Social Security Benefits are an Asset

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Day in and day out, we see middle income married couples with an aggregate cumulative Social Security benefit, through life expectancy (85 for men and 88 for women), well over a million dollars as a combined asset. When we show this analysis to our clients, they are in awe as they never knew their benefit to be worth so much. Taking this into consideration, why aren’t people finding out ways to maximize what is their most valuable retirement tool?

Money in general, and more specifically Social Security benefits, tend to evoke very emotional reactions. People want to draw as soon as possible because they don’t want to be subsidizing someone else’s retirement without seeing the benefit for themselves. This fear of missing out often leads to an erroneous investment mindset about Social Security. Retirees with this mindset truly believe that maximization comes from drawing early instead of reviewing what options are available. As we share in our seminars “people are more concerned about dying early, than living too long”. By drawing early, you would have to die before reaching your break-even point to win financially. This does not seem like a good way to maximize an investment.

People also have very good intentions, that usually go by the wayside – they will say “I will go ahead and draw early and invest that money”. This kind of thinking ignores the reality of investments, specifically risk and the volatility of investments; also the fact that LIFE happens and that money does not always end up where you had intended it to go. Because of inflation, money loses value over time. Putting your Social Security checks in conservative investments such as CD’s, Treasury Bills and savings accounts is one of the riskiest things to do – yes, your principal is protected, but the buying power of your money will be eaten away by inflation.

So, let’s look at your Social Security benefit – there is no volatility, it includes Cost of Living Adjustments to ensure the buying power of your benefit, it has the right of survivorship, and for every year you wait to draw your benefit after full retirement age, you will be rewarded with an 8% increase per year. Treating your Social security in the terms of protection versus profit, is a much better way to look at this asset.

Pillars LLC is in the Corinth, MS area but service all 50 states. Roy and Diane are both National Social Security Advisors and Roy is a former CPA of over 40 years. You may contact them at dthompson@pillarsllc.com, on their website at www.pillarsllc.com or call at 601-954-0699. KNOW before you GO!!


Wife is Older – Strategies

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Because there are more re-marriages in our society today, we see more clients where the wife is quite a bit older than the husband. This creates an unusual set of circumstances when filing for your Social Security. Why? Because if the wife is younger, the usual situation created is that the wife, if the lower earner, would entertain spousal benefits and then if possible switch to her benefit later in the filing strategy. Not the case when the husband is younger – let’s look at a real-life situation.

  1. Amy will turn Full Retirement Age in February 2019, and Randy will turn Full Retirement Age in October 2023. Amy has the lower benefit amount and Randy intends to continue working past his Full Retirement Age.
  2. Amy’s Full Retirement Age Benefit is $550 and Randy’s is $2140.
  3. If they both filed early their lifetime maximum benefit, based on life expectancy of 85 for him and 88 for her would be $716,740.00. Amy could file at 64.9 months and Randy would file at age 62. With this option, they both would also be restricted on their income due to the Earnings Limitations which is $17,040 in 2018. Their Survivor Benefit amount would be $1,762.00.
  4. If they both filed at Full Retirement Age (66 for her and 66.6 for him) their lifetime maximum would be $955,200.00. They could both continue working without concern for the Earnings Limitations rule. Their Survivor Benefit would be $2,137.00 per month.
  5. If they both waited and filed at age 70, the lifetime maximum benefit would be $975,630.00 and their Survivor Benefit amount would be $2,735.00.

