5 Questions Answered: Social Security Retirement Benefits

1.  How is my social security calculated?  Social Security is calculated using your 35 highest paid earnings years and then averaged using the benefits calculation formula.  You must have worked full time for at least 10 years to qualify for any social security retirement benefit.  Currently, full retirement benefits age is between age 66 and 67 (October 2018). More adjustments by the Social Security Administration for the full benefit payment age are anticipated affecting calculations for those born after 1967.  To see what your payment may be based on your age visit https://www.ssa.gov/benefits/retirement/

2.  Will Social Security Be There For Me?  Social Security will pay promised benefits through 2033.  After that it will pay about 75% of benefits.  Options to raise taxes to cover this shortage or to decrease benefits after 2035 are being discussed. American workers currently employed pay for those currently receiving benefits; benefits paid into Social Security are not ‘banked’ for an individual’s future use.

3.  What is Social Security? A Retirement Plan?  Social Security is considered insurance and was proposed by President Roosevelt and Congress and signed into law in 1935.  It was never intended to be enough to completely fund retirement for individuals but meant to supplement an individual’s retirement investments and savings.

4.  How do I file for Social Security Retirement Benefits?  You can file by visiting an office, by calling (800) SSA-1213, or online at www.ssa.gov. You can file up to 4 months before you want payments to begin.

5.  Can My family receive benefits upon my death for certain situations?  If you die your surviving spouse can be paid up to 100% of your payment if they are at least Full Retirement Age or receive a reduced amount as early as age 60.  An individual can be paid 75% of your benefits at any age if they are caring for your child under age 16.  Your unmarried child can be paid 75% of your benefits if they are under 18, under 19 and in high school or at any age if they were permanently disabled before age 22.  Your parent over age 62 can be paid your benefits if they were dependent upon you.

The continuation of Social Security Retirement benefits after 2033 continues to be a hot topic as the U.S. population ages and younger generations continue to decline in population. Fewer Social Security taxes paid into the Social Security system will continue to impact future payments. Individuals reaching full retirement age after 2035 may want to consider contributing more to their after-tax and pre-tax retirement accounts or purchasing a fixed annuity as a replacement for decreased or lost Social Security Retirement benefits.

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Do You Understand Your Employee Benefits?

As we approach the end of 2018 many employers are scheduling their benefits meeting requiring you to select yours before the end of the year. Not all benefit options are the same and understanding each is crucial to making an informed decision. Ask your HR department or the advisor or agent representing the benefit what you don’t understand or ask them to provide you additional information prior to the benefits selection deadline. Many insurance and health benefits don’t allow you to change them once selected. However, employer-sponsored retirement plans allow you to select different funds, rebalance and change payroll contributions at any time  per federal law.

Retirement Plan Options & Employer Match. You may have multiple choices of providers or funds available for you to choose from. Not all employer retirement plan providers provide assistance on fund selection or on-going advice. I can help you with the following:

• Determining how the retirement plan fund options fit your risk profile
• Including your company retirement plan assets in your financial plan
• Monitoring the fund options and offer guidance on rebalancing
• Rolling over your former employers plan into an IRA

Employer-Sponsored Life Insurance. Life insurance is the most inexpensive way to add protection to your family and your assets if you die. Employer life insurance plans ‘group’ you with other employees to reduce the cost of the insurance. Many times there is a need for additional life insurance outside of their employer plan since the death benefit is usually limited and based on your income. Questions to ask:

• Is this life insurance portable if I leave? 
• Will I still be insured after age 65 (some plans drop you after this age) if I’m still employed?
• Can I add more insurance or am I committed to a certain death benefit amount?
• Can I insure other members of my family?
• Death can cause the early liquidation of assets if there isn’t adequate life insurance.

