Page 18 - January 6 2012

SOCIAL SECURITY
Making the most of social security benefits
It’s likely that Social Security will provide a smaller portion of retirement income than you expect...
Billy Peterson, CFP ® Peterson Wealth Services, Inc. 877-470-4002 www.petersonwealthservices.com
by Billy Peterson
In this day and age of economic uncertainty and market volatility, more and more individuals are asking the question, “What can I count on for my
retirement?” Social security income is supposed to
be a reliable piece of one’s retirement income, but many are looking at it with a skeptical eye. It’s likely that Social Security will provide a smaller portion of retirement income than you expect, because for the system to remain solvent some changes will have to be made. The younger and wealthier you are, the more likely these changes will affect you.
Over 57 million people today receive some form of Social Security benefits, including 87 percent of indi- viduals over age 65. (source: Fast Facts & Figures about Social Security, 2010). These benefits are paid from
the trust fund. The two major causes for the financial hardship on the trust fund are demographics and lon- gevity. In decades past, retirees didn’t live as long so the checks from the trust fund stopped sooner for the aver- age person. The immensity of the baby boom popula- tion has started pulling massive distributions from the trust and the current working population, being much smaller in number, is unable to match the demands that are needed to pay benefits to eligible retirees.
To be eligible you must earn 40 credits in your lifetime. You can earn up to 4 credits per year depending on the amount of income you have. Thus you are typically eligible after 10 years of work. When you work and pay Social Security taxes, you earn Social Security credits. Credits can count toward your retirement benefits and can qualify you and your family for disability and survivor insurance coverage. In addition, when you pay Medicare taxes, you are earning Medicare protection that can be available to you when you reach age 65 or sooner if you become disabled. Social Security Benefits are paid based on your full retirement age (FRA). Keep in mind that this is likely to be changed at some point by Congress.
But you don’t have to wait until FRA to begin receiving benefits. You can actually start receiving benefits as early as age 62, albeit at a discount. Doing
so is sometimes advantageous; however the ultimate determination of whether early distributions would be your best choice depends on how long you will live.
If you have a family history on longevity, it might
be best to wait longer and receive at least your full benefit amount. We have a break-even calculator that is useful in comparing different life expectancies and what your lifetime social security benefits will be at different start ages.
Some points that are often overlooked or unknown about Social Security are the following: • Social security benefits are taxable up to 85%
depending on earned income.
• Divorcees may be eligible for up to 50% of their
ex-spouse’s benefit.
• Deferring receipt will permanently increase benefits,
but no increases apply after age 70.
• No cost of living adjustments for 2010 or 2011. • Benefits must now be paid electronically and the
SSA will no longer send paper statements. You can apply for Social Security benefits in
person at your local SS office. You can also begin the process by calling 800-772-1213. The SSA suggests you contact them the year before you plan to retire to determine when you should apply and begin receiving benefits. If you’re applying for disability or survivor’s benefits, apply as soon as you are eligible.
Being prepared is a good idea and knowing what you can expect can help you make decisions about when to start your benefits and if you may need to supplement your benefits with income from other sources. It can be a confusing ordeal so seek help.
DISCLAIMER: The above information and content are general in nature for informational purposes only and do not constitute financial advice or investment recommendations. Speedhorse Magazine makes no endorsements and bears no liability for your use of the information provided in this col- umn. Always consult a suitably qualified financial professional and/or tax professional on any specific problem, issue or investment opportunity.
$1,500
$1,200
$900
$600
$300
$0
A $1,000 Scenario
This example assume a benefit of $1,000 at a full retirement age of 66
16 SPEEDHORSE, January 6, 2012
If you were born in:
1943-54
1955
1956
1957
1958
1959
1960 and later
Your full retirement age is:
66
66 and 2 months 66 and 4 months 66 and 6 months 66 and 8 months 66 and 10 months 67
62 63 64 65 66 67 68 69 70
Age You Choose to Start Receiving Benefits
*Charts from “Social Security: What Inquiring Minds Want to Know About”
FINANCIAL FORUM
Monthly Benefit Amount