Inter - Economic Market Allocation - How the Average Investor can Beat the Market!
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The purpose of this blog is to inform the investor about Economic - Market history and give the investor the insight that will improve his or her portfolios capital performance.
Mr. Peter Casula Jr
Navigating the labyrinth of the Social Security system can be confusing and overwhelming. And don't expect any help from the folks at the administration, as they aren't allowed to give you advice on how to maximize Social
Security benefits. But there are ways, and it all starts with recognizing qualification differences between married folks and singles.
Here, we'll look at the special considerations for singles. Depending on whether you are single and never married, divorced, or widowed, there are different options when it comes to collecting Social Security benefits.
Be Patient: Waiting Longer Is Usually Better
One of the cardinal rules relating to Social Security is to be patient, says Laurence J. Kotlikoff, professor of economics at Boston University and co-author of Get What's Yours: The Secrets to Maxing Out Your Social Security.
Simply put, the Social Security administration penalizes you for taking your benefits early and rewards you for taking them late.
"To get maximum coverage against longevity risk—of living far beyond what our savings can support—most of us need to be patient and wait to take our Social Security benefits at their maximum levels," says Kotlikoff. "In the case of Social Security retirement benefits, that's 70, when our retirement benefit will start at 76% higher than if
we take it at 62."
your full retirement age is 66, with a monthly benefit of $1,000, if you take benefits early at age 62, it would reduce your benefit to $750. But if you are able to wait until age 70, your benefit would increase to $1,320, according to the Social Security administration. Depending on when you were born, your "full retirement age" or when you qualify for full Social Security benefitsage 66 or 67. Use this calculator to determine your full retirement age.
Single. The definition of singles for Social Security purposes means either single or divorced but married for less than 10 years. The first tip is to wait as long as you can—up to the age of 70—to file in order to access a greater percentage of your benefit. The second tip is once you hit your full retirement age of 66 or 67, to "file for and suspend your retirement benefits," Kotlikoff suggests. "Ask for your retirement benefits, but then immediately suspend it. That action builds delayed retirement credits. Let's say someone is diagnosed with pancreatic cancer. That action gives them the right to request payment of a lump sum of all the suspended benefits," he says.
Divorced. If you were married for 10 years or longer, you are eligible to take Social Security on both your own and your ex's earnings record.However, if you remarry, you could lose eligibility for ex-spousal benefits. "Divorced couples get the best of both worlds," says Ann Minnium, certified financial planner and founder of Concierge Financial Planning, LLC.
Minnium points to a real-life example: "Lisa was surprised to learn that since she had been married for over 10 years she was eligible to take Social Security based on both her and her ex-husband's record. Plus, she didn't have to tell him! Once Len, her ex, reaches age 62, which is next year, Lisa can file for her spousal benefit based on her ex-husband's record. However, if she waits until her full retirement age of 66 and 2 months, she can have her cake and eat it too. At her full retirement age, Lisa will be able to file for her spousal benefit while still letting her own benefit continue to grow. Yes, that's correct, she is entitled to two Social Security benefits," Minnium says.
Widowed. If you are widowed, you may be able to time your benefit collection to ensure you receive the highest lifetime value."Take one benefit early and let the other benefit grow and hop onto that," Kotlikoff says. For example, you can begin collecting a reduced widow benefit at age 60, he says. Take that early and wait until 70 to take out your own retirement benefit. "Then you will get the larger of the two," Kotlikoff explains.
Minnium points to another example. "I have a client who has been widowed for many years. She recently retired and started her widow benefit of $23,000 per year at age 64. At age 70 she will switch to her own benefit, which will be $30,000 per year. Assuming she lives to age 95, by filing for her widow benefit and then switching to her own, she will have received over $181,000 more in lifetime Social Security benefits than she would have with her original filing strategy," Minnium says.
The end of the year is a time for celebration, reflection, and new beginnings. It can also be a critical time for nuts-and-bolts retirement account maintenance, including automated steps that can help you avoid the sting of penalties.
No matter what stage of retirement planning you're in, the final months of the year are a good time to check the beneficiaries and contact information on your retirement account and update them as needed. Does it really matter? Yes. There are some important deadlines in December, so it can be crucial that your custodian is able to reach you to resolve any problems quickly.
Chief among those deadlines is the December 31 cutoff for distributions in the current tax year. When you hit 70½, your annual required minimum distribution (RMD) must be distributed from the account no later than December 31 (your very first RMD can generally be deferred until April 1 of the following year, if you prefer; this only applies to the first year). Importantly, unlike the April 15 tax filing deadline, December 31 is nota postmark deadline; the assets must be out of the account by the end of the year to avoid a potentially steep penalty. We're talking about 50% of the RMD.
Here are a few tips to ensure there are no hiccups with your RMD:
Have cash available for your distribution. Remember that it takes three days for a trade to "settle." If you don't liquidate enough assets to cover your RMD, you may be caught short.
Enroll in automated distributions. Just as it sounds, this takes the burden of requesting your RMD every year out of your hands. If automated, your RMD will be calculated and distributed to you whenever you wish.
Enroll in verbal or "on-demand" distributions. This allows you to request a distribution with a convenient phone call to your custodian.
Request your distribution early.Even if you don't want the transaction processed until the last day of the year, getting your request in no later than mid-December will help you avoid the crush of the crowd and give you plenty of time to resolve any unforeseen difficulties.
Transfer assets to a taxable account. If, because of your investing prowess and/or general optimism, you prefer not to sell out of any of your positions—or if there is no longer time for your trade to settle before the deadline—you can transfer assets "in kind" (meaning the actual securities, not the cash equivalent) to a taxable account (individual, joint, trust, and so on). Please be aware: This method may make it difficult to transfer the exact amount of your RMD. Depending on the value of your investments, you may end up distributing significantly more than you have to.
Maintenance Is Good for All
Even if you're not yet required to distribute from your account, the end of the year may still be significant. If you have automatic contributions coming into your IRA, for example, make sure the contributions scheduled for next year will reflect the correct tax year. Between January 1 and April 15 (generally), you can designate a contribution as current year or prior year. If you have standing withholding instructions for verbal distributions, for example, make sure they still match your needs. If, and only if, a Roth conversion is advisable for the current tax year, that transaction must also occur before the new year.
For employers who maintain retirement plans for their employees, the end of the year is also of note. SIMPLE IRA providers, for instance, must provide their enrolled employees with their annual notice of elections between November 2 and December 31.
Similarly, employers who maintain qualified retirement plans (such as a 401(k), money-purchase pension plan, profit-sharing plan, etc.) for their employees also need to make any desired changes to their plans before the new year. Such provisions ordinarily take effect on January 1, so if you have questions for your employer, late in the year may be the best time to ask.
Regardless of your age, whether you're an account owner, an employer, or a participant, a quick check of your retirement account details at the end of the year could pay convenience dividends down the road. For sure, they could cut the risk of penalties.