Archive for the 'Social Security' Category Page 2 of 16



What Defines Old vs Young?

Wherever the line that defines whether you are ‘old’ or ‘young’ is, the individuals on either side end up looking very differently, in political and economical terms. According to a recent New York Times article, in 2004, older voters began moving right (politically), while younger voters shifted left. This year, polls suggest that Mitt Romney will win a landslide among the over-65 crowd and that President Obama will do likewise among those under 40. The split between the ages goes farther than politics; the two have different views on many of the biggest questions before the country. For example, the young favor gay marriage and school funding more strongly and are also notably less religious, more positive toward immigrants, and  less hostile to Social Security. On the other hand, the older crowd are less tolerant to immigrants and expect more out of Social Security.

Over all, more than 50 percent of federal benefits flow to the 13 percent of the population over 65; a portion of these benefits come from Social Security while a much larger from Medicare. However, contrary to common perception, most Americans do not come close to paying for their own Medicare benefits through payroll taxes. Instead, medicare, in addition to being the largest source of the country’s projected budget deficits, is a transfer program from young to old.

One aspect that both the ‘old’ and ‘young’ can agree upon is that they are more open to change and confident that life in the United States will remain good.

 

If your Plans for Retirement were Shattered

Having financial security throughout retirement is what every working American strides for. However, with declining asset portfolio and house values, it is easier said than done. Planning for retirement can take a wicked twist if one is laid off within a few years of their pre-determined retirement age. According to a New York Times article, the average time someone 55 or older was unemployed was 52.2 weeks. In order to cope with a catastrophe like this, one needs to know a few strategies that will assist you to get back on pace to retirement.

A simple strategy that can be taken is to consider a part time job. Even if this means you’re bringing in $700 per month, this is money you would not have had otherwise. The next step is to figure out the bare minimum you absolutely need and set aside the amount. Finally, deposit the excess into your savings account.

If working part time is not for you, consider tapping into your retirement savings; taking the 10% hit on the amount withdrawn might be worth reducing the damage that could be inflicted in taking a loan and building up debt before retiring.

Paying for health insurance is another critical strategy for coping with not generating income with retirement on the horizon. The first step is to take an early (penalty-free) withdrawal from your I.R.A. to pay for health insurance premiums. After that, you need to pay for your insurance during the year you received unemployment benefits.

 

Why you may NEVER Retire

When you were growing up, you most likely imagined yourself retiring at 65 and getting a secure monthly income from your pension, health care benefits, and social security. However, in this day and age, that is longer the case at all.

Let’s start with retirement pensions. According to this article from Yahoo Finance, between 1998 and 2010, the proportion of companies offering DB (defined benefits pension) plans fell from 67 percent to 17 percent while DC (defined compensation pension) plans rose from 10 percent to 58 percent. The overlying reason companies did this was to cut their costs and unless you have remarkable fortune investing, the DCs will deliver less income after you retire.

The dropping income does not help with retiring either. According to the September 2011 Census Bureau, an average family’s in the U.S fell 2.3 percent to $49,445 in 2010 and has dropped 7 percent since 2000 after adjusting to inflation. These numbers are the lowest since 1996.

The increase in childcare has also delayed retirement for many. According to the Census Bureau, the share of American families with dual-earning couples soared from 20.4 percent to 42.4 percent. This astonishing increase adds to parental stress and boosts childcare expenses for most families.

People’s insufficient returns from their asset portfolio has also caused many to keep working past the age of 65 – stocks have earned slightly more than 2 percent a year in the last decade – the average annual return of the S&P 500 between 2002 and 2012 has been 1.8 percent. Even long term investments do not look promising. The 10 – year Treasury note, for example, only pays 1.72% and to get a measly 2.8% return, you need to put aside your money for 30 years. In a nutshell, due to lower corporate contributions and a shift in the responsibility from the company to the employee to handle investments, annual returns are, on average, 6% to low.

Inadequate savings is one of the overlying reasons people retire later than they would like. According to the Employee Benefits Institute, 17 percent had more than $250,000 saved up in 2011. What is even more astounding is that 60% of the people surveyed had less than $60,000 saved. In short, many Americans do not have enough money saved up in order to retire at their desired age.

Keep these points in mind and plan for a safe retirement by using our Free Retirement Calculator.

 

Strategies for using Home Equity

For most retirees, their main objective is to maintain cash flow throughout their retirement years in order to avoid running out of. According to US News, more than half of retirees age 65 and older get at least half of their retirement income from Social Security. It has been established that the maximum safe annual withdrawal from an account begins with a first year’s withdrawal equal to between 4.0 percent and 4.25 percent of the initial portfolio value. Many retirees find that this is uncomfortably limiting and therefore tend to draw more than that amount. There are three strategies considered that involve the use of home equity as a supplement to withdrawals from the account

The first strategy holds that conventional thinking maintains that home equity, drawn upon in the form of a reverse mortgage, should be used as a last resort. This article on reversing home equity to supplement retirement income shows that cash flow drawn from home equity uses either of two more active strategies (below), in conjunction with withdrawals from the account, yields cash flow survival probability that is significantly greater than the more passive approach of using home equity as the last resort. This is known as the “conventional strategy.”

The second strategy for coping with excess withdrawals from the safemax account is a reverse mortgage credit line. In this strategy, the credit line is drawn upon every year to provide the retirement income until it is exhausted and only after the credit line is exhausted are withdrawals taken from the account. This is referred to as the “reverse-mortgage-first strategy.”

