You’re Not Ready to Retire Until You’ve Answered This Key Question

So you think you’re ready for retirement? You have your financial plan in place and you’re pretty certain you know what you need to know about Medicare and Social Security? That’s a good start, but it’s not enough. This recent article on the financial website Kiplinger tells us that no one is really ready to retire until they’ve asked and answered this key question: “What do I want the next chapter of my life to look like?”

We like this article, written by financial expert Barbara Shapiro, because it echoes something we tell our clients, seminar guests and radio listeners repeatedly: you’ll never achieve the type of retirement you’ve dreamed about unless you have a plan. What’s more, the kind of planning that will get you where you want to go takes time and careful thought. As Shapiro writes, “The majority of clients who are happily retired spent a great deal of time thinking and planning for it.” She says she asks her clients who are in their 60’s if they have given retirement any thought. “Most of them have,” says Shapiro, “but are having difficulty formulating a plan.”

Part of the planning problem, the Kiplinger article suggests, is that many people concentrate on the “mechanics” of retirement (typically financial) without spending enough time thinking and talking about the “emotions” of retirement. Most of us are so used to working at our regular jobs that it’s a challenge to imagine what life will be like when we no longer have to pick up the briefcase or punch the time clock. That’s why when Barbara Shapiro’s clients want to know when they can “afford to retire” – the question on the lips of many retirees – she first has them discuss and answer some fairly “touchy-feely” questions, such as:

  • Describe what you envision yourself doing the first week of retirement. How does it make you feel?
  • If you’re married, how does your spouse feel about retiring?
  • Do you want to stay in your home or move?
  • Do you want to live in warm weather or cold?
  • How’s your current health?
  • Do you want to leave a legacy to your loved ones or spend all of your money?

Why does Shapiro put them through this emotional exercise? In our opinion, it’s because she recognizes an essential truth about retirement. “Before we even discuss whether they can afford to retire,” Shapiro says, “I want to see where they are psychologically and emotionally. If they’re not ready mentally, then all the money in the world won’t buy them a fulfilling retirement.” We concur wholeheartedly.

Writing in the Kiplinger article, Shapiro says that retirement – which used to last a few years but now can last two decades or more – comes in stages. The first stage is when new retirees act like they’re on what she calls “a long-term vacation.” They go back to school, take fun and interesting courses just because they can, and may even take a stab at a new profession. “Most new retirees increase their travel, dine out more and attend the movies, theater or symphony more frequently than they did prior to retirement,” says Shapiro. “They are redefining themselves and their new lifestyle.”

During the second stage of retirement, after the novelty wears off, many retirees settle down into “a slower, more mundane lifestyle,” still going out but also enjoying their time at home. During this phase, “Physical issues may start to present themselves,” says Shapiro. “For example, they may not feel comfortable driving at night and switch to meeting friends for lunch instead of dinner.” Finally in the third stage of retirement most seniors are no longer able to live independently. Some age in place with in-home help, while others move to various types of senior living and senior care facilities. In our view, the point here is to think and plan ahead for all three phases of retirement and make certain your loved ones understand and support your wishes. That way you’re far more likely to protect your assets, avoid become a burden, and guard against one day being moved into a nursing home against your will.

Is money important? Absolutely – but it’s no panacea. “Clearly, the amount of available money influences how, when, and where someone retires,” Shapiro concludes. “The greater the resources, the more options one might have; however, every potential retiree needs to have a well-thought-out game plan in place that makes sense for them both financially and emotionally.” At AgingOptions, our term for that kind of plan is a LifePlan. It includes all the elements you need to make sure your plan will see you through each phase of a happy and successful retirement. An AgingOptions LifePlan incorporates a financial plan, a legal plan, a housing plan, a medical plan and a family plan. It helps you ask and answer the types of questions suggested in the Kiplinger article. Best of all, it becomes your road map to get you where you want to go in your retirement years.

Why not invest a few hours and find out more about this dramatically different approach to retirement planning? Come join us at an upcoming AgingOptions LifePlanning Seminar. These popular events take place at convenient locations throughout the region, so click here for all the details, and then sign up online or call us during the week. Let us help you achieve the retirement of your dreams with an AgingOptions LifePlan.

(originally reported at www.kiplinger.com)

More U.S. Seniors Working Today Than Any Time Since JFK Was President

You’re 65 or older and still going to work every day? Congratulations – you’re part of a growing club. According to this article just published in USA Today, more Americans in your age group are working today than at any time since John F. Kennedy was President more than 55 years ago.  As USA Today puts it, “Retire by your mid-60s? How 1960’s.”

