Tag Archive for: social security

Women Face a Unique Path to Retirement

Women Face a Unique Path to Retirement

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The truth of the matter is that women are controlling more wealth than any other time in our history. They also face unique challenges when it comes to retirement planning. The fact that, on average, women live longer than men make proper planning even more important.

In my experience working with households where women are the sole financial decision maker, women value professional advice and collaboration when it comes to retirement planning. They are confident in their ability to stick with a plan but are not overconfident in their ability to manage risk when markets act up.

Time vs Timing- They embrace the idea that the time spent invested in the market is more valuable than timing the market. Meeting with a financial planner has more in common with working with a personal trainer than going to a doctor. There are no overnight remedies but a disciplined plan over time is proven to be the most effective strategy.

Inflation is the silent killer- The primary goal of retirement planning is not to get rich. It is to save enough for retirement and have our investments outpace inflation. Holding cash feels good in times like these but holding too much over the long run erodes the purchasing power on our savings.

Social Security Can Get Complicated-  If you’ve spent an extended amount of time out of the workforce to raise a family or care for a family member, you may have a lower social security benefit than expected. This is because your Social Security benefit takes into consideration your top 35 working years. If you spent a good amount of time outside of the workforce there are going to be some zeroes averaged in when calculating your benefit. If you are divorced, you should educate yourself on any spousal and/or survivor benefits that you may be eligible for from your ex-spouse.

Confronting Long Term Care- We have all seen the statistics. Women have a longer life expectancy than men. This increases the probability of being a caretaker and also needing outside help to care for themselves. Addressing this potential cost and how it would affect your retirement plan is critical. For many, it could be the largest risk to their retirement savings.

Aligning Your Values with Your Investments- With the rise in interest for sustainable investing, there are many investment companies that can tailor a portfolio to invest in companies with a focus on environmental, social, and governance (ESG) concerns. This is great news for those that want to invest in companies that are having a positive social and environmental impact.

A Smarter Way to Be Charitable- The ability to deduct charitable contributions has become more difficult due to the SECURE Act which was legislation passed by Congress in 2019. However, there are strategies where you can bunch your contributions in a given year to increase the likelihood of being able to receive a deduction.

If you are within 10 years of retirement, now is a good time to get organized and start assembling your trusted team of professionals to help you get the most out of your retirement. If you have questions about any of the above or would like to discuss how I can help you plan, feel free to reach out for a complimentary consultation.

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Securities offered through LPL Financial, Member FINRA / SIPC. Investment advice offered through Stratos Wealth Partners, Ltd, a registered investment advisor. Stratos Wealth Partners is a separate entity from LPL Financial.

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inflation

Retirees Get a Raise as Inflation Persists

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First the good news: Retirees will get a generous increase in their Social Security checks come January 2022. Social Security and Supplemental Security Income (SSI) benefits will increase by a whopping 5.9% in 2022, the biggest increase in 40 years.1 That means that the average monthly retirement benefit of $1,565 will grow to $1,657. Although Social Security accounts for only about 30% of overall retirement income, millions of retirees — over 10% — rely on Social Security for 90% or more of their income. So the increase will be more than welcome for many.
The bad news is that the boost only adds to an already disturbing inflation picture. The Consumer Price Index (CPI) came in 6.2% higher in October compared with a year earlier, even faster than an already heady 5.4% pace through September, and above economists’ forecasts. Rates have moderated since summer, but they remain stubbornly high. Prices for cars, fuel, rent, meat, and other groceries are noticeably higher, and many families are feeling the pinch.

Bottlenecks, Shortages, and Stimulus

The root cause of the rising prices is of course Covid. The pandemic has caused major disruptions in supply chains across the globe. From microchips to lumber, supply bottlenecks have led to shortages and price increases. Labor shortages have exacerbated the situation, particularly in leisure and hospitality businesses, resulting in wage increases — many long overdue. Add to this the massive government stimulus packages passed since the spring of 2020, and you have the perfect inflationary storm.

The big question is: will it persist? Are we headed toward a 70s-style inflation cycle? Six months ago, the consensus answer to this question was an emphatic no. The uptick was widely expected to be short-lived, basically just a rebound from the price drops at the outset of the pandemic in the spring of 2020. Since then, however, supply chain problems have festered and structural issues such as labor shortages have surfaced. What’s more, the price of oil has more than doubled over the past year, up 35% in just the past two months. Although most economists still believe that inflation will moderate in the coming months, many are less certain in their outlook. There is also the matter of the huge infrastructure and spending bills currently before Congress, which if passed, will add to inflationary pressures.

