THE FISCAL BLUE PRINT
WITH COACH JEFF MONTGOMERY
Episode 4: Questions To Ask Before You Start Collecting Social Security
So the first 3 episodes on SS all lead us to this episode, number 4!
All the information about filing ages, primary insurance amounts (PIA), earning restrictions, taxes on social security………….all of that information has to lead to some decision down the road, right?
This episode is really one big practical planning segment. So hopefully we can help you make an informed decision that is right for you and your personal circumstance. Maybe it makes sense to collect early……..then again maybe it doesn’t!
This show is about asking the right questions! What questions should you be asking yourself before you make this major financial decision on when to start collecting social security.
Practical Planning segment:
Asking the right questions is absolutely critical! In many ways the direction we take and the decisions we make are all a result of the quality of questions we ask ourselves.
If we don’t ask good questions we won’t have good results!
Question from Chuck: “Hi guys, Enjoying your Podcasts on SS. I’ve heard rumors in the past that our illustrious leaders have dipped into our SS funds to bailout shortcomings in other areas. Has there been legislation passed to prevent this in the future ? Or,was this just a nasty rumor?”
Well Chuck that’s a great question and I do hear this from time to time! So lets finally put that rumor to rest! Social Security is funded by FICA taxes (payroll taxes). From 1983 to 2010, Social Security collected more FICA taxes from workers than the amount of actual benefits paid to retirees. This excess helped build a trust fund of $2.8 trillion by the end of 2015.
The trust fund has to be invested in something right? It shouldn’t just sit there in cash earning nothing. This surplus has been invested in U.S. government bonds that are legally obligated to pay the stated, market rate of interest, and then repay the principal when they mature.
Just like when you buy any investment, such as a stock or a bond, the entity that issues the stock or bond usually spends the money you paid for that investment. When you buy a corporate bond, for instance, the issuing company spends the money on any aspect of its business that needs funding, such as plants, equipment, computers, advertising or employees’ salaries and benefits.
Now, you have a good argument that the federal govt doesn’t spend the money it raises from issuing bonds with any semblance of frugality. That’s a good argument to make.
But the short answer the surplus was invested in US bonds with an obligation to pay interest back to the trust fund and the principle when the bonds mature.
Great question Chuck!
What are some of the basic questions to ask yourself?
I think the most basic question is do you need it? Do you need the money to survive and pay your basic needs?
When it comes right down to it………………do you need the money for your basic living needs such as housing, food, electricity, etc. Social Security provides the majority of income to most elderly Americans. For about half of seniors, it provides at least 50 percent of their income, and for about 1 in 5 seniors, it provides at least 90 percent of income.
Many times the decision to start or not start comes down to this basic question.
Will you work, even part time, before your full retirement age? Will you be working and how much will you be earning?
Keep an eye on the earnings restrictions limits if you work and collect your benefits earlier than your full retirement age.
$17,040 for every $2 over that they will take away $1 which will be returned to you at your FRA but prorated into your payment. Not a lump sum all at once.
Word of caution……………….Ive seen situation where people started collecting early because they fully retired and then received an offer for a new job that they couldn’t refuse.
Are you Married? Single? Divorced?
Very important! Also, if you are married what is the age difference between spouses?
So this is important for a number of reasons:
- If you’re married does your spouse qualify for his or her own benefit?
- Many times one spouse does not qualify for benefits; homemaker. So in that case it may make sense to delay to earn a higher amount
- What’s the age difference?
- If the high earning spouse is older or does not have longevity it may make sense to delay the higher earning spouses SS, earn credits. Because when that spouse passes the surviving spouse will get that much more as a survivor benefit
- If you’re single it’s a little bit easier decision and it will come down to basic needs and longevity
How is your health and longevity? Ex; family history
If your basic needs are met with other sources (pensions, retirement funds, etc), so you don’t need the money right away, and you have longevity where if you wait to collect (lets say all the way to age 70) vs collecting early; there’s a break even age where the total accumulated benefit would be the same. Typically that age falls around 78 to 82 range!
Case Studies: To much to type….listen to the podcast
Thank you for listening to our month long series on social security. If you have question email to firstname.lastname@example.org or goto www.mfswealth.com contact link and click the orange record button and leave us a voice message.
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