients face many of the same risks that our wealthier clients do: outliving their money, poor stock market performance and rising health or long-term care costs are near universal concerns. Others such as inflation and the death of a spouse may be particularly impactful for those with limited resources. So what are some simple tips that middle income clients might consider in planning for retirement? Continue reading

Ready to Retire? 7 Things You Need to Do Now – As Seen in the Fiscal Times!

Ready to Retire? 7 Things You Need to Do Now


The Fiscal Times

May 31, 2013

You’ve worked hard over many years and finally your retirement finish line is 3-to-6 months away.

But don’t start exhaling just yet – there’s  still plenty of race left to run. Before you take one of the biggest steps of your life, make sure you read this list to understand what you need to do and why:

1. Do the math.
When you first thought of retirement years back, you probably had  a vague idea of what your spending would amount to by the time you actually took this step. But at this point, you should have a much clearer picture of your monthly budget. Be sure to laser in on your fixed expenses as well as on your lifestyle expenses to determine your financial needs.

RELATED: Why Boomers Are Ditching Retirement to Go to Work

Look at your anticipated income to clearly identify how much you’ll be taking in and from what sources.  As part of this step, develop a Social Security strategy. Determining when to start taking Social Security is a pivotal decision that will impact all your other retirement income sources.

While you can start taking Social Security benefits at age 62, your payments will be reduced based on the number of months you take those benefits before you reach full retirement age. And if you take a part-time job in retirement, that could reduce your Social Security payments, says Katie Libbe, vice president of consumer insights at Allianz Life. 

For example, if you’re under 66, you can only earn up to $15,120 in 2013 without it impacting your Social Security. Once  you exceed that, you’ll lose $1 in benefits for every $2 in wages you earn (which doesn’t include investment income like dividends or capital gains), according to Jonathan Gassman, CPA with The Gassman Financial Group. But if you wait until full retirement age, you can earn as much as you want and your benefit won’t be affected.

Either way, meet with a representative at your local Social Security office as well as your financial planner to discuss your options.

If the numbers don’t add up in your favor when you’re doing your budget – you  may need to delay retirement by a year or two in order to ramp up savings.

2. Tell your employer.
There’s no set rule for when it’s best to tell your employer you plan to retire.

Some employers have the advance notice time you must give written into your contract, so read over company policies carefully. If you’re high up on the corporate ladder or occupy a critical role in the company,  it’s typically recommended to give your boss at least six months notice, according to Joyce Goila a management consultant with The Herman Group. But  for most people, one to three months will suffice. “It’s important to look at what others have done [in your company] when giving notice for retirement,” she says.

3. Meet with your human resources department.
If you’re lucky enough to have a pension in 2013, understand it. What is it going to pay you? Are there any advantages to waiting to take your money? While most employers offer a lump sum option, for many people an annuity might be better if it is coordinated with overall retirement income. Furthermore, consider any possible rollover options to IRAs or Roth IRAs, depending on your retirement income goals, advises Jamie Patrick Hopkins, a professor of taxation at American College.

If you have a 401(k), what are your distribution options? What benefits may be portable or convertible, such as health, life, or long-term care insurance? Look through all of your benefits and compensation information – some employees find they have deferred compensation they never knew about. Verify everything to prevent any surprises.

4. Get a handle on health care costs.
Health care is a wild card in retirement. A recent Fidelity Investments survey estimates that a couple retiring at age 65 this year will need $220,000 to cover health care expenses – and that’s with traditional Medicare coverage.

Well before you leave your job, research Medicare and look at all your health care options. Are you  and your spouse eligible for Medicare, and what supplemental insurance might be best for you? You might need to continue private insurance if you aren’t  eligible for Medicare yet. Or  perhaps your spouse is under 65 and separate decisions will need to be made, says Roy Laux, president of Synergy Financial Services.

Do a thorough analysis of your current health care needs as well as potential future needs based on your health history and your family’s history. Look into long-term health care insurance and see if it’s right for you. This will help you determine how much of your savings to set aside for potential medical expenses. Schedule your dental, vision and annual visits while you still have employer-sponsored health care.

5. Eliminate as much debt as possible.
The fewer debts you have going into retirement, the better. If possible, it’s a good idea to pay off any lingering debt, says Rita Cheng, a certified financial planner with Ameriprise Financial. But you also don’t want to drain your retirement savings just to enter your golden years debt-free.

Start by paying off any credit card debt, since you’re likely paying a higher interest rate on the balance (the national average is 13 percent for fixed-rate credit card). Your mortgage is the last type of debt you should pay off. If you don’t have the luxury of paying it off before you retire, consider refinancing. It’s easier to qualify for a refinance while you’re still employed, and though mortgage rates are currently low, they’re likely to rise soon. Today’s 30-year fixed-rate mortgage is 3.77 percent, but they’ve been inching higher and are likely to continue doing so. By 2014, the rate is expected to be 4.5 percent, according to the Mortgage Bankers Association.

6. Review your investments.
“This close to the [retirement] finish line, you don’t want to leave your savings to chance. Moving investments out of volatile stocks and mutual funds into more stable options [like annuities] is a smart move when you don’t have time to recoup losses,” says Dan White, a certified financial planner with Daniel A. White & Associates.

Not only should you check to see if your asset allocation is appropriate as you enter this next life stage, you also want to take a good look at all fees associated with your investments. White recommends moving some funds into low or no-fee CDs. “While [interest rates] are low today, we’ll see them start to rise on these accounts sooner rather than later,” he says.

7. Develop a strategy for withdrawals.
Drawing down retirement savings can be incredibly complex – it requires a thorough analysis of all sources of income to ensure assets are utilized in the correct order, taking into account Social Security and tax implications, says Libbe at Allianz Life.

The trick is knowing how to turn those assets into income. “There’s a rule that says you can safely withdraw 4 percent of your assets annually, adjusting the amount upward for inflation each year,” says James Poe, founder of Texas Retirement Specialists. But that’s not engraved in stone, he says. Speak to your financial advisor to determine how much you’ll need to begin withdrawing from your portfolio to meet your needs, then set up a monthly disbursement.

Of course, as much as you can prepare, sometimes even the best-laid plans need to be changed.  Be ready to make big adjustments or small tweaks if there are developments in your life or the economy that warrant those changes. Six months or so into retirement, many people realize their financial needs are different than they expected. “While it’s never too late to start preparing, the sooner you start, the more choices you’ll have,” says White.

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