Options over and above what they are told (above) on SS statement:

  1. BEST CASE – Amy files on her benefit at age 66. Randy files for his benefit at age 70. Amy adds spousal benefit at age 74.2 which increases her benefit from $550 to $1068 per month. Total benefits through life expectancy are $993,202.00. NOTE: this is an increase of $17,500 over waiting until age 70. This is money that would have never been noticed, had they not gotten professional advice. Survivor benefit is maximum at $2,735.00.
  2. ALTERNATIVE 1 – Randy files for his benefit at age 68 and Amy files for benefit at age 66, then Amy files for spousal benefits at age 72.2. Total benefits would be $977,250.00 and Survivor Benefit would be $2,390.00

These are just two additional options available – we could add many, many more based on the individual requests such as when they want to retire, how long they want to work, and their desired income stream. The increase from filing early to BEST CASE is $276,462.00 through life expectancy. The point is – you have more than the three options available on your Social Security statement. With the addition of Spousal Benefits, at the appropriate time, the lifetime maximum is increased. And in other circumstances, a Spousal Boost is available. Different rules for different situations – contact a professional before filing.

Pillars LLC is in the Corinth, MS area but service all 50 states. Roy and Diane are both National Social Security Advisors and Roy is a former CPA of over 40 years. You may contact them at dthompson@pillarsllc.com, on their website at www.pillarsllc.com or call at 601-954-0699. KNOW before you GO!!


When Should I File?

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First, people need to know when their Full Retirement Age is – most people do not know the answer to this question. The answer can be found on your SS statement. You need to set up an account at www.ssa.gov to obtain your latest SS statement and there will be a benefit amount listed at your Full Retirement Age. You need to set up this account and check each year against your W-2; many mistakes are found in your Earnings History listing and this is what is used to calculate your benefit amount.

WHAT IS YOUR FULL RETIREMENT AGE?

65 if you were born before 1937

65+ months if you were born between 1938 and 1942

66 if you were born between 1943 and 1954

66+ months if you were born between 1955 and 1959

67 if you were born after 1960

When can you start filing? The earliest you can file is age 62 and any month between 62-70 is acceptable. Some of the complications with filing before your Full Retirement Age are: benefits are immediately reduced by 25-30% depending on your year of birth, you immediately reduce the Survivor Benefit, you immediately eliminate any claiming strategies that exist to improve your situation over and above the three options listed on your statement, and if still working you will be hit with the Earnings Limitations rule which is $17,040 for 2018 (if you earn over this amount, SS will reduce your benefit $1 for every $2 over that maximum). A lot to consider, but most people only consider the fact that they are eligible and therefore start drawing. You also need to consider what works best for you and your family – are there health issues, do you want to continue working, are you mentally ready for retirement, can you absorb the medical insurance issue between 62-65, and what level of income do you need or want to maintain? These are just a few of the considerations that need to be thoroughly reviewed prior to a BEST decision.

For many people, waiting until age 70 is not the best choice either. I read 5 articles today that clearly listed filing at age 70 as your best option; all we can do is shake our heads. These articles are written by financial professionals and they are not aware of some of the rule changes. Waiting and filing at age 70, has eliminated claiming strategies you may qualify for to provide an income stream between age 66-70. Claiming strategies are not just for married couples, but can include those widowed and divorced people as well, if they qualify under the new rules. In summary, you simply left money on that table that you qualified for by not knowing the rules and regulations. Also, people still believe that they file for Social Security at full retirement age of 65, the same as Medicare – this has changed and this error will cost you money in the long run.

If we had $10 for every person we have talked to, that wished they had contacted a professional prior to filing, we would not be writing these articles!!

The purpose of this article is to try and make people aware of the fact that Social Security is an area of expertise just like Financial Planning, Tax Law, Medicare and other professions. If you don’t concentrate and study it each day, missing just one rule or regulation can cause your client to miss out on income he/she has earned. Ron Carson, CEO of Carson Wealth Management Group, recently stated that retirees are leaving an estimated $10 billion in Social Security benefits unclaimed each year because they have not optimized their claiming strategies. We truly understand that waiting is not possible for everyone, but our goal is to allow people to see their options and make a prudent decision from their reports we provide. Do yourself a favor – it is well worth it!!

Pillars LLC is in the Corinth, MS area but service all 50 states. Roy and Diane are both National Social Security Advisors and Roy is a former CPA of over 40 years. You may contact them at dthompson@pillarsllc.com, on their website at www.pillarsllc.com or call at 601-954-0699. KNOW before you GO!!


