Q: I am 42 years old. I have been working through my financial plan and I am wondering if I should count on receiving a Social Security benefit when I retire. The Social Security website says the trust fund reserves will be depleted by 2034 and “payroll taxes will be enough to pay only 79 cents for each dollar of scheduled benefits.”
If you’ve been reading the financial news or viewing stock market pages on the internet, you may have noticed headline banners announcing changes to social security rules that take affect after April this year. And you may be wondering if the changes will affect you.
Don’t worry, spousal benefits are not coming to an end. What will end is the ability for a spouse to collect spousal benefits if an older spouse is not collecting benefits yet. And a spouse not yet age 62 by January 1, 2016 can no longer claim “spousal benefits only” at Full Retirement Age (FRA) to allow her own benefits to grow until age 70.
Question: My wife and I are both 61 years old. We earn above-average incomes and our projected Social Security benefits at full retirement age are $2,600 each. Our financial planner told us we should wait until age 70 to take advantage of a 32 percent increase of annual benefits between the full retirement age and age 70. She also told us that if I would file for Social Security at my full retirement age and then suspend payments, when my payments start at age 70 they would include the 32 percent increase and my wife could start collecting a spousal benefit equal to one-half of my benefit when she turns 66. Then when she turns 70 she could switch to her own benefit, which would include the 32 percent increase.
Now I hear that Congress is passing a law that might cancel this strategy. What’s that all about?
Question: You once wrote a column on social security tips. I cut it out but now I can’t find it. Can you give me an update?
Answer: The subject of social security benefits in general can be daunting. Hopefully you will find something below helpful that will keep you from leaving extra money on the Social Security table.
Gary Alt, co-founder and financial advisor at Monterey Private Wealth in Pleasanton, CA recently had an article published by Nasdaq. You can read the article at Nasdaq.com by clicking here, or read it below.
Deciding when to start collecting Social Security benefits is one of the biggest financial decisions you’ll make in retirement. Why? The lifetime cost of making the wrong choice can be enormous, and could have a huge impact on your family’s retirement lifestyle. Considering that you’ve contributed a hefty amount over many years of your career, make sure you’re not shortchanging yourself or your family.
Consider a hypothetical example: Bob turns 62 this year and is wondering whether he should begin collecting benefits. If he waits until his full retirement age of 66, he’ll get $24,000 per year. Taking early benefits at age 62 cuts his payments by 25%, so Bob will get only $18,000 a year.
If he waits until age 70, his full retirement benefit amount increases 8% a year, rising to $32,652. By age 85, those payments will add up to about $608,600, compared with only about $547,600 if he started collecting at age 62, assuming 2% percent annual cost of living adjustments.
While there are a lot of factors that go into the decision on when to start taking benefits, a few of them are critical in making the right choice....