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SOCIAL SECURITY CLAIMING STRATEGIES

What can married couples do to increase joint lifetime benefits?

What is your “magic number”? Roughly half of retirees claim Social Security benefits at age 62, as soon as they become eligible. Some people delay benefits and postpone using their retirement savings as an income source. Others apply out of necessity; their financial situation leaves them little choice.
  
These factors aside, what if you have a choice? If you wait a few years to apply for Social Security, how much more income might you realize?
  
Could you wait until age 66? The Social Security Administration has made 66 the “full” retirement age for people born during 1943-1954. If you were born in this period and you apply for Social Security at age 62, you will reduce your retirement benefit by 25% and your spouse’s by 30%.2,3
  
That alone might convince you to wait. In addition, there are claiming strategies that may bring spouses much greater cumulative lifetime Social Security income, and they depend on one spouse waiting until age 66 to apply for benefits.
  
That may be the time for a file & suspend strategy. This tactic positions a married couple to receive maximum Social Security benefits at age 70, with one spouse being able to claim some benefits at age 66.
 
An example: Terry was born in 1947 and Teresa was born in 1951, so full retirement age is 66 for both of them. Terry files his claim for Social Security benefits at age 66, but then he elects to suspend his $2,000 monthly retirement benefit. Doing that clears the way for Teresa to get a $1,000 monthly spousal benefit when she reaches 66; she can do this by filing a restricted claim for spousal benefits only at that time.4
 
So while some spousal benefits are rolling in, Terry and Teresa have both elected to put off receiving their own Social Security benefits until age 70. That allows each of them to rack up delayed retirement credits (8% annually) between 66-70. So when Terry turns 70, he is eligible to collect an enhanced benefit: $2,640 per month instead of the $2,000 per month he would have received at age 66. At 70, Teresa can switch from receiving the $1,000 monthly spousal benefit to collecting her enhanced benefits.1,4
 
Variations on file & suspend. There are other ways to do this. For example, 66-year-old Terry could initially apply for Teresa’s spousal benefits as Teresa applies for her own benefits at 62. Terry thereby gets $800 a month while Teresa receives her own reduced benefit of $1,200 a month. At 70, Terry foregoes getting the spousal benefit and switches to receiving his own enhanced benefit ($2,640 a month thanks to those delayed retirement credits). If Terry lives to age 83 and Teresa lives to age 90, their total lifetime Social Security benefits will be $1,043,520 under this strategy, as opposed to $840,600 if they each apply for benefits when they turn 62.
 
Widows can also use a variant on the file-and-suspend approach. As an example, Fran is set to receive $1,400 monthly from Social Security at age 66. Her husband dies when she is 60. She can get a widow’s benefit of $1,430 at 60, but instead she claims her own reduced benefit of $1,050 at age 62, then switches to a widow's benefit of $2,000 at 66 (her husband would have received $2,000 monthly at age 66). By doing this, she positions herself to collect $112,000 more in lifetime benefits.
 
Postponement can also be used to enlarge survivor benefits. Let’s go back to Terry and Teresa: if they each start getting Social Security at 62, Teresa is looking at a $1,650 monthly survivor benefit if Bob passes away. But if Terry waits until 66 to claim his benefits, Teresa’s monthly survivor benefit would be $2,640.1
 
Details to note. The file-and-suspend strategy is only allowable if one spouse has reached full retirement age. In order for you to claim a spousal benefit, your husband or wife has to be getting Social Security benefits. Applying for Social Security before full retirement age with the idea that your spouse can collect spousal benefits at 62 has a drawback: you are reducing both of your lifetime retirement benefits.5
 
Only 29% of respondents in a 2012 AARP survey knew that waiting until age 70 to apply for Social Security would bring them their maximum monthly benefit. Congratulate yourself for being in that group, and consider the long-range financial merits of claiming your benefits years after age 62.
 
Representatives are registered, securities are sold, and investment advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC , a registered broker/dealer and investment advisor, 2000 Heritage Way, Waverly, Iowa 50677, toll-free 800-369-2862. Nondeposit investment and insurance products are not federally insured, involve investment risk, may lose value and are not obligations of or guaranteed by the financial institution. CBSI is under contract with the financial institution, through the financial services program, to make securities available to members.

  
This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.   
 
Citations.
1 -
www.smartmoney.com/retirement/planning/strategies-to-max-out-social-security-benefits-1329243329517/ [3/2/12]
2 –
www.ssa.gov/retire2/retirechart.htm [11/15/12]
3 –
www.ssa.gov/retire2/agereduction.htm [11/15/12]
4 -
www.investmentnews.com/article/20121105/BLOG05/121109984 [11/5/12]
5 -
www.nextavenue.org/article/2012-08/how-avoid-making-social-security-mistakes [8/6/12]
6 -
www.aarp.org/about-aarp/press-center/info-02-2012/new-aarp-survey-shows-many-unaware-of-social-security-claiming-strategies.html [2/29/12]

11212012-WR-645

How Much Money Will You Need In Retirement?