Changes to Social Security for 2018

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Thought we would take an article to share with our readers some of the changes that will affect Social Security in 2018.

COLA (Cost of Living Adjustment) – the 61 million Social Security beneficiaries will receive a 2 percent cost of living adjustment to their benefit amount. This will make the average monthly payment go up from $1,377 per month to $1,404 per month. Be aware that this COLA adjustment may not be seen in your payments because of the increases for some in the Medicare premiums. “About 70 percent of Social Security beneficiaries on Medicare will only see an increase of $2 in their monthly checks,” says Dan Adcock a policy expert at the National Committee to Preserve Social Security and Medicare (NCPSSM).

SHIFTING FULL RETIREMENT AGE – the full retirement age (FRA) will inch up again this year to 66 and 4 months for those born in 1956. This pattern will continue until it reaches age 67. By waiting until FRA, beneficiaries will ensure that they will get the full payout. Delaying beyond that has additional advantages including an increase of 8% annually to your check amount, improved Survivor benefit, utilization of claiming strategies to improve your income stream and others.

EARNINGS CAP – the amount of income subject to tax for the Social Security program will increase in 2018 to $128,400. Earnings beyond that are not subject to Social Security tax. This will result in an estimated 12 million people paying higher Social Security taxes.

HIGHER BENEFIT INCREASE – the maximum benefit will increase by 3.7 percent from $2,687 per month ($32,244 a year) to $2,788 per month ($33,456 a year). This maximum amount is based on your top 35 years of earnings and only a handful of people are eligible for this amount. The average benefit in 2018 is $16,848 for the year.

EARNINGS LIMITATIONS INCREASE – if you decide to draw your benefit prior to your full retirement age, your income per year has limitations. The increase in this amount will be to $17,040 in 2018. For every $2 you earn over this amount, Social Security will withhold $1 from your Social Security check. The year that you turn full retirement age, that limitation increases to $45,360 for that year only. At full retirement age and older, there is no restriction on income amounts.

Do yourself a favor in 2018 – plan ahead and have this benefit reviewed before filing. Your decision about filing is basically a permanent decision. We unfortunately see the sad faces of people that did not educate themselves to the options that are available before filing.

Pillars LLC is in the Corinth, MS area but service all 50 states. Roy and Diane are both National Social Security Advisors and Roy is a former CPA of over 40 years. You may contact them at dthompson@pillarsllc.com, on their website at www.pillarsllc.com or call at 601-954-0699. KNOW before you GO!!


Husband says “NOW”

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Believe it or not, we get calls from wives that are concerned about their husbands knowledge of Social Security laws. Because we are in 5 state newspapers, depending on the article, these calls are frequent. This might be because women are reading the articles we write more thoroughly and this causes them to question. Whatever the reason, we are thankful for the calls because on many occasions their concern was legitimate.

This is a real example just the names have been changed:

Larry – age 66.0 months and Full Retirement Benefit amount is $2500.00

Evelyn – age 64.3 months and Full Retirement Benefit amount is $1250.00

Larry wants to file now – they may need the additional income. If Larry files at Full Retirement Age (FRA) and Evelyn files at age 64 and 3 months, their lifetime benefit (85 him/88 her based on national averages) will be $984,537.05. Larry will draw his FRA (full retirement age) benefit amount and Evelyn’s will be reduced for taking early to $1110.00. The thing they may or may not have realized was that the Survivor Benefit will be reduced by over $783.00 per month in comparison to other options that were presented.

But what if?

Evelyn files at 64 and 4 months for a reduced benefit amount of $1,067.00 per month. Why 64 and 4 months? Because this opens up the opportunity for Larry to file a Restricted Application for Spousal Benefits from Evelyn’s benefit in the amount of $600.00. At 68 and 3 months

Evelyns is able to file for Spousal Benefits off Larry in the amount of $1,117.00 and at age 70

Larry files for full benefit that has improved by 8% per year for 4 years in the amount of $3,300.00. Also, their Survivor Benefit has improved to a maximum of $3,300.00 per month vs. $2500.00.

