The market was slightly down this month and somewhat up for the quarter. Nothing exciting either way.
My wife suggested that I discuss social security. I then realized that I have ignored this topic in my newsletters. I answer a lot of questions in this area, however.
“Should I increase my profit/wages? I am five years from retirement.” The point of the question is the wrong belief that your social security benefits will be based on your final five years of employment. In reality, social security benefits are based on the average of your highest 35 working years.
“I want my wife to collect social security. Should I put her on payroll?” Or a variation of the same question. “My spouse stayed home and his/her account is very small. What do we do to increase it?” When a couple retires, each spouse collects the higher of their own account or 50% of the spouses account. Let’s look at the classic family. Ward Cleaver worked and June Cleaver stayed home and took care of Beaver and Wally. On retirement, they will collect as a couple 150% of Ward’s benefit. June’s account is tossed. Her small wages do not matter. Furthermore, when Ward dies first (men often do), June will collect Ward’s 100% as a survivor. If June dies first, Ward keeps his own account. In no part of this example, does June’s account matter. It is only important if her account is greater than 50% of his.
“When should I start collecting?” Based on your birth year, you are assigned a full retirement age. Mine happens to be 66 years and 10 months (1959). For each year, you start earlier your benefits are about 8% reduced (for life) and for each year after that point, it is about 8% increased (for life). The exact formula is complicated. You can start as early as 62 or as late as 70. If my particular full retirement benefit is $2,000 per month, my age 62 benefit would be about $1,400 and my age 70 benefit would be about $2,700. So when should I start? I am healthy. I have never had had a major health problem. My mother is 93 and going strong. My father died at 81. Obviously, an accident or a disease whose name we must not speak could hit me early. But statistically, I am good until at least 90. I will not touch my social security until the last minute before I am 70. I have other clients who have asked me the same question. On inquiry, I found out they already had a heart attack, the evil disease, etc. They should take their social security as early as they can. Over a huge population, it comes out about the same. Less benefits for more years or more benefits for less years. Your situation, however, is unique. One additional wrinkle, if you are still working there is a fairly low wage limitation if you are collecting social security before full retirement age. It is about $1,000 per month (more in the year you turn 66). Excess wages will cause you to forfeit part or all of social security. Since I do not plan on retiring and I make more than that, it is another reason for me to wait until after full retirement age.
More next time.
|Rate||Assets Under Management|
|1.00%||Between $125,000 and $750,000|
|.85%||Between $750,000 and $1,250,000|
|.80%||Between $1,250,000 and $1,750,000|
|.75%||Between $1,750,000 and $2,500,000|
|.70%||Between $2,500,000 and $3,250,000|
|.65%||Between $3,250,000 and $4,250,000|
A single rate is applied to the entire account. So a person with a $750,000.01 account pays less than a person with a $750,000 account. I will waive personal tax return fees for accounts over $1 million. For accounts that are above $5,250,000, we’ll need to discuss a custom rate.
As I’m writing these to help my readers, I would be very appreciative of any input in regards to what I should write next. If you want me to write about a particular topic, please contact me. Please contact me if you would like to submit a post to my blog.
If anything that I mentioned above interests you, please consider downloading my free e-book. The book contains my thoughts on investment management and some information that I think everyone should know. You can also download it below.
Questions for the comments
Did my newsletter make sense? Do you agree or disagree with what I said?