Have you underestimated?

What is enough? If you’re considering retiring in the near future, you’ve probably heard or read that you need about 70% of your end salary to live comfortably in retirement. This estimate is frequently repeated … but that doesn’t mean it is true for everyone. It may not be true for you. Consider the following factors:

Health. Most of us will face a major health problem at some point in our lives. Think, for a moment, about the costs of prescription medicines, and recurring treatment for chronic ailments. These costs can really take a bite out of retirement income, even with a great health care plan.

Heredity. If you come from a family where people frequently live into their 80s and 90s, you may live as long or longer. Imagine retiring at 55 and living to 95 or 100. You would need 40-45 years of steady retirement income.

Portfolio. Many people retire with investment portfolios they haven’t reviewed in years, with asset allocations that may no longer be appropriate. New retirees sometimes carry too much risk in their portfolios, with the result being that the retirement income from their investments fluctuates wildly with the vagaries of the market. Other retirees are super-conservative investors: their portfolios are so risk-averse that they can’t earn enough to keep up with even moderate inflation, and over time, they find they have less and less purchasing power.

Spending habits. Do you only spend 70% of your salary? Probably not. If you’re like many Americans, you probably spend 90% or 95% of it. Will your spending habits change drastically once you retire? Again, probably not.

Will you have enough? When it comes to retirement income, a casual assumption may prove to be woefully inaccurate. You won’t learn how much retirement income you’ll need by reading this article. Consider meeting with a qualified financial professional who can help estimate your lifestyle needs and short-term and long-term expenses.

This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.   11192012-WR-643
 

Retirement Planning With Health Care Expenses in Mind

It is only wise to consider what Medicare won’t cover in the future. 
 
As you save for retirement, you also recognize the possibility of having to pay major health care costs in the future. Is there some way to plan for these expenses years in advance?

Just how great might those expenses be? There’s no rote answer, of course, but recent surveys from AARP and Fidelity Investments reveal that too many baby boomers might be taking this subject too lightly.

For the last eight years, Fidelity has projected average retirement health care expenses for a couple (assuming that retirement begins at age 65 and that one spouse or partner lives about seven years longer than the other). In 2013, Fidelity estimated that a couple retiring at age 65 would require about $220,000 to absorb those future costs.¹ 
When it asked Americans aged 55-64 how much money they thought they would spend on health care in retirement, 48% of the respondents figured they would need about $50,000 apiece, or about $100,000 per couple. That pales next to Fidelity’s projection and it also falls short of the estimates made back in 2010 by the Employee Benefit Research Institute. EBRI figured that a couple with median prescription drug expenses would pay $151,000 of their own retirement health care costs.¹

AARP posed this question to Americans aged 50-64 in the fall of 2013. The results: 16% of those polled thought their out-of-pocket retirement health care expenses would run less than $50,000 and 42% figured needing less than $100,000. Another 15% admitted they had no idea how much they might eventually spend for health care. Unsurprisingly, just 52% of those surveyed felt confident that they could financially handle such expenses.¹

Prescription drugs may be your #1 cost. In fact, EBRI currently says that a 65-year-old couple with median drug costs would need $227,000 to have a 75% probability of paying off 100% of their medical bills in retirement. That figure is in line with Fidelity’s big-picture estimate.2
What might happen if you don’t save enough for these expenses? As Medicare premiums come out of Social Security benefits, your monthly Social Security payments could grow smaller. The greater your reliance on Social Security, the bigger the ensuing financial strain.2
A positive note: EBRI and Fidelity both reduced their estimates of total average retirement health care expenses from 2012 to 2013. (Who knows, maybe they will do so again this year.)¹

The main message: save more, save now. Do you have about $200,000 (after tax) saved up for the future? If you don’t, you have another compelling reason to save more money for retirement.

Medicare, after all, will not pay for everything. In 2010, EBRI analyzed how much it did pay for, and it found that Medicare covered about 62% of retiree health care expenses. While private insurance picked up another 13% and military benefits or similar programs another 13%, that still left retirees on the hook for 12% out of pocket.¹
 
Consider what Medicare doesn’t cover, and budget accordingly. Medicare pays for much, but it doesn’t cover things like glasses and contacts, dentures and hearing aids – and it certainly doesn’t pay for extended long term care.2
 
Medicare’s yearly Part B deductible is $147 for 2014. Once you exceed it, you will have to pick up 20% of the Medicare-approved amount for most medical services. That’s a good argument for a Medigap or Medicare Advantage plan, even considering the potentially high premiums. The standard monthly Part B premium is at $104.90 this year, which comes out of your Social Security. If you are retired and earn income of more than $85,000, your monthly Part B premium will be larger (the threshold for a couple is $170,000). Part D premiums (drug coverage) can also vary greatly; the greater your income, the larger they get. Reviewing your Part D coverage vis-à-vis your premiums is only wise each year.2,3