This is only one of many options available to this couple, but we are presenting the best and the worst. You take if from there – remember you do have options, over and above what your Social Security statement reflects.

Social Security is complicated and the Bi-Partisan Budget Act of 2015 only made the system more complicated. Don’t leave this benefit to chance – professional review is recommended in all situations.

Call us at 601-954-0699 (located in Corinth, MS but serve all 50 states) or email us at dthompson@pillarsllc.com for more information. Website is www.pillarsllc.com. Roy and Diane are both National Social Security Advisors and Roy is a former CPA of over 40 years.


Is Waiting until Age 70 our Best Option?

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This is a typical family story we hear quite often – my wife and I have wonderful careers, we love our jobs, are in good health, and plan to both wait until age 70 to draw the maximum benefit on our Social Security.

Good choice/bad choice? In most cases, not a good decision.

Example:

Joseph is 68 years old and Betty is 66.6 months. Because of the Bi-Partisan Budget Act of 2015 changes to the law, and because they were both born before 1954, if one spouse files for their benefit, the other spouse is entitled to file a Restricted Application for Spousal Benefits. How will this make a difference? Joseph’s benefit amount is $2500 at FRA. Betty’s benefit is $1800 at FRA. If they both wait to file until age 70, their benefit amount through life expectancy (85 his/88 hers based on national averages) is $1,249,776.00.

If they utilize a Restricted Application, giving Betty an income of $1250 from age 66.6 – 70, she can still work without Earning Limitations, and Joseph will be drawing Full Benefit Amount for a combined income of $3750; he can still continue to work, their benefit amount through life expectancy will be $1,287,276.00. A difference of $37,500. And the Survivor Benefit remains the highest available.

And, this is only one way to figure this scenario. Here is another:

Betty could have filed for her benefit and Joseph file a Restricted Application from her benefit. This would have allowed $2700 in income that would not have been realized waiting until age 70, their benefit amount through life expenctancy would be $1 263,024.00 , they both could have continued working, and the Survivor Benefit would have remained the highest available.

Why would they choose the lower income route? Maybe because of taxes or other financial situations. That, my folks, is the beauty of a PLAN and having choices. We could write about case after case where people were afforded the beauty of an income stream, improving their benefit amount through life expectancy, and increasing their Survivor Benefit; simply because of professional review.

Social Security has so many options that people are not aware of. You can email us at dthompson@pillarsllc.com or rthompson@pillarsllc.com for more information. Our website is www.pillarsllc.com. We have the experience and knowledge necessary to make an educated decision about these benefits.


Voluntary Suspension of Benefits

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In our world of Social Security and the clients we meet, it is becoming more and more common for clients to proceed with a Voluntary Suspension of their Benefits. What does this mean and why would someone do this?

  1. The option to “voluntarily suspend” refers to a process that is only available after reaching Full Retirement Age and Full Retirement Age is different for each individual based on their date of birth.
  2. In the POMS Manual (Social Security Administration Rules and Regulations) this is explained in POMS GN 02409.100. “Beginning in January 2000, the Senior Citizens’ Freedom to Work Act of 2000, permitted primary beneficiaries who were at Full Retirement Age, but were not yet age 70, to voluntarily suspend payments to earn delayed retirement credits.” Delayed Retirement Credits are 8% per year, for every year you don’t file until age 70. This request can be written or oral and does not have to be signed.
  3. If you elect to Voluntarily Suspend your benefit, please be aware that in the Bi-Partisan Budget Act of 2015, new rules were created that will also stop any spousal or other family benefits paid from the suspended account. This is a huge consideration.
  4. People elect to do this for several reasons: they realized that filing prior to Full Retirement Age was not a good decision on their part. Another reason could be that they have gone back to work and they do not need this benefit, and they would rather collect the Delayed Retirement Credits. Another reason might be that he and his spouse have a big differential in their ages, and she could not file off of his benefit until after he started his benefit again at the later age.