Last month, says USA Today, more than 19 percent of American adults 65 and older were still punching the time clock, figuratively speaking, and going to work. That’s according to data just released by the U.S. government. That’s the highest percentage of seniors working since 1962, according to the report. Back in 1985, the number of 65-plus men and women in the U.S. actively employed reached its modern-day low point at just 10 percent, and it has been on the rise ever since, so labor experts predict those of you seniors still heading out to the workplace on a regular basis will continue having plenty of company.

Overall we at AgingOptions tend to think is a good thing, since studies repeatedly show how adults of retirement age generally stay healthier, mentally and physically, if they can keep on being actively employed.  Recently we published this article on our AgingOptions Blog touting the benefits of what experts call a “phased retirement.” The old idea of hanging up your tool belt or briefcase at 65 and then sitting around all day is generally a thing of the past. However, our philosophy revolves around senior adults being empowered to make decisions that work best for them, not for someone else, so this statistic about men and women age 65 and older staying actively employed is something of a mixed bag.

Our concern is stated well in the USA Today article which says, “As America grows older and as life expectancy gets longer, some workers keep heading to the office because they like it and still feel engaged. But many others are continuing to work for a simpler, darker reason: they can’t afford not to.” According to data from the Employee Benefit Research Institute, more than 25 percent of those 55 and older report having saved less than $10,000 in retirement plans, savings and investments. For that reason, one-third of folks in that age group expect to retire at age 70 or older, if they ever retire at all. This sounds less like a choice and more like an emotional burden and a financial trap.

Ironically, on paper things are looking pretty good for senior workers these days, the USA Today article suggests, with an official unemployment rate for workers 65 and older of less than 4 percent. But we suspect that figure hides the grim reality that many seniors may have given up looking for work after months or years of discouraging rejection.  “Older workers still heading for jobs may be the lucky ones,” says USA Today, with a growing number of seniors reporting that they want to work but can’t get hired by employers who want younger (and often lower-paid) employees.

It’s also frustrating to see that many of the retraining programs and other job-related education initiatives put in place by government and private industry to help workers qualify for new types of work are passing seniors by.  A few years ago the Washington Post published this article on seniors and unemployment which included a grim assessment. “The remedies for unemployment among older workers are different from the things that help younger workers: While vocational programs and access to higher education are seen as the ticket to a better job for those just starting out, those who’ve already spent decades in the workforce have less to gain from a training course that will only benefit them for the few years it takes to get to retirement. That’s why avoiding job loss in the first place is so important.”

In short, we can’t overemphasize the importance of planning and preparation. The best way for most of you to protect your assets in retirement and avoid becoming a burden to those you love is to start now to build a retirement plan that will allow you – within reason – to live as you wish, working or not, with your health care needs covered, your housing choices carefully planned out, and your family fully supportive of your wishes. Perhaps it’s time for you to take a fresh look at what “retirement” will look like for you. Here at AgingOptions, we can offer you a brand new perspective on this dynamic and exciting time of life. No matter what the retirement journey looks like for you, you’ll need both a good map and a qualified guide to get you where you want to go.  That “map” is a type of retirement plan we call a LifePlan.

Unlike other forms of piecemeal “planning,” an AgingOptions LifePlan takes all the critical facets of retirement into account: financial security, housing options, legal preparation, health care needs and family communication. Your LifePlan is the best method we’ve ever discovered to help turn your retirement hopes and dreams into reality. Your first step on the road to discovering a new approach to retirement is a simple one: plan to attend one of our free LifePlanning Seminars. These information-packed sessions will open your eyes to a world of possibilities while answering many of your questions about practical issues related to retirement planning. Click here to go directly to our Upcoming Events page where you’ll find dates, times and online registration. It will be our pleasure to meet you at a LifePlanning Seminar soon!  Meanwhile, as we say at AgingOptions, “Age On!”

(originally reported at www.usatoday.com)

 

 

 

People Think They Know about Retirement Finances – but Do They?

How knowledgeable are you about retirement-related finances? Odds are you aren’t as well-informed as you think. That’s the message in this recent article from Time Magazine’s “Money” website. Written by retirement expert Walter Updegrave, the article suggests that even people who think they know their stuff when it comes to money questions in retirement don’t know as much as they think they know.