For its part, the Federal Reserve is increasingly concerned that supply disruptions could last long enough to prompt consumers and businesses to expect higher prices, setting off an upward spiral of wage and cost increases. It has already signaled a slowdown in bond purchases, and could start raising interest rates if the inflation numbers remain elevated. But raising rates is not a popular move in Washington, on Wall Street, or on Main Street, so the Fed will likely proceed very cautiously, with definitive moves — if any — unlikely before year-end.

What You Can Do

In the face of rising prices, consumers do not have many options. You can be more selective in your purchases, charge more for your services if you’re self-employed, or try to convince your employer to raise your salary to compensate. But in the end, if food, rent, and fuel cost more, you have to pay more.

For investors, the key to staying ahead of inflation is to seek investments that have the potential to deliver higher returns. Historically, stocks have shown the greatest ability to outpace inflation over time, although past performance is no guarantee of future results. There are also inflation-indexed bonds issued by the U.S. Treasury, but they generally make sense only if you expect a major uptick in inflation.

Talk to your financial professional to see what investing strategy might best suit your circumstances in an inflationary or rising rate environment.

 

 

Notes:

Social Security Administration, October 13, 2021.

This material was prepared by LPL Financial. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that they views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. All performance referenced is historical and is no guarantee of future results. All indexes are unmanaged and cannot be invested into directly.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

All company names noted herin are for educational purposes only, and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.

Treasury Inflation-Protected Securities (TIPS) help eliminate inflation risk to your portfolio, as the principal is adjusted semiannually for inflation based on the Consumer Price Index (CPI), while providing a real rate of return guaranteed by the U.S. government. However, a few things you need to be aware of are that the CPI might not accurately match the general inflation rate; therefore, the principal balance on TIPS may not keep pace with the actual rate of inflation. The real interest yields on TIPS may rise, especially if there is a sharp spike in interest rates. If so, the rate of return on TIPS could lag behind other types of inflation-protected securities, like floating rate notes and T-bills. TIPs do not pay the inflation-adjusted balance until maturity, and the accrued principal on TIPS could decline, if there is deflation.

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Retiring Early Because of COVID

Retiring Early Because of the Coronavirus

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Should You Take An Early Retirement?

The story is a common one these days. You have been furloughed or laid off, just a few years before you plan to retire. Or, your work-from-home arrangement is ending, and you’re not keen on resuming the commute or going back to a crowded workspace. Retiring early may be a good idea, since fate has presented the opportunity?

Many 50- and 60-somethings are asking themselves this very question. In fact, the average American retires at age 61.1 But, that’s at least five years away from collecting full Social Security retirement benefits, not to mention pensions, which typically begin at age 65, when available. What’s more, Medicare coverage does not begin until age 65, leaving early retirees with potentially hefty health insurance premiums until Medicare kicks in.

Anyone contemplating retiring early will want to plan carefully and ask several important questions.

When Should You Begin Collecting Social Security?

You can begin collecting Social Security retirement benefits as early as age 62. But you will face a significant reduction if you start before your normal retirement age: from 66 to 67, depending upon when you were born. Those choosing to collect before that age face a reduction in monthly payments by as much as 30%. Also, there is a stiff penalty for anyone who collects early and earns wages in excess of an annual earnings limit ($18,240 in 2020).

What age is best for you will ultimately depend upon your financial situation as well as your anticipated life expectancy. For most people, holding off until normal retirement age is worth the wait. But you may want to consider taking your benefits earlier if:

  • You are in poor health.
  • No longer working and need the benefit to help make ends meet.
  • Earn less than your spouse and your spouse has decided to continue working to help earn a better benefit.

How Will You Fund Health Care Costs?

A big obstacle to early retirement is health insurance. If you are working for a company that pays all or most of your health insurance, you could face hundreds of dollars in added monthly expenses if you retire before age 65. Plus, most companies no longer offer retiree health benefits, and if they do, the premiums can be high or the coverage low. In addition to health insurance premiums, there are also co-pays, annual out-of-pocket deductibles, uncovered procedures, and out-of-network costs to consider — not to mention dental and vision care costs.

On the positive side, the Affordable Care Act (ACA) prohibits insurance companies from discriminating because of preexisting illnesses and limits how much they can charge based on age. And for those with lower incomes, government subsidies may be available.

What Will Early Retirement Mean for Your Investing and Withdrawal Strategies?