EXAMPLE: Tom began his benefits at age 62. His PIA (primary insurance amount) is $2,000. Starting at age 62 reduces his monthly payment to $1500. At his Full Retirement Age, Tom can suspend his benefit. He will earn 2/3 of 1% delayed retirement credit per month until he resumes benefits. If he waits until age 70 to start them again, his monthly payment will be $1,980 – about 99% of his PIA. Remember though, if any auxillary benefits are being paid off this benefit, they will be suspended also.

This option can be tricky if not calculated with all variables taken into consideration. Social Security has so many options that people are not aware of. You can email us at dthompson@pillarsllc.com or rthompson@pillarsllc.com for more information. Our website is www.pillarsllc.com. We have the experience and knowledge necessary to make an educated decision about these benefits.


Social Security and Student Loan Debt

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A situation regarding student loan debt has come to our attention again, and thought we would share some insight to this problem. Students, at an alarming rate, are borrowing the maximum amount from the government to pay for their higher education. They are allowed to pay very low monthly fees for these loans over a long extended period of time. In their minds, this means I will just paying for this the rest of my life. Well, guess what?
“Unpaid, federally guaranteed student loans are one of the reasons you can have your disability checks, both Veterans Affairs and Social Security, garnished by the federal government. There are limitations on how much the government can take each month, but they can take the money.” Garnish Disability to Pay Student Loan? Dr. Don Taylor, PhD, CFA, CFP, CASL – Bankrate – Jun 7, 2013.

So, if this debt extends past retirement age, the Federal government is going to garnish a portion of the Social Security you earned for retirement.

In 2008, when so many older adults lost their jobs, many went back to school to get their degrees in an effort to make themselves more marketable. Now some of these folks, that are wanting to retire, are faced with the option of dipping into other assets to get these loans paid off, or having a chunk of their retirement garnished. Not a good situation.

Recommendations:

1. Have a heart to heart with your students about how this debt could harm them when they are approaching retirement.
2. Limit the amount they borrow if possible.
3. Pay off this debt as soon as possible. It may hurt for a while, but they will be glad it is off their back.
4. Have them work during college to limit the amount of money needed to borrow.

Can you imagine the amount of money the Federal government will save when all these Millennials are of retirement age, and their benefits are partially garnished?

This benefit is too important not to have it professionally reviewed. We talk to people everyday that wish they could take back the decision they made – simply because of lack of education on the subject. You can email us at dthompson@pillarsllc.com or rthompson@pillarsllc.com for more information. Our website is www.pillarsllc.com.


Filing for Benefits and Helpful Tips

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Most of our articles deal with Social Security claiming strategies and how to improve you income stream but thought we would take a break and offer some helpful tips to make the process easier to navigate.

  1. Need your date and place of birth and Social Security number.
  2. Your bank or other financial institution’s Routing Transit Number and your account number as your benefit will be electronically deposited.
  3. The amount of money earned in the last calendar year and what you expect to earn in the year of filing.  If filing in September through December, you will also need to estimate next year’s earnings.
  4. The name and address of your employer(s) for the year of filing and the previous year.
  5. The beginning and ending dates of any active U S. military service you had before 1968.
  6. The name, Social Security number and date of birth of your current spouse and any former spouse.  You should also know the dates and places of marriage and dates of divorce or death if applicable.
  7. A copy of your Social Security statement.  If you don’t have a current one, will need to set up an account at www.ssa.gov and print out report.

Sometimes the following documents are also requested:

  1. Your original birth certificate or other proof of birth.  
  2. Your original citizenship or naturalization papers, if you were not born in the United States.
  3. A copy of your U. S. military service paper(s) such as DD-214-Certificate of Release or Discharge from Active Duty if you had military service before 1968.
  4. A copy of your W-2 form(s) and or self-employment tax return for the year prior to filing.