According to the article, the American College of Financial Services just released the results of its Retirement Income Literacy Quiz. The scores weren’t exactly stellar. Of 1,244 adults between the ages of 60 and 75 who took the 38-question online quiz, almost three-fourths flunked, scoring 60 percent or less. Only a tiny handful of participants scored an A or B (91 percent or better).  Author Updegrave writes that he’s not surprised at this poor showing since previous surveys “have revealed some pretty disconcerting gaps in people’s knowledge of retirement planning.” Based on our experience here at AgingOptions, we think he’s right: there’s a lot of confusion and misinformation out there, and many people are making dangerous and reckless financial decisions as a result.

What’s in this test, which one expert calls “the most comprehensive retirement literacy quiz out there”? As we said, it consists of 38 multiple choice questions covering a variety of financial topics, some basic and some more complex. In Walter Updegrave’s assessment, “For the most part, I felt the questions pretty well covered the main topics you’d want to have a handle on to plan for a secure retirement.” Some examples of general questions include these:

  • What’s the maximum amount you can safely draw from your nest egg if you want it to last 30 years?
  • What’s the right age to claim Social Security if you expect to live a long life?
  • Which expenses are covered by Medicare and long-term-care insurance?
  • What are the odds that at some point in life you might need assistance with activities of daily living?

But Updegrave also cautioned that some of the questions demanded “a level of technical knowledge even well-informed individuals aren’t likely to possess.” These questions dealt with topics like payout rates for annuities, the types of stocks that generate the highest returns, and ratings of different types of bonds. When asked why these tougher questions were included, one of the officials from the American College of Financial Services said he agreed many of the questions, especially the two about annuities, were difficult. Indeed, fewer than 20% of respondents correctly answered either one. But “they were included because a lot of people in the age group surveyed are buying or have already purchased annuities, so they should understand how they work and have an idea of what they cost.” The same logic holds true for investments: if you’re going to buy stock, you had better have some basic facts at your disposal.

The good news, said Walter Updegrave, is that those who do well on the quiz appear to do better in retirement. “(They) are more likely to plan better and have more confidence in their ability to manage their finances” including having a plan in place to deal with the cost of long-term care and believing that they’re better able to manage their investments throughout retirement.” The bad news is that about sixty percent of test-takers went into the quiz with what they thought was a high level of knowledge – but two-thirds of that group flunked. The message is that over-confidence is no substitute for good information.

So you think you’re ready to give this quiz a try? Here’s the link to the Retirement Income Literacy Quiz. How long it takes is up to you, so allow plenty of time. You’ll get an automatic score at the end. And if you get an A, congratulations – only one percent managed that feat! But if you’re like most people, you may be surprised (and not in a good way) by your score.

Let us offer two big caveats. First, no single test can tell the whole story when it comes to financial literacy. Second, when it comes to planning for retirement, here at AgingOptions we urge all our clients, radio listeners and seminar attendees to remember this important fact: money isn’t everything. Yes, financial planning is critically important, but it’s only one part of a strong retirement plan, and yet far too many retirees think a financial plan is all they need. This is a dangerous misconception. Your financial plan has to work in close harmony with a fully developed legal strategy so that your assets will be fully protected. Since lack of preparation for a medical crisis is one of the biggest causes of financial catastrophe, your medical plan has to be airtight. All of these interconnect with your housing plan, so that you can maintain your independence and avoid being forced into unplanned institutional care. Finally, unless your family knows and understands your wishes – and supports them – your retirement plan can become chaotic. You need a better, more comprehensive strategy to link finance, legal, medical, housing and family together.

The only retirement plan that accomplishes this is an AgingOptions LifePlan. With your personalized LifePlan in place you’ll look ahead to your retirement with security and confidence. But don’t take our word for it: find out for yourself at a free LifePlanning Seminar, where in just a few short, fast-paced hours you’ll learn about this revolutionary approach to developing a blueprint for your retirement. We invite you to come join us soon at a location near you. Simply click here for dates, locations and online registration,  or contact us during the week and we’ll gladly assist you. Age On!

(originally reported at http://time.com/money)

Observing Memorial Day by Honoring and Helping Our Service Members

By Kirk Larson, Social Security Washington State Public Affairs Specialist

On Memorial Day, we honor the soldiers and service members who have given their lives for our nation. Social Security respects the heroism and courage of our military service members, and we remember those who have given their lives in defense of freedom. Part of how we honor service members is the way we provide Social Security benefits.

The unexpected loss of a family member is a difficult experience for anyone. Social Security helps by providing benefits to protect service members’ dependents. Widows, widowers, and their dependent children may be eligible for Social Security survivors benefits. You can learn more about Social Security survivors benefits at www.socialsecurity.gov/survivors.

It’s also important to recognize those service members who are still with us, especially those who have been wounded. Just as they served us, we have the obligation to serve them. Social Security has benefits to assist veterans when an injury prevents them from returning to active duty.