Underlying message: stay healthy. It may save you a good deal of money. EBRI projects that someone retiring from an $80,000 job in poor health may need to live on as much as 96% of that end salary annually, or roughly $76,800. If that retiree is in excellent health instead, EBRI estimates that he or she may need only 77% of that end salary – about $61,600 – to cover 100% of annual retirement expenses.¹
           
Securities sold, advisory services offered through CUNA Brokerage Services, Inc. (CBSI), member FINRA/SIPC , a registered broker/dealer and investment advisor. CBSI is under contract with the financial institution to make securities available to members.
Not NCUA/NCUSIF/FDIC insured, May Lose Value, No Financial Institution Guarantee. Not a deposit of any financial institution.
   
This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
     
Citations.
1 - washingtonpost.com/news/to-your-health/wp/2014/03/31/guess-how-much-you-need-to-save-for-health-care-in-retirement-wrong-its-much-more/ [3/31/14]
2 - money.usnews.com/money/retirement/articles/2013/06/17/how-to-budget-for-health-costs-in-retirement [6/17/13]
3 - medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html [4/30/14]

05282014-WR-1035

 

 

Apply For Social Security Now ... or Later?

When should you apply for benefits? Consider a few factors first.
 

Now or later? When it comes to the question of Social Security income, the choice looms large. Should you apply now to get earlier payments? Or wait for a few years to get larger checks?
 
Consider what you know (and don’t know). You know how much retirement money you have; you may have a clear projection of retirement income from other potential sources. Other factors aren’t as foreseeable. You don’t know exactly how long you will live, so you can’t predict your lifetime Social Security payout. You may even end up returning to work again.

When are you eligible to receive full benefits? The answer may be found online at socialsecurity.gov/retire2/agereduction.htm.
 
How much smaller will your check be if you apply at 62? The answer varies. As an example, let’s take someone born in 1952. For this baby boomer, the full retirement age is 66. If that baby boomer decides to retire in 2014 at 62, his/her monthly Social Security benefit will be reduced 25%. That boomer’s spouse would see a 30% reduction in monthly benefits.¹
 

Should that boomer elect to work past full retirement age, his/her benefit checks will increase by 8.0% for every additional full year spent in the workforce. (To be precise, his/her benefits will increase by .67% for every month worked past full retirement age.) So it really may pay to work longer.2

Remember the earnings limit. Let’s put our hypothetical baby boomer through another example. Our boomer decides to apply for Social Security at age 62 in 2014, yet stays in the workforce. If he/she earns more than $15,480 in 2014, the Social Security Administration will withhold $1 of every $2 earned over that amount.3
 
How does the SSA define “income”? If you work for yourself, the SSA considers your net earnings from self-employment to be your income. If you work for an employer, your wages equal your earned income. (Different rules apply for those who get Social Security disability benefits or Supplemental Security Income checks.)4
 
Please note that the SSA does not count investment earnings, interest, pensions, annuities and capital gains toward the current $15,480 earnings limit.4
 

Some fine print worth noticing. If you reach full retirement age in 2014, then the SSA will deduct $1 from your benefits for each $3 you earn above $41,400 in the months preceding the month you reach full retirement age. So if you hit full retirement age early in 2014, you are less likely to be hit with this withholding.4

Did you know that the SSA may define you as retired even if you aren’t? This actually amounts to the SSA giving you a break. In 2014 -assuming you are eligible for Social Security benefits - the SSA will consider you “retired” if a) you are under full retirement age for the entire year and b) your monthly earnings are $1,290 or less. If you are self-employed, eligible to receive benefits and under full retirement age for the entire year, the SSA generally considers you “retired” if you work less than 15 hours a month at your business.2,4
 

Here’s the upside of all that: if you meet the tests mentioned in the preceding paragraph, you are eligible to receive a full Social Security check for any whole month of 2014 in which you are “retired” under these definitions. You can receive that check no matter what your earnings come to for all of 2014.4
 
Learn more at socialsecurity.gov. The SSA website is packed with information and user-friendly. One last little reminder: if you don’t sign up for Social Security at full retirement age, make sure that you at least sign up for Medicare at age 65.
  
This material was prepared by MarketingLibrary.Net Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.
   
Citations.
1 - socialsecurity.gov/retire2/agereduction.htm [2/26/14]
2 - socialsecurity.gov/retire2/delayret.htm [2/26/14]
3 - socialsecurity.gov/cola/ [2/26/14]
4 -
http://ssa.gov/pubs/EN-05-10069.pdf [2/26/14]

06042014-WR-1043 
 

 

 

 

 

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