Keep these documents together in a folder so they are handy at the time of filing.  If you do not have one of these documents you can still start the process and indicate at the time of filing that you are in the process of securing the requested document.

You can either file on line, over the telephone or in person at your local Social Security office.  If you do this online, you will be given an application number.  Make sure you write this number down in order to access the process again, if incomplete.

When you reach the question about when you want to begin benefits, be careful.  The answer will be automatically populated with a start date.  Unless your selected claiming strategy is to begin benefits on this date, you will need to change the date to reflect your selected strategy.

At the end of the process you will see a summary of your answers and will have the opportunity to edit your responses.  Also, there is an area for remarks where you can enter additional information if necessary.

Remember, this decision is basically permanent.  Just make sure you read what you sign!!  We recommend that our clients go directly to the SS office to file, simply because of errors that can be made online.

With a customized report, you will receive a summary of your options you have chosen, and you can simply hand this to the person at the counter.  This process simply eliminates all confusion about what you are filling for.  You can email us at dthompson@pillarsllc.com or rthompson@pillarsllc.com for more information.  Our website is www.pillarsllc.com.


Survivor Benefits – Ouch

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One of the areas we work the hardest for our clients is in the area of Survivor Benefits.  People do not realize that with the proper advice and calculation, that the Survivor Benefit can be improved in most cases by quite a bit.  Remember, in a married couple, when one of you dies, only one check remains – the higher of the two and this will be your benefit for the rest of your life.

Retirement comes with PLANNING – you should not wait until the year before you leave your career to start this process.  Not only do you have to review Medicare options, 401K’s and other assets, but your Social Security benefit.  We preferably like to see our clients about two years before retirement to start the process.  You see, Social Security is really the cornerstone of most people’s retirement plan.  And to take at face value, what you see on your Social Security statement, can be a great loss of revenue to you and your family.

The Social Security Administration’s Office of the Inspector General (OIG) just recently reported that more than 100,000 widows and widowers were underpaid on their benefits.  The objective of this report “was to determine whether the Social Security Administration had adequte controls to establish a correct initial month of entitlement for widower’s benefits”.  As it turns out, it does not.

This is so discerning, because had these individuals had their benefits analyzed prior to filing, this would never have been the case.

When someone dies, people are told by a friend or loved one that one of the first things they need to do is file for that Survivor Benefit.  This may or may not be the appropriate plan of action or in their best interest financially.  Here is a partial listing of some of the issues that can arise with Survivor Benefits:

  1. If working and under Full Retirement Age, you are immediately hit with the Earnings Limitations rule, which limits your income to $16,920 per year (2017).  For ever $2 you earn over this limit, $1 will be withheld from your check.  In otherwords, you may not see one plug nickel of your benefit.  And, we have seen this happen one too many times.
  2. The law changes of November 2, 2015 did not affect Survivor Benefits.  Therefore, you have options, depending on when you file, to improve your lifetime income stream. If you file for the wrong benefit first, you are shortchanging these options.  
  3. If you draw this benefit at age 60 when first available, or 50 if disabled, it will be immediately reduced by 28.5%.  This is a huge reduction when you factor it through life expectancy.
  4. Usually there are life insurance proceeds that can be used prior to tapping into Social Security benefits.

We see many unintentionalmistakes in this area that are costly to the beneficiary – if you know of someone that is recently widowed, please have them call before they file.  They need to know all options along with the proper month of entitlement before fiing.

Remember,  Social Security is a lifetime annuity,  is inflation protected, and has the right of survivorship.  Call us at Pillars, LLC,  601-954-0699 to order your customized report.   Or your can email us at dthompson@pillarsllc.com or rthompson@pillarsllc.com for more information.  Our website is www.pillarsllc.com.