Wounded military service members can also receive expedited processing of their Social Security disability claims. For example, Social Security will provide expedited processing of disability claims filed by veterans who have a U.S. Department of Veterans Affairs (VA) Compensation rating of 100 percent Permanent & Total (P&T). Depending on the situation, some family members of military personnel, including dependent children and, in some cases, spouses, may be eligible to receive benefits. You can get answers to commonly asked questions and find useful information about the application process at www.socialsecurity.gov/woundedwarriors.

Service members can also receive Social Security in addition to military retirement benefits. The good news is that your military retirement benefit does not reduce your Social Security retirement benefit. Learn more about Social Security retirement benefits at www.socialsecurity.gov/retirement. You may also want to visit the Military Service page of our Retirement Planner, available at www.socialsecurity.gov/planners/retire/veterans.html.

Service members are also eligible for Medicare at age 65. If you have health insurance from the VA or under the TRICARE or CHAMPVA programs, your health benefits may change, or end, when you become eligible for Medicare. Learn more about Medicare benefits at www.socialsecurity.gov/medicare.

In acknowledgment of those who died for our country, those who served, and those who serve today, we at Social Security honor and thank you.

Reverse Mortgages: the “Misunderstood” Financial Tool That Could Rescue Your Retirement

There’s a crisis looming in America when it comes to retirement. No doubt you’ve read the articles and heard the news stories about this oncoming tidal wave of challenges for retirees, especially aging boomers. We’ve written about this issue several times on the AgingOptions Blog. As baby boomers retire – now at the rate of about 10,000 every day – they simply don’t have enough money set aside. “Many of them,” say the experts, “are woefully underfunded for their future retirement needs.”

So is it possible that one of the most misunderstood financial tools in America could be the very thing that saves retirement for a growing number of aging boomers? According to this article from Yahoo News, reprinted from US News & World Report, the answer is a definite yes. And what is this mystery tool? It’s none other than the reverse mortgage, which one expert, Jamie Hopkins, professor of finance at the John E. Simon School of Business, calls “one of the most misunderstood financial products in existence.”

The Yahoo News article points out, as most people know, that reverse mortgages (known as Home Equity Conversion Mortgages, or HECMs) have gotten a “bad rap” over the past decade or two because of the way these instruments were designed and marketed when they first appeared. Reverse mortgages were associated with late night television ads featuring endorsements by aging celebrities – and the earlier ones also carried far less protection for borrowers and their families. Horror stories of spouses left out in the cold – literally – because of reverse mortgages gone bad were frequent features on the news. As a result, many financial planners were skeptical of the HECM at best.

But that was in a much different time. Unbeknownst to many uninformed Americans who still view these financial instruments with unwarranted disdain and suspicion, the reverse mortgage has changed dramatically in recent years, with a host of new regulations and safeguards. As a result, says the article, “Reverse mortgages are now gaining a lot of attention as a viable option for retirement income.” Most of the skeptics have now become enthusiastic advocates. One expert quoted in the Yahoo News article stated flatly, “Reverse mortgages deserve a second look today.”

This fresh new look at the HECM couldn’t come at a better time for retiring boomers, the majority of whom are moving into their “golden years” with far fewer resources than they’ll need in the future. This lack of savings is compounded by an anticipated longer lifespan, which means today’s boomers will probably be facing an increasing number of age-related health issues. According to Professor Hopkins, “This retirement income shortfall is nothing less than a crisis facing the United States.” But the crisis could be averted for many by the power of a reverse mortgage which will allow homeowners to stay securely in their homes while tapping into the largest single “cash reserve” most of them possess – their home equity.

How might an HECM benefit a retiree? There are several ways. One popular option is to take out a line of credit, which allows the homeowner to supplement his or her income when needed. Not only is this a protected source of ready funds, but the available credit amount grows the longer the HECM is in force. Another option is to use the proceeds from the reverse mortgage to pay off the original loan, leaving a retiree with no house payment – a saving which would make a dramatic difference in retirement lifestyle for most of us.

Some retirees use income from their reverse mortgage to allow them to delay claiming Social Security benefits, a tactic which can boost monthly payments by more than 30% if, for instance, a retiree can hold off until age 70 instead of drawing benefits at 66. Other retirees have found that drawing on their HECM during times when the stock market is down and the value of their stock-based assets is depressed gives those balances time to recover. The HECM provides an excellent cushion, protecting retirees from having to sell when prices are low.

