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Retirement income planning – the critical path you can’t afford to miss
Like a critical life-saving operation where every move must be perfect and every minute counts, crafting and maintaining a retirement plan entails some of the most important decisions you will ever make. It should go without saying that what we do toward or past the end of our earning years has a grave finality to it, since we typically won’t be able to make more money to replace that lost to poor decisions, nor have the time to forgo withdrawals and wait on a couple of market cycles to make up lost ground. Getting retirement planning right can give us all the income we need for a satisfying lifestyle, with adequate reserves against the risks of higher health care costs and long term care, and to leave a nice inheritance to the people or causes that we care about. Getting it wrong can yield a life of misery and even a shortened one if we can’t afford to pay for the drugs, operations, and other care we may need. This guide could alert you to danger areas that you or your other advisors have overlooked, and brighten your future. If so, I am happy to have helped you and your family.
For many people, Social Security is a very big part of this equation. Even for affluent investors with other resources and sources of income, Social Security is a major asset. Yes, I know that Social Security is a social welfare system which engineers income redistribution favoring lower income folks. Still, it is unwise to marginalize the value of Social Security.
Social Security claiming decisions – when and how you take your benefits – can be one of the most bewildering and error-prone choices retirees make, and once done, there is usually no going back to fix mistakes. Since the old “file and suspend” “loophole” has been closed, I won’t give you indigestion telling you about it, but hats off to those readers who had the foresight and good advice to grab the “free money” before the door closed, in some cases producing hundreds of thousands of dollars in additional benefits. A big mistake for many remains taking benefits too early – as soon as available, or not before reaching full retirement age, or even later depending on your fact pattern. If you expect to live a normal life expectancy, you may be leaving lots of money on the table since total payouts to you could be much less than waiting, and getting a bigger check even for a shorter period of years. Not coordinating with your spouse’s claiming strategy is another potentially costly pitfall, as are divorcees not claiming benefits, and not carefully planning job income around Social Security tax traps. Another mistake we see is not checking for errors in the Social Security credit record – it is not uncommon to see government mistakes on past earnings that slash benefits unless corrected. Finding errors and fixing them is not as hard as it sounds, and if you take us up on the free Social Security Maximization Analysis & Report, we will show you how. If you get the free analysis done, we can also do a detailed Social Security claiming strategy analysis to help guide you toward the best decisions in your personal circumstances, and try to get ahead of this complex, error-prone area.
Investors with portfolios, IRA’s, annuities and other assets sometimes discount the value of Social Security, but this can be a big mistake. If you’ve been a high-earning taxpayer, live long and make smart Social Security claiming choices, the present value of a successful couple’s benefits can be as high as $3,504,000 or more – that’s how much you would have to have invested in a pension to match the income stream. And if you play your tax cards right, the after-tax value could be much, much more than a pension. That’s a serious asset by anyone’s standards, and deserves careful planning.
If you have an investment accounts of even a few hundred thousand dollars or more, making the right Social Security “claiming” decisions can become very complicated, with taxes, joint mortalities, various benefit combinations and benefit ages all impacted by the rest of your unique wealth planning. The wrong choices on investment, IRA, and other planning could mean you needlessly pay tax on nearly all your Social Security! And wrong claiming ages and benefits choices by you and your spouse could mean a difference of hundreds of thousands or more in lost lifetime income if you’re not careful.
Having enough income to afford a long, comfortable retirement is among the top goals of most Americans. Running out of money, not having enough for health or long term care, & being forced to rely on children or spend down thier inheritance to make ends meet are among their greatest fears. And with over 50% of senior widows below the poverty line, leaving a spouse financially insecure is a grave concern. Avoiding the wrong Social Security decisions – among the dozens of confusing options – can go a long way to assure funding for the retirement you want. If you’re like most investors in our experience, you’re not getting quality input from your advisors on critical Social Security decisions. That’s why I wrote Maximum Social Security Income Strategies for Investors, to fill in this gap for investors. Please take it with my compliments and wishes for greater income and security for you. I also offer a free Social Security Maximization Analysis and Report to help you apply the techniques in this report, and more, to help you squeeze every nickel you can out of this system you have likely paid hundreds of thousands into. Call my team at 800-262-1082 to learn how to get yours.
Social Security Tip #1 – Understand your benefit
As with most things governmental, your Social Security benefit structure is far from simple. The first key concept is the PIA or Primary Insurance Amount, which is calculated based on the average of the highest 35 years of your earnings which were credited into the Social Security system. The PIA is a key metric that determines the various benefit permutations you have available to you. You can check yours at ssa.gov, or contact our office at 800-262-1083 to arrange for a free Social Security Maximization Analysis & Report, and we will check it for you.
Social Security Tip #2 – Maximizing your benefit
Your full retirement age – FRA – is the age at which you get your “full” benefit. This used to be 65, but is going up depending on your year of birth. Those born in 1957, for instance, don’t reach FRA until 66½. If you take benefits before FRA, such as at 62, they are permanently reduced. For instance, someone whose FRA is 66 who starts at 62 will only get 75% of their PIA – for life. will The amount of reduction depends on your FRA – the later the FRA, the bigger the reduction. If you wait until after FRA, your benefit will go up permanently, but not past 70 under existing rules. Your FRA is very important in determining what your actual benefit options are.