The third and final strategy also uses a reverse mortgage credit line, but withdrawals from the credit line are taken in some years and not others. According to the article on supplementing retirement income, the withdrawals are taken according to an algorithm that is coordinated between the account and the line of credit, this strategy is termed the “coordinated strategy.” The use of these active strategies is likely to result in a higher residual net worth after 30 years than the use of the conventional strategy.

Are you considering a reverse mortgage? Use our free reverse mortgage calculator to find out how much you qualify for.

 

If the Politicians were to Fail

A recent New York Times article discusses a new and informative book called Clash, written by Scott Burns and Larry Kotlikoff. The book shows the effects of current policies on young people and offers actual policy solutions for banking, taxes, healthcare, and Social Security. Other than offering advice, Clash informs us what we can do to support ourselves if the politicians fail to do so. This is what a critic has to offer about the book, “[Clash] is so well written that Scott Burns and Laurence Kotlikoff should be considered the Stieg Larssons of economics.” This book should be read by everyone, including politicians, mainly to get informed about the looming crisis and what the people would/should do if they were to fail to take action.

You can purchase the book on Amazon here.

 

Online Social Security

Social Security now provides a service to all that will provide you with your Social Security statement online. It will provide you with the estimated Social Security and Medicare taxes you’ve paid, information about qualifying and signing up for Medicare, things to consider for those age 55 and older who are thinking of retiring, and many other pieces of information that can be useful for planning your retirement. All of the provisions can be found here. To get your Statement online, you must create a my Social Security Account.

Are you considering retirement or having trouble deciding on when to take your Social Security benefits?  Use our Free Retirement Calculator as well as our Social Security Calculator

 

Possible Social Security COLA Increase

Here’s some good news for once!  It was announced that after two full years of no COLA (Cost of Living Adjustment) raise, Social Security recipients may be due for one in 2012.  Though it’s not etched in stone just yet, it’s expected that the announcement for as much as a 3.5% raise may be announced at the end of this month.

The raise in COLA is obviously needed and it’s been a very rough two years for people who rely on Social Security for their retirement income.  The price of gas, food, electricity and clothing have all risen while income has remained exactly the same.  But things must always balance, and if COLA is increased expect an increase in Medicare premiums.

Are you anxiously awaiting the announcement?  Did the past two years with no increase really impact your retirement income?

Want to find ways to optimize your social security?  Read how to, here.

See how your retirement will be affected by a raise in your social security benefits by using our Retirement Calculator.

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Proposed Increase to the Retirement Age

Do you think Social Security will be around for your children or grandchildren?  Senator Tom Carper of Delaware was quoted as saying, “My sons are 21 and 22; neither of them thinks Social Security is around for them.  I want to make sure that it is.”  But how?  Obviously if we knew how to answer this question, it wouldn’t be such a debate!  But the U.S. government has come up with one proposal that is gaining steam – increasing the retirement age.

The current retirement age of 66 was originally set because of the way Americans worked in the early 20th century.  Many of the jobs were factory and other blue collar jobs that were rough on the body.  As time continued and these jobs moved out of the country, Americans made the switch to less physically demanding and more mentally challenging jobs.   Because of the switch, more Americans began living longer lives and had the ability to continue with their jobs for a more years than the physically demanding jobs.  The most popular plan among lawmakers is increasing the retirement age slowly over time.  By year 2050 the proposed retirement age would be 68 and would  increase to 69 by year 2075.  If this becomes reality, the change would affect those born after 1982.  Do you think that an increase to the retirement age is the answer to helping our economy and Social Security?

You can read more about this topic, here.

What age will you run out of money in retirement?  Find out by using our Retirement Calculator.

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Hey! I’m Not Dead!

Imagine walking to your local bank to make a transaction and you find all of your accounts have been closed because you’ve been declared dead.  It sounds impossible, but it happens more than you think.  Each year, Social Security declares 14,000 wrongly dead. That averages out to 38 mistakes a day!  While it may seem amusing at first, it’s no laughing matter.  Mistaken death entries lead to Social Security benefit cutoffs and can result in the living person’s Social Security number being released in files available to the public.

For some people that have been declared dead by the Social Security Administration, the mistake has cost them financially too.  One woman was accidentally entered into a funeral home’s death notice and therefore declared dead.  She then racked up $400 of bounced check fees and never received the more than $1,000 in disability payments she was owed.  Even when she was declared alive again, the administration refused to reimburse her.  If you are ever declared dead,  the first step is to find out who made the mistake then get a copy of your death certificate and fill out a form to amend it.  You will probably also have to have the individual who reported your death, sign the certificate.

Use our Retirement Calculator to see how your Retirement Plan shapes up.

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Crazy Ways to Save For Your Retirement

Spend more money to save more money for retirement?  According to Rob Warner, author of the book, “Get a Life: You Don’t Need $1Million to Retire Well,” that’s exactly what to do.  It may seem counterintuitive, but he has a point.

My favorite example that he gives his readers is to take more vacations.  According to Warner, people want to retire at an early age because they have worked themselves to the bones for many years – they rarely took vacations or when they did, they scrimped and saved and never felt like they truly took a break.  Retirement to these people is a permanent vacation where they can finally go to all those places they were never able to.  Who wouldn’t want to race towards that!  But think about it – if you do take quality vacations, you’ll feel more rested.  If you feel rested, you may be able to work another year or two.  If you work another year, you are able to delay Social Security which means an extra 8% more in benefits for life.  And by working another year, you’re adding to your savings instead of beginning to deplete it.  And so on and so on.  You can read more examples of creative ways to save for retirement, here.

See if your current savings will be enough to retire by using our Retirement Calculator.

Want to learn how to optimize your Social Security?  Find out here.

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