So we encourage you to read the Yahoo News article for yourself. You can also search the AgingOptions Blog for past articles on reverse mortgages. But without a doubt the most important step you can take is to talk with an expert to get all your questions answered and to find out if a reverse mortgage is right for you. We are well acquainted with several highly qualified professionals in the reverse mortgage field, including regular radio guest Laura Kiel, and can recommend them with complete confidence. Don’t let your preconceived notions and other people’s opinions keep you from discovering the power of a reverse mortgage! You just may find, as others are discovering, that a Home Equity Conversion Mortgage could save your retirement.

When it comes to all aspects of retirement planning, we at AgingOptions stand ready to assist you with a full range of strategic services designed to help you enjoy a secure and fruitful retirement. Our approach, called LifePlanning, encompasses all aspects of retirement – finances, medical care, housing options, legal protection and family communications – weaving these into a well-crafted plan that protects your assets while helping you avoid becoming a burden to those you love. To learn more about this powerful approach to planning for your future, join us – without obligation or cost – at a future LifePlanning Seminar. You’ll find all current dates, times and seminar locations here on our Upcoming Events tab. You can register there, or contact us during the week, and we’ll gladly assist you.

(originally reported at http://finance.yahoo.com)

Tailor-Made Retirement: the Case for a New, More Flexible Approach

In an earlier time, what we call “retirement” was pretty simple. People worked non-stop until they reached a certain age – then abruptly they stopped working and entered a state called “retirement.” But these days, as with seemingly everything else, flexibility is the new watchword. The old model of retirement which some say hearkens back to the industrial age is simply not the norm any more.

Among many recent articles about this issue of the changing face of retirement, one of the most interesting and thorough treatments we’ve seen appeared late last year on the website of the Wharton School of Business at the University of Pennsylvania. You can click here to read this insightful article. It’s called “The Case for a Phased Retirement.” As the Wharton researchers put it, “In the same way that flexibility has come to the workplace — where, when and how we work — so, too, has arrived the age of the tailor-made retirement.” These days once unfamiliar terms such as “phased retirements, bridge jobs, un-retirement and second and third acts” are being commonly and openly discussed when people think about continuing to work after the typical, traditional, so-called retirement age. The reason for this trend, says Wharton, is simple. “Workers are demanding it, and firms have good cause to accommodate the idea that work does not one day simply stop.”

Workers are insisting on this radical transformation in the retirement landscape for multiple reasons, some encouraging and some less so. First, let’s consider what some might call the bad news: quite a few people continue to work into their late 60’s and 70’s chiefly because they have to. The lack of retirement savings by most boomers has been well documented, and when you combine paltry savings with job losses during the Great Recession, skyrocketing debt, and the fact that people today are living longer, staying on the job is hardly an option for some. But on the opposite end of the economic spectrum, the news is much more encouraging. “The reasons people at the upper and lower ends of the income scale keep working,” says the Wharton article, “is very different. If you ask people at the low end, they say ‘I need the money,’ they are working because they have to. At the upper end, they say ‘I’d like to make a contribution.’ They are working because they want to.”

And that, we suggest, is what makes this whole idea of Phased Retirement so exciting and intriguing. Researchers from Boston College studied retirees and found that 60 percent of those who leave their primary careers end up doing something else, including working part-time or changing to a whole new career in retirement. “For those who can afford to ease out of fulltime work, the options are flourishing,” says the Wharton analysis. Many companies, fearful of the “brain-drain” that can happen when seasoned workers retire, are starting to come up with ways for these trained men and women to ease into retirement by cutting hours gradually, not all at once. Some of these programs even include a requirement that older workers spend part of their time mentoring their younger counterparts. Since 60-80 percent of older workers say they would prefer to stay in the workplace on a more limited schedule after the age of “formal” retirement, this concept seems like a win-win to us.

So once again we encourage you to read this important article (you can click here to access it) and as you do we hope it causes you to stop and consider what Phased Retirement could mean for you. Chances are you have many more years of active, productive living ahead of you, and it’s a virtual certainty that you have important knowledge and skills that an employer – your present one or another one – could find highly useful. Phased Retirement can help you financially, of course, but the benefits go far beyond money to include better physical health, sharper mental skills, and a deep sense of personal satisfaction that comes from giving back to those around you. These benefits are priceless.

Perhaps it’s time for you to take a fresh look at retirement. Here at AgingOptions, we can offer you a brand new perspective on this dynamic and exciting time of life. There’s no need to fear growing older – quite the opposite! But if retirement is a journey, you need a good map and a trained, professional guide to get you where you want to go, with your assets well-protected and your independence and security preserved. That “map” is a type of retirement plan we call a LifePlan, a carefully crafted and comprehensive blueprint that takes all the critical facets of retirement into account. As we work with you to craft your LifePlan, we consider your financial security, your housing options, your legal preparation, your health care needs and the importance of having your family informed and supportive of your desires. Your LifePlan is the best method we’ve ever discovered to help turn your retirement hopes and dreams into reality.