Employer-Sponsored Disability Insurance. Not being able to work due to injury can quickly deplete financial assets. Disability insurance replaces lost income from a short-term injury or disability or a permanent disability. Social Security Disability benefits won’t replace 100% of your income. Purchasing additional disability insurance coverage is a good idea if you’re in your prime earning years. Ask, so you understand:

• Is disability insurance is underwritten based on my profession, age, and my possible risk of injury at work?
• If I take Social Security Disability Benefits if I’m injured, is my Social Security Retirement Benefit reduced or eliminated in retirement?

Employer-Sponsored Health Insurance Solutions. Your company may provide you with health insurance choices that you are unable to modify. Ask your insurance provider:

• Are there additional coverage choices for vision, dental, wellness, or indemnity insurance coverage based on my job role?
• Can I customize a health insurance plan based on my specific needs?
• Can I insure additional family members?

Part of asset protection is having insurance coverage in place so that you don’t have to prematurely liquidate personal savings, investment accounts or retirement accounts. I am here to assist you in any way I can with the information you’re being provided regarding your employee benefits.

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I am here to assist you in any way I can with the information you’re being provided regarding your employee benefits.

College Planning Isn't Just About 529 Plans

There is a growing trend in college planning where families hire an Independent Education Counselor (IEC) to help plan, execute strategies for the ACT or SAT testing and assist in applying to college in hopes of being accepted. IECs start working with families as early as the eighth grade if the family is considering an ivy-league school or grooming the child for a scholarship academics or sports. The earlier the agreement with the IEC starts, the more expensive the college preplanning costs. Unfortunately, preplanning costs are not a qualified expense under a 529 plan as of today.

Most families choose to work with an IEC when the child is a high school junior or senior due to a lack of college counseling in high school. IECs help guide families through the process of determining which college is the best value for the profession the child is considering.  For some professions graduating from an ivy-league school does lead to higher incomes, but for most graduating from an academically competitive school is what determines higher earnings.

A second benefit an IEC provides is that they get to know the child to help determine which colleges will help the young student succeed and graduate. For students paying for college on their own or using financial aid, the student loan process can be confusing. IECs provide counseling on loan options and assist with loan applications.  Additionally, they work with the student on managing their personal spending and their loan money hoping to avoid the spending problems as many young students without financial counseling tend to do.  

If you have a desire to discuss setting up a college savings plan for your child or grandchild we welcome your inquiry as it’s never too late to start saving.

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Your ‘To-Do’ List: Schedule a Fall Financial Review

Scheduling a fall financial review is especially important this year due to the Tax and Jobs Act and impending market changes. We’ve been enjoying a robust stock market which makes now a prime time to meet. Fall tends to be when people start thinking about next year and what they want to accomplish financially by reviewing the following:

Your Financial Plan- People with a written financial plan are more likely to follow it when they work with their advisor and monitor the plan’s recommendations throughout the year. If you don’t have one, it’s time to have one done now. Having a financial plan puts you in a better position to start on your plan immediately at the beginning of 2019. 

How the Tax and Jobs Act May Impact Your Investments- Along with your tax professional, I may suggest extra contributions into your pre-tax accounts before the end of this year or converting pre-tax investments to after-tax investments. With the income ranges for tax bracket changed for 2018, you still have time to make some strategic changes before the end of the year if you are on the upside of a higher tax bracket. Receiving a Bonus at the end of the year can impact this if you’re trying to keep your taxable income lower and stay in the same tax bracket.

Planning for Next Year- Starting the New Year strong with a financial plan in place after a fall review puts you in a better position to start your plan immediately at the beginning of next year.  People with a written financial plan are more likely to follow the plan when they work with their advisor and can monitor recommendations throughout the year.

Reviewing This Year’s Investment Performance- Reviewing fund and stock performance over 2018 helps us assess what changes are necessary for next year in your portfolio.  At some time the bull market will come to an end, which is why planning for under performance is critical. If your investments didn’t perform to your expectations it’s time we evaluate your portfolio.

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Scheduling a fall financial review is especially important this year due to the Tax and Jobs Act and impending market changes.

SAI November 2018 Newsletter Approval 2293314.1

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