Perhaps the most significant concern for early retirees — one that is often overlooked — is how retiring early will impact their investing and withdrawal strategies. Retiring early means taking larger distributions from your retirement savings in the early years until Social Security and pension payments begin. This can have a significant impact on how long your savings last, perhaps more so than if larger distributions are taken later in retirement. Consider the following:

  • Delay withdrawals from tax-favored retirement accounts, such as individual retirement accounts (IRAs) or 401(k) plans. The longer you wait to withdraw this money, the more you can potentially benefit from tax-deferred compounding. Instead, consider tapping into taxable accounts first.
  • Adjust your withdrawal rate to help ensure that your savings will last throughout a lengthened retirement. Financial planners typically recommend a 4%-5% annual withdrawal rate at retirement, but you may want to lower this since you will need your savings to last longer.
  • Structure your investments to include a significant growth element. Since your money will have to last longer, you will want to consider including stocks or other assets that carry high growth potential. Stocks are typically more volatile than bonds or other fixed-income investments but have a better long-term record of outpacing inflation.

So, if the coronavirus pandemic has left you thinking about retiring early, make sure you are prepared. The first place to start is with a detailed plan that includes estimated income and expenses. Work with a financial professional to put in place a plan that factors in all of the necessary elements you will want to consider.

 

Source/Disclaimer:

1Source: Gallup, Snapshot: Average American Predicts Retirement Age of 66, May 10, 2018.

 

                                                                                                                                                                            

This material was prepared by LPL Financial. This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that they views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change. All performance referenced is historical and is no guarantee of future results.

 

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When should I take Social Security?

How Much Social Security Can You Expect?

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How Much Social Security Can You Expect?

One of the first steps in planning for retirement is to get an accurate read on just how much income you can expect to receive from Social Security. The exact amount of your Social Security benefit will depend upon your earnings history and retirement timing. Although Social Security provides only about a third of a typical retiree’s income, it often serves as the foundation for calculating how much other income you’ll need and how much you’ll need to save.

The best and most accurate estimate of your future Social Security benefits comes from the Social Security    Administration (SSA). If you are age 60 or older, you should be automatically sent an annual statement showing exactly how much you can expect when you retire. If you are under age 60, you can access current estimates through the SSA’s My Social Security site. You can also access SSA’s online calculators.

Here is a summary of the different ways you can get accurate estimates of your Social Security:

  • Social Security Statements are mailed annually to anyone age 60 or older who has paid into Social Security. The statements include an estimate of your monthly benefit at full retirement age, based on your earnings history. They also show your earnings history – a year-by-year breakdown of earnings on which benefits are based. You can also request a statement by creating a personal my Social Security account. Once it’s set up, you can easily access updates and view your earnings history. You can also request a statement at any time by calling 1-800-772-1213 or contacting your local SSA office.
  • Retirement Estimator gives estimates based on your actual Social Security earnings record. The calculator shows results for early (age 62), full (ages 65-67 depending upon your year of birth), and delayed (age 70) retirement. The Retirement Estimator also lets you create additional “what if” retirement scenarios based on current law.
  • Other SSA benefit calculators help you estimate your Social Security benefits if you do not have an earnings record with Social Security or cannot access it. The calculators will show your retirement benefits as well as disability and survivor benefit amounts if you should become disabled or die. A variety of calculators are available that address different circumstances.

 

A recent report by the SSA suggests that a lot of Americans are not taking advantage of the free statements available to anyone who has paid into Social Security. According to the report, only 43% of registered my Social Security users accessed their accounts online in 2018, down from 96% in 2012.1

 

How much also depends on when you start collecting

If you want, you can sign up for Social Security benefits at age 62. However, you’ll receive less than your full benefit — somewhere between 70% and 75% — depending on when you were born. What’s more, if you are still working and make more than the yearly earnings limit ($17,640 in 2019), your benefit will be reduced by one dollar for every two dollars earned beyond that limit.

Wait until full retirement age (from 66 to 67 for those born after 1942) and you’ll receive your full benefit and face no earnings penalty. Sign up for benefits beyond full retirement age and your benefit will increase 8% a year until you reach age 70.

When you decide to collect will depend in part on how much you can expect to receive. So make a point of checking out one of the resources above.

 

 

1Source: Social Security Administration OIG, Issuance of Social Security Statements, February, 2019.

 

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© 2019 DST Systems, Inc. Reproduction in whole or in part prohibited, except by permission. All rights reserved. Not responsible for any errors or omissions.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.  This article was prepared by DST Systems Inc. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you discuss your specific situation with a qualified tax or legal advisor. Please consult me if you have any questions. LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an affiliate of LPL Financial.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial LLC is not an affiliate of and makes no representation with respect to such entity. 

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