Your first step on the road to discovering a new approach to retirement is a simple one: plan to attend one of our free LifePlanning Seminars. These information-packed sessions will open your eyes to a world of possibilities while answering many of your questions about practical issues related to retirement planning. Click here to go directly to our Upcoming Events page where you’ll find dates, times and online registration. It will be our pleasure to meet you at a LifePlanning Seminar soon!

(originally reported at http://knowledge.wharton.upenn.edu)

Ex-Spouse Benefits, Taxes, and You

By Kirk Larson, Social Security Washington Public Affairs Specialist

During the month of April we observed both Ex-Spouse Day and Tax day. These two observances are extra important if you are an ex-spouse, because Social Security pays benefits to eligible former spouses. In addition, you may need to have claimed this income on your tax forms.

If you are age 62, unmarried, and divorced from someone entitled to Social Security retirement or disability benefits, you may be eligible to receive benefits based on his or her record. To be eligible, you must have been married to your ex-spouse for 10 years or more. If you have since remarried, you can’t collect benefits on your former spouse’s record unless your later marriage ended by annulment, divorce, or death. Also, if you’re entitled to benefits on your own record, your benefit amount must be less than you would receive based on your ex-spouse’s record.  In other words, we’ll pay the higher of the two benefits for which you’re eligible, but not both.  You are potentially eligible for up to 50% of what your ex-spouse could receive at their full retirement age.

You can apply for benefits on your ex-spouse’s record even if he or she hasn’t retired, as long as you divorced at least two years before applying.  In addition, your ex-spouse must be at least age 62.

The amount of benefits you get has no effect on the benefits of your ex-spouse and his or her current spouse. Visit Retirement Planner: If You Are Divorced at www.socialsecurity.gov/retire2/divspouse.htm to find all the eligibility requirements you must meet to apply as a divorced spouse. Our benefits planner gives you an idea of your monthly benefit amount. If your ex-spouse died after you divorced, you can still quality for widow’s benefits. You’ll find information about that in a note at the bottom of the website.

Visit www.socialsecurity.gov/retire2/divspouse.htm today to learn whether you’re eligible for benefits on your ex-spouse’s record. That could mean a considerable amount of monthly income. What you learn may bring a smile to your face … even when Tax Day rolls around!

How Many Wait Until 70 to Begin Social Security? The Surprising Answer

Here at AgingOptions a great number of the retirement-related questions we get involve Social Security benefits. It’s surprising how much misinformation there is about this program that touches so many millions of lives. That’s why we’re always on the lookout for articles that help people better understand this vital government-run system of benefits.

Here’s one recent example of a helpful article from the popular financial website Motley Fool. Most people approaching retirement age know that the longer you wait to start claiming Social Security benefits, the more monthly benefit you get – but just how much more still seems to confuse people. In plain-spoken language the Motley Fool article explains how waiting to file for benefits will have a dramatic life-long impact, not only on you but your spouse as well. Yet in spite of the demonstrated benefits of delay, the actual number of seniors who maximize benefits by waiting as long as possible to file is shockingly low.

First let’s consider a few basics. As far as the Social Security Administration is concerned, your “full retirement age” is determined by your birth year: if you were born between 1943 and 1954, your full retirement age is 66. (For those born later, this handy chart on the Social Security website shows how full retirement age is gradually increasing.) The earliest date when a person can claim Social Security benefits is 62. So if that’s the case, many people argue, why wait? Why not take the benefits at the earliest possible date?

The answer lies in the way Social Security incentivizes people to delay. For every year between age 62 and 70 that you hold off taking benefits, those benefits increase by about 8 percent. That means waiting the extra eight years from 62 to 70 boosts your benefits by more than 75 percent, for the rest of your life. If you are survived by a spouse who is relying on your benefits, their lifetime payout will probably be increased as well. So if waiting is such a great idea, most people put off taking benefits, right? Definitely not.

According to Motley Fool, quoting research from Boston College, “a vast majority of (seniors) wind up taking benefits before they hit their full retirement age.” This translates into about 60 percent of seniors who sign up for Social Security benefits between ages 62 and 64. Another third or so tend to enroll at or near their full retirement age. This means that only 10 percent of all seniors are waiting to file for benefits after their full retirement age. And how many manage to max out their benefits by holding off until age 70? The answer is surprising, to say the least: only 3 percent!