Social Security Tip #3 – Audit the government
You probably never had a call from the IRS saying you paid too much in taxes. You probably won’t get a similar call from the Social Security Administration saying they made a mistake and owe you more than they thought. Sadly, such mistakes are common, and it pays to check to make sure you have received credit for all the Social Security taxes you and your employer have paid into your “account” over the many years. Check your records with them to spot errors like “they have me down for zero, but I know I worked in 1988!” Go to ssa.cov to learn how, or ask us to look when we do your free Social Security Maximization Analysis & Report.
Maximizing your benefit is a little tricky, and the software we use in the free analysis can really help. Start at 62 and you get a smaller payment for a longer time. Wait until 70 and you get a bigger payment for a shorter time. Usually, the maximum value you can extract from the system comes from starting at an age somewhere in between, such as 67½. Your (and your spouse’s) life expectancy factor in, as do taxes and other sources of income, in getting and keeping the most you can from Social Security. If you’re not careful, you may wind up paying tax on most of your Social Security, cutting your actual benefit, and likely annoying you to no end!
Social Security Tip #4 – Protecting a surviving spouse
Spousal Social Security planning can get devilishly complicated, and our software really helps in crunching the 20,000 calculations we do to help optimize benefits. We need to juggle the retired worker’s benefit, the spousal benefit, the survivorship benefit, and the restricted application rules, where the spousal benefit is claimed (getting you ½ your spouse’s benefit now) while your own benefit continues to grow in value – you switch when it tops our or exceeds your spousal benefit.
Getting the spousal planning is critical. With more than 70% of elderly widows struggling below the poverty line, it is important to conserve income, especially when we note that over half of these widows were not poor before the death of their husbands! Calculating the income gap created by the husband’s death is something our Social Security Maximization Analysis & Report will provide, as well as insight on how to fill it to continue a comfortable lifestyle.
Social Security Tip #5 – Tax control
As I have written extensively about for years (see my 9 Biggest Tax Mistakes and How to Avoid Them report – call 800-262-1083 to get your copy), poor tax planning is probably the biggest impediment to wealth accumulation facing most Americans. This goes double in retirement, when every penny can become more precious.
Many assets have different tax treatments (capital gains vs. ordinary income, expedited and heightened taxation of mutual funds vs. ETF’s, max-bracket and additional excise tax exposure in annuities and IRA’s, max-bracket on interest vs. lower rate on dividends, etc.) and it is very common to see the wrong types of investments in the wrong sort of accounts, such as stocks and other capital gains assets in IRA’s, which can double or more the effective tax rate. Paying attention to lining up account type and asset type tax treatment has been called asset location planning, but is often overlooked by investors and their advisors. But asset location and withdrawal location planning can make a huge difference, with net annual return potential said to be over 3% or more a year ((https://corporate1.morningstar.com/uploadedFiles/US/AlphaBetaandNowGamma.pdf)). On a million dollar nestegg, that could be over $30,000 more a year to spend! Other mistakes include not harvesting capital losses to offset taxable gains, not planning other income around Social Security tax issues, ballooning the amount in Social Security benefits forgone due to higher taxation, and so on.
In many cases, it makes sense to take big money out of IRA’s – and pay the tax! – in your 60’s, then switch to Social Security later. Doing both at the same time – or taking other taxable income – can drive the portion of your Social Security that’s taxed from zero to 50% to 85% of your benefits! Good tax strategy is complex but can be priceless, but varies so much from family to family that it is difficult to generalize here. If you take our free Social Security Maximization Analysis & Report, we will comment on yours and look for ways to improve it.
Social Security Tip #6 – Get good advice
It goes without saying that you can’t call the Social Security administration for advice, and probably would not want it if you could! This complex area is not something many advisors are trained on or help their clients with. Many are not even allowed to! As I worked through the studies for my PhD in Retirement and Financial Planning, I really gained insight into the complexity and importance of this area, and have used this knowledge to help our clients and the public make smarter, more profitable decisions. Since many of your Social Security choices are not reversible, take care to collect good information and get it right!
Social Security Tip #7 – Run the numbers
As mentioned, we run some 20,000 calculations and add a lot of studied advice when we do the Social Security Maximization Analysis & Reports. These help project the most profitable paths in this complex area, to target the maximum individual and family net income scenarios for couples and for the surviving widow or widower. Too many permanent Social Security decisions are made on the back of napkins, and some families are shortchanged forever, with widows needlessly on the road to poverty. I hope you let us do our Social Security Maximization Analysis & Report for you, to help chart the best path for your family. No cost or obligation, just solid number crunching and information.
Thanks for reading!
So that’s it! If you have an interest in getting better acquainted with me or my firm, the following offer may be of interest to you. As mentioned, to help investors with income Social Security planning and to endeavor to help increase their wealth, my firm offers a free Social Security Maximization Analysis & Report,, which you can obtain by calling us at 800-262-1083. Part of our Social Security Maximization Analysis & Report involves helping you review retirement income strategies And remember, getting the feedback of even the most well-intentioned of your existing advisors may draw you into a “leave well enough alone” myopia that may salve all egos but leave your cupboards barer than they might otherwise be—especially if they make a lot of money on your relationship and perhaps would prefer you not dig too deep. Even if they don’t have knowledge gaps they’d rather you’d not know, and even if they might be tempted to spin answers in fear of losing your business.