10 Updates

Social Security At Age 62? Why Delaying Your Benefits May Not Pay Off

Apr 23 2014, 11:18am CDT | by

The following is a guest post by Scott T. Hanson, CFP, a financial advisor with Hanson McClain Advisors in Sacramento, Calif.  What if I told you to start take your social security benefits as...

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13 weeks ago

Social Security At Age 62? Why Delaying Your Benefits May Not Pay Off

Apr 23 2014, 11:18am CDT | by

The following is a guest post by Scott T. Hanson, CFP, a financial advisor with Hanson McClain Advisors in Sacramento, Calif. 

What if I told you to start take your social security benefits as early as possible? That advice goes against conventional wisdom, but it may be a good idea for some retirees.

There’s not a week that goes by where I don’t see a story about how it pays to delay initiating benefits. While it may be beneficial for many folks to wait until age 66 or even age 70, null

As a financial advisor, a key part of my job is to evaluate risks and probabilities, and to then recommend strategies to reduce these risks as much as possible. We use financial calculators, build algorithms and create large spreadsheets in order to paint some sort of picture of the future. But our outcomes are only as good as the assumptions that we use in building our models.

One of the major, and most overlooked assumptions in determining when to start Social Security benefits is the likelihood that Congress may change the benefits in the future. After all, a retiree will only receive benefits as long as the government provides those benefits.

I am not implying that I believe Congress will cut Social Security benefits to retirees in the near future, but it is certainly within the realm of probabilities that there will be some sort of “means testing” in the future. And if you think I’m nuts for even suggesting this, consider the following:

Social Security payments were tax-free for many years. A worker paid into the Social Security system through payroll deductions, the employer matched those payments and the worker received the benefits tax-free during retirement. It would seem unreasonable to be taxed on the retirement payments since there was no tax-deduction provided to the worker for the contributions made.

Congress took an unfortunate step in reducing benefits to” wealthier” retirees with the passage of the 1983 Amendment to the Social Security Act. This law effectively reduced Social Security payments for higher income retirees by taxing up to 50% of the benefits for those who had provisional income of $25,000 ($32,000 for married tax filers). Essentially, the government was providing benefits with one hand while taking them away with the other.

Things got worse in 1993 when Congress passed the Omnibus Budget Reconciliation Act, which increased the percentage of benefits that would be included in taxable income. The law caused up to 85% of benefits to be taxable for those with provisional incomes of greater than $34,000 ($44,000 for married).

These higher taxes did not impact a large portion of Americans: mainly, those who were retired with low income and were relying upon Social Security benefits. But for those who had higher incomes during retirement, the taxes definitely had an impact. A retiree today in the top Federal income tax bracket of 39.6% will see an effective reduction in benefits of 33.66% (85% of 39.6%).  That’s a one-third reduction in benefits.

And it gets still worse. Higher income retirees pay surcharges for Medicare Part B and Part D. There once was a time when all Medicare recipients paid the same, but the surcharges now apply to “higher income” retirees.

So what does the future hold? It is anyone’s guess, but considering that Social Security and Medicare are growing much faster than tax receipts, something has got to give. Perhaps the shortfall will be made up entirely by taxing the younger workers. This is possible.  But it’s also quite probable that this shortfall will be made up by some sort of means testing for the higher income retirees.

A means testing for Social Security could be an increase in income taxes, a reduction in benefits, a sur-tax, or some other method.  Who knows what Congress could dream up?

Obviously, I cannot predict what our elected leaders may do 10 or 20 years from now any more than I can predict where the stock market is headed this year. I wish I could.  I can, however, emphatically state that there is at least some possibility that Social Security payments will be needs based in the future.

Because I don’t know what the future holds, here is my rule of thumb: For those who will need Social Security benefits during retirement—those who will be relying upon the income to meet their monthly needs—I recommend you defer the commencement of benefits for as long as possible, perhaps even until age 70. You’ll have a much larger check each month and, given the fact that you’ll need the money, you won’t be an easy target for Congress to slash benefits in the future.

For those who reach retirement age financially set, either through hard work, disciplined savings, luck, or a combination of all three, consider taking the money as soon as you can get it. The financial calculators may tell you otherwise, but those calculators fail to calculate the risk that benefits may be different in the future./>/>

If a person were to analyze the value of an income stream from a private entity, one would surely take into account the probability of either outright default or some sort of reduction in receipts. It makes only logical sense to analyze Social Security the same way. Any financial analyst worth their wage in salt would certainly take into account the possible reduction in future benefits.
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Update
10

7 weeks ago

RM47mil KWSG contributions still unclaimed

Jun 9 2014 7:54am CDT | Source: Business Times Malaysia

KUALA LUMPUR: About RM47 million of contributions in the Teachers Provident Fund (KWSG) still remain unclaimed, the Dewan Rakya ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
9

7 weeks ago

Gold shop lost almost RM1mil

Jun 9 2014 3:50am CDT | Source: Business Times Malaysia

KANGAR: A gold shop owner lost almost RM1 million after after the safe on in his shop was brok ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
8

7 weeks ago

Motion to debate MAS losses in Dewan Rakyat rejected

Jun 9 2014 3:39am CDT | Source: Business Times Malaysia

KUALA LUMPUR: AN emergency motion to debate the losses incurred by Malaysia Airlines last year, amounting to RM1.2 billion was rejected by the Dewan Rakyat ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
7

7 weeks ago

MH370 Tragedy: Hisham: RM27.6 mil spent on 1st phase of SAR

Jun 9 2014 2:11am CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia spent some RM27.6 million in its first phase of the search operations for missing Malaysia Airline flight MH370, said Acting Transport Minister, Datuk ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
6

7 weeks ago

9.1m litres of diesel seized in a month

Jun 8 2014 1:11am CDT | Source: Business Times Malaysia

PUTRAJAYA: The Domestic Trade, Cooperatives, and Consumerism ministry has seized some 9.1 million litres of diesel and property worth RM58 million since mounting ‘Operasi Diesel Sela ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
5

7 weeks ago

Girl, 9, awarded RM2.78m compensation for medical negligence

Jun 6 2014 4:56am CDT | Source: Business Times Malaysia

KUALA LUMPUR: A nine-year-old girl who suffered brain damage during her birth at a government hospital was awarded over RM2.78 million in ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
4

7 weeks ago

Malaysia's total trade in April up 12pc

Jun 5 2014 11:52pm CDT | Source: Business Times Malaysia

KUALA LUMPUR: Malaysia's total trade in April 2014 rose by 12 per cent from a year ago to RM123.86 billion due to growing trading activities, International Trade and Industry Minister Datuk Seri Mustapa Mohamed said ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
3

7 weeks ago

Works Ministry to spend RM20m for upgrading works at 50 accident black spots

Jun 4 2014 11:35pm CDT | Source: Business Times Malaysia

JOHOR BARU: The Works Ministry will implement upgrading works at 50 accident prone locations in the country that have been identified this year involvi ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
2

7 weeks ago

Najib launches loan scheme for Ramadan traders

Jun 4 2014 10:24pm CDT | Source: Business Times Malaysia

PUTRAJAYA: Prime Minister Datuk Seri Najib Razak today launches RM45 million Ramadan ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 
Update
1

7 weeks ago

Residents bring up objection against Kidex to Suhakam

Jun 4 2014 4:49am CDT | Source: Business Times Malaysia

PETALING JAYA: A group of 20 Petaling Jaya residents held a meeting with the Human Rights Commission of Malaysia (Suhakam) over their objection against the proposed RM2.2 billion Kinrara Damansara S ...
Source: Business Times Malaysia   Full article at: Business Times Malaysia
 

 

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