Experts do acknowledge that there are times when taking early benefits may be necessary. If you’re in ill health, for example, with a limited life expectancy, taking benefits early on may be better that waiting too long for benefits you’ll never see. And for those left unemployed and facing economic crisis from the recent recession, Social Security benefits can provide an economic lifeline. But claiming early benefits just because you want a little more cash in your budget is shortsighted, and you’ll almost certainly come to regret it. Once you lock in those lower benefits, you’re pretty much stuck.

There’s another reason to delay benefits: protecting yourself against future benefit cuts. Lurking behind the advice to wait, there’s an ominous warning implied in the Motley Fool analysis. “The reality is Social Security isn’t in good shape,” says the article, “and the program that seniors rely on is nearing a point where its foundation will begin cracking.” The article explains that by the year 2020 “Social Security’s Trust will begin paying out more cash than it’s bringing in…culminating in the program’s extra cash being completely exhausted by 2034.” Assuming Congress does nothing to stop the bleeding and shore up the program, Social Security Trustees “estimate that an across-the-board benefits cut of up to 21 percent may be needed to sustain payouts to the year 2090.” Social Security was designed to provide beneficiaries with 40 percent of their retirement income, but for a huge number of retirees (including 43 percent of singles) the program provides 90 percent of their income. “With so many seniors reliant on Social Security,” the Motley Fool notes, “a 21 percent haircut would be a major problem.” But the larger your monthly check, the less painful it would be.

There’s much more to the issue of how to maximize Social Security benefits, and we encourage you to seek out good sound guidance for your specific situation. Contact us here at AgingOptions and we will gladly advise you. But remember, planning for your financial future is only one facet of preparing for retirement. At AgingOptions, we employ a unique and comprehensive approach called LifePlanning that “connects the dots” like no retirement plan we know of, blending your financial plan with medical, legal and housing strategies in a seamless, well-crafted whole. Your LifePlan also brings your loved ones into the picture, since it’s essential that those closest to you agree with and support your wishes as you age.

If you’re tired of piecemeal retirement planning and curious about this comprehensive method of preparing for a fruitful and secure future, we invite you to attend a free AgingOptions LifePlanning Seminar. These popular events take place at locations throughout the region, and we welcome you to bring your questions and come join us. You’ll be very glad you did! For dates, times, locations and online registration, simply click here – or contact us by phone during the week. We’ll look forward to meeting you.

It may be a good idea to delay taking Social Security – but it’s never a good idea to delay planning for your retirement. Let AgingOptions be your guide. Age on!

(originally reported at https://www.fool.com)

 

 

Wall Street Journal Says Get Ready! Congress is Coming After Your 401(k)

The members of Congress enjoy one of the best retirement plans in America. But that doesn’t stop them from coming after yours! So says this recent article from the pages of the Wall Street Journal.

Writing in the Journal, financial columnist Jason Zweig warns that, as part of its tax reform deliberations, Congressional negotiators have cast their hungry eyes on the 401(k) accounts that form a vital part of the retirement plans for a vast number of working Americans. Ironically, says Zweig, our elected representatives aren’t even considering changes to their own retirement plans which are not only extremely generous but remarkably safe. “The lucky participants in one of the best retirement plans around are coming after yours with a meat cleaver,” Zweig writes – so it might be time for us working Americans to grab our pitchforks and defend our retirement savings.

Here’s the problem. As Congress and the Trump administration debate the fine points of tax reform, they’re looking for revenue wherever they can reasonably find it. Right now, as most of us know, the contributions we make to an employee-sponsored 401(k) plan (or a similar 403(b) if you work for a non-profit organization) are taken out of your paycheck pre-tax, giving you a healthy incentive to set aside retirement savings in an account that is tax-deferred. You won’t pay taxes on the contributions you make or on the interest earned until you begin making withdrawals, usually when you retire. (This assumes you are not saving money in a Roth IRA in which contributions have already been taxed and the withdrawals can be made tax-free.)

So what’s the danger? Here’s how the Wall Street Journal’s Jason Zweig describes it. “At a meeting with members of the Senate Banking Committee earlier (in April),” says Zweig, “Gary Cohn, the director of the White House National Economic Council, discussed ideas that would remove pre-tax benefits from retirement accounts including 401(k)s and shift them to after-tax benefits, according to people familiar with the discussions. It wasn’t clear how seriously the administration is evaluating any specific proposal, these people said.”

