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Things to Consider Before You Claim Social Security

31 Jul

Whether you want to leave work at 62, 67, or 72, claiming the retirement benefits you are entitled to by federal law is no casual decision. You will want to consider a few key factors first.

How long do you think you will live? While no one knows the answer to this question, some common sense considerations of overall health and family history can help guide you as you plan. If you have a feeling you will live into your nineties, for example, it may be better to claim later. If you start receiving Social Security benefits at or after Full Retirement Age (which varies from age 66 to 67 for those born in 1943 or later), your monthly benefit will be larger than if you had claimed at 62. If you file for benefits at FRA or later, chances are you probably a) worked into your mid-sixties, b) are in fairly good health, and c) have sizable retirement savings.1

If you really need retirement income, then claiming at or close to 62 might make more sense. If you have an average lifespan, you will, theoretically, receive the average amount of lifetime benefits regardless of when you claim them. Essentially, the choice comes down to more lifetime payments that are smaller versus fewer lifetime payments that are larger. For the record, Social Security’s actuaries project that the average 65-year-old man to live 84.0 years, and the average 65-year-old woman, 86.5 years.2

Will you keep working? You might not want to work too much after claiming, since earning too much income may result in your Social Security being withheld or taxed.

Prior to Full Retirement Age, your benefits may be lessened if your income tops certain limits. In 2018, if you are aged 62 to 65, receive Social Security, and have an income over $17,040, $1 of your benefits will be withheld for every $2. If you receive Social Security and turn 66 later this year, then $1 of your benefits will be withheld for every $3 that you earn above $45,360.3

Social Security income may also be taxed above the program’s “combined income” threshold. (“Combined income” = adjusted gross income + nontaxable interest + 50% of Social Security benefits.) Single filers who have combined incomes from $25,000 to $34,000 may have to pay federal income tax on up to 50% of their Social Security benefits, and that also applies to joint filers with combined incomes of $32,000 to $44,000. Single filers with combined incomes above $34,000 and joint filers whose combined incomes surpass $44,000 may have to pay federal income taxes on up to 85% of their Social Security benefits.3

When does your spouse want to file? Timing does matter, especially for two-income couples. If the lower-earning spouse collects Social Security benefits first, and then the higher-earning spouse collects them later, that may result in greater lifetime benefits for the household.4

Finally, how much in benefits might be coming your way? Visit SSA.gov to find out, and keep in mind that Social Security calculates your monthly benefit using a formula based on your 35 highest-earning years. If you have worked for less than 35 years, Social Security fills in the “blank years” with zeros. If you have, say, just 33 years of work experience, working another couple years might translate to a slightly higher Social Security income.1

A claiming decision may be one of the most significant financial decisions of your life. Your choices should be evaluated years in advance – with insight from the financial professional who has helped you plan for retirement.

At BrioWealth, we believe that financial planning should be done for the purpose of giving your life greater confidence, security and joy. That’s why we work closely with our clients to understand their personal goals and passions and build a plan around that. As retirement income specialists, BrioWealth helps our clients build wealth and create smart strategies for secure, sustainable retirement income. Call us at 877-606-1484 or visit http://www.briowealth.com to start creating your life enhancing financial plan!

Sources:

1 – MarketWatch.com, November 2, 2019

2 – SSA.gov, May 28, 2020

3 – BlackRock.com, May 28, 2020

4 – MarketWatch.com, November 11, 2019

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

 

 

 

Why it Can Actually Pay to Change Jobs

1 Sep

Job Finance Article

The do’s and don’ts seem to be constantly changing when it comes to landing a job and cultivating your perfect career. Striking that perfect balance of longevity with a company and well-rounded experience can be a challenge. While loyalty to a company may have its pluses, you may not be doing yourself any favors when it comes to your salary. Findings suggest that changing jobs more frequently is actually financially savvy.

Remember 5% annual raises? You don’t see them much anymore. In fact, when the respected HR firm Buck Consultants released its 2013 employee compensation forecast, it projected that “the median salary increase in 2013 will be 3%” and that “the new normal for salary increases will settle at this 3% level.”1

Chances are, your most recent raise was on the order of 2-3%. While you are keeping up with consumer prices at that rate, you may not be making up for any financial steps you took backward as a result of the recession. Even the all-stars at your firm may be getting just a 5-6% yearly raise.

Why does jumping ship so often mean a jump in pay? As a senior hiring manager who has worked with Intuit and other Fortune 500 firms in the San Francisco Bay Area recently commented to Forbes, “I would often see resumes that only had a few years at each company. I found that the people who had switched companies usually commanded a higher salary.”2

“The problem with staying at a company forever,” she reflected, “is [that] you start with a base salary and usually annual raises are based on a percentage of your current salary. There is often a limit to how high your manager can bump you up … however, if you move to another company, you start fresh and can usually command a higher base salary to hire you.”2

In fact, Forbes contributor Cameron Keng notes that “staying employed at the same company for over two years on average is going to make you earn less over your lifetime by about 50% or more.”2

How does he reach this conclusion? He plots out a 10-year graph in which an employee starts at a salary of $100,000, assuming 3% annual raises and a “conservative” 10% increase in pay per job change. After 10 years at one employer and a decade of 3% raises, the extreme loyalist is earning $130,000. In contrast, a more opportunistic worker who changes jobs four times and works for five employers in those ten years will be earning about $170,000 a decade on.2

If you want change, when should you make your move? U.S. News & World Report recently addressed that question in its Jobs in 2020 web special. It cited several circumstances that might call for a job change:

  • You’ve worked for the same company for 10 years or longer
  • Your skill set is underappreciated
  • You find yourself battling your co-workers
  • Or your goals differ from the company’s goals.

If you’ve just come back from a vacation or wrapped up a major project, it might be a good time to make a change. If a fiscal year is just ending for your employer, this might be another prime time.3

On the other hand, there are bad times to change jobs, and USN&WR also noted some of those.

  • You’re overworked, having interpersonal issues at the office or just bored. You don’t want to overreact; restructuring your workday or work tasks may offer a solution.
  • A major life event, long vacation or house hunt is just ahead, a job change may not be ideal or smart.
  • If you sense that the economy (or your industry) is in line for a downturn
  • You’ve been at your job for less than a year.
  • Lastly, a job search that coincides with the holiday season may be more prolonged than you anticipate; HR officers and managers may be more available (and less stressed) when mid-January rolls around.3

If you love what you do and are good at it, you may see no reason to change jobs. Alternately, you might reason that you could excel and love your work even more in a new environment. Consider the above-mentioned factors (and others) if you are looking for greener grass.

Julie Newcomb, a Certified Financial Planner™ in Orange County, CA, specializes in financial planning for women.  As a wife, mom and business owner, Julie understands the pressures and challenges most women feel on a daily basis as they juggle many important priorities. Julie’s favorite thing about her job is the ability to give women peace of mind when they entrust her with their finances. To learn more about Julie Newcomb Financial, go to julienewcomb.com.

Sources:

1 – tlnt.com/2012/11/08/remember-those-3-salary-increases-now-theyre-the-new-normal/ [11/8/12]

2 – forbes.com/sites/cameronkeng/2014/06/22/employees-that-stay-in-companies-longer-than-2-years-get-paid-50-less/2/ [6/22/14]

3 – money.usnews.com/money/careers/slideshows/the-10-best-times-to-switch-jobs [3/12/14]