Apparently Congress is tired of waiting for you and me to pay income taxes on our retirement savings. For that reason they want to tax us before those funds go into our retirement accounts. And here’s the real eye-opener: “Taxing retirement-plan contributions Roth-style,” Zweig writes, “would generate roughly $1.5 trillion over the next decade the way the government reckons the numbers…So giant a pot of honey may be hard for Congress not to raid.”

Besides giving Uncle Sam a windfall at our expense, the great danger in this plan is that it removes one of the real incentives for most of us to save for retirement. “It’s hard for most people to save for a goal that glimmers faintly decades in the future,” says the Wall Street Journal. “Take away the tax incentive, and many savers might no longer see the point of even trying.”

One of the financial experts quoted in the article describes a solid financial plan for retirement as a four-legged stool, comprised of a pension, a 401(k), Social Security and supplemental savings. But only a relatively tiny fraction of workers today earn a pension. (By the way, that’s something else Congress doesn’t have to worry about: in 2015 the average pension earned by a retired member of Congress was over $41,000, and a Senator or representative with 30 years of service qualifies for well over $105,000 in annual pension.) If you remove the incentive for people to save in a tax-deferred account, fewer and fewer will approach retirement with anywhere near enough money set aside. The retirement crisis is only going to get worse.

So what’s the answer, according to the Wall Street Journal analysis? Mandatory savings is one idea that has been floated, requiring people to save for their future. Leaving the present system alone is another option. But “at a bare minimum,” says Jason Zweig, “if Congress is going to hack away some of the tax advantages of private retirement plans, it should make matching cuts to the cushy federal system.” It only seems fair, after all. And if you are the protesting kind, Zweig has this advice: “If you have a pitchfork in your garage, keep it handy. Your 401(k) might need defending.”

As interesting as this article is, we here at AgingOptions believe it makes a mistake common to many stories about retirement: it focuses entirely on finances. There’s no doubt that having a good financial plan in place is essential to your retirement security, but it is only one piece of a much larger puzzle. Protecting your assets is all well and good, but have you considered how to cover yourself against medical emergencies, both in the short term and long term? Few things will drain your bank account more quickly that a long term care crisis. What about housing? Simply assuming you’ll be able to stay put in your home indefinitely is extremely naïve, even dangerous. There are also legal safeguards you’ll want to put in place to protect your assets and to make sure you won’t become a burden to your loved ones. And speaking of your loved ones, you need to make certain your family knows your wishes as you age, and will support the choices you make.

All these elements – financial security, medical coverage, housing choices, legal protection and family communication – together make up an AgingOptions LifePlan, the most comprehensive retirement plan we know of. If this sounds like a unique and powerful approach to planning for your retirement future, it is. Why not take just a few hours and find out more, without any obligation? Plan now to attend a free LifePlanning Seminar at a location that’s convenient for you. We assure you, you’ll be very glad you did.

For dates, times and online registration, click here – or, if you prefer, call our office for assistance during the week. Discover how to enjoy a secure and rewarding retirement with an AgingOptions LifePlan.

(originally reported at https://blogs.wsj.com)

 

 

Social Security Making a Difference in Communities

By Kirk Larson, Social Security Washington Public Affairs Specialist

Social Security is a critical federal program that promotes income stability among millions of households in the United States. Social Security is always evolving to meet the needs of the American public. We’re optimistic about the future and the limitless possibilities for progress.

Much of the progress we’ve made together, as a nation, is through the shared responsibility of paying Federal Insurance Contributions Act (FICA) tax. This federal payroll tax funds Social Security— programs that provide benefits for retirees, the disabled, and children of deceased workers. You help us keep millions of hard working Americans out of poverty.

Without your contribution, wounded warriors wouldn’t receive the benefits they deserve. Children who have lost parents would have no social safety net. Millions of elderly people would be destitute. In the same way that we take great pride in helping people who need it, you should take pride in making this country stronger. You can see the many ways our retirement benefits help your loved ones and neighbors at www.socialsecurity.gov/retire.

Right here in the Washington Social Security is at work providing support.

In King County alone there are over 300,000 people (about 1 out of 6) collecting monthly payments totaling over 5 billion dollars per year.

When you look at Washington State the economic impact in small and large communities is undeniable. There are close to 1.3 million people receiving monthly payments worth more than 20.4 billion dollars per year.

The case is similar in other state. Take Idaho, there are over 326,000 people receiving payments. That is about one out of every five people. That represents over 4.8 billion dollars per year.

Social Security money is an important driver of local commerce.

If you want to learn about your own Social Security benefits, visit www.ssa.gov/myaccount/ to empower your future, for today and tomorrow.