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September 2009
Free financial wellness seminars... Professional Members of the Asheville Strategic Alliance will provide weekly financial solution seminars, which are open to the public and free of charge. Seminar Details Thurs., September 3, from 6 to 7 p.m. Thurs., September 17, from 6 to 7 p.m. Thurs., September 24, from 6 to 7 p.m.
The short answer: Yes. The long answer: It is projected that Social Security, under the current system, will be fully funded until 2037. After that year -- and if there is no reform -- Baby Boomers can expect to receive 75 percent of the promised benefits. So Baby Boomers can be fairly confident that Social Security is not "going broke," as many fear, and that reform will likely occur. "Social Security is far more valuable than most people realize," said Doug English, CFP, of Scientific Investors, which has offices in Asheville, NC, and Charleston, SC. He will be conducting a free seminar about Social Security on September 17, 2009, in downtown Asheville. It is entitled "Savvy Social Security Planning: What Baby Boomers Need to Know to Maximize Retirement Planning." Another salient point when planning for retirement: Social Security usually forms about 40% of the foundation of the average retiree's total annual income. Consequently, it's vital for every Baby Boomer to understand how much Social Security will pay each month before one actually decides to retire; most people cannot afford to make a wrong decision. Doug English -- a financial planner who helps clients figure out the best time to retire and which investments can make the most sense to achieve financial security -- explained that Baby Boomers should coordinate Social Security payments with the rest of their retirement income plans. Only then can a retiree hope for a financially worry-free retirement. POP QUIZ #2: When should a Baby Boomer choose to retire, and how much money can that person expect to receive each month? Short answer: There is no short answer. Long answer: Planning for retirement is one of the most complex challenges that most Americans will face. Yet, there are solid facts that a person can consider to limit risk and build a stable financial future. "There is nothing wrong with maximizing one's Social Security benefits," said English. He explained that one's benefit will depend on how much a person earned over his or her working career and at what age the person applies for benefits. THE DECISION IS IN THE DETAILS There are many facts a person must weigh before deciding whether to take early retirement or wait until later to receive Social Security payments. But Baby Boomers can be assured that they will collect Social Security as long as they live. And the longer a person lives, the more he or she will extract from the system. Also, Social Security offers annual inflation adjustments, currently at 2.8%, known as COLAs (Cost of Living Adjustments). For instance, if one's monthly benefit today is $2,000 and annual COLAs are 2.8%, and the person lives 10 more years after retiring, he will receive total lifetime benefits of $304,256. If the person lives 20 more years after retiring, the total benefits will be $673,622. If one lives 30 more years after retiring, he can expect payments totaling $1,160,479. SOCIAL SECURITY AS LIFE INSURANCE Another key benefit of Social Security has to do with survivor benefits, which operate similar to a life insurance policy. In the case of retirees, the surviving spouse can switch to the higher of the two benefits. If John Doe was receiving $2,000 and he dies, Jane Doe (his spouse) can trade her $1,200 benefit for his $2,000 benefit. There are a number of other nuances in the Social Security Act (which was launched in 1935) to consider as well. EARLY RETIREMENT VERSUS DELAYED RETIREMENT Baby Boomers have to calculate in dollars and cents the impact of whether or not to take early retirement, because retiring earlier means receiving less money each month than one would have received if he or she had waited until later. A Baby Boomer born between 1943 and 1954 can apply for benefits at age 62 and receive 75% of the PIA (or Primary Insurance Amount); at age 63, he would receive 80% of the PIA; at age 64 receive 87%; at age 65 receive 93%; at age 66, the person would be considered to be at full retirement age and able to receive 100% of anticipated benefits. Doug English said that there are those who may want to work after age 66, but they must consider the wisdom of doing so. If a Baby Boomer applies for Social Security after he or she turns 66, the Boomer will earn what is known as "delayed credits" of 8% for each year delayed. So if the Boomer applies at age 67, his or her benefit will be 108% of the PIA (or Primary Insurance Amount). At 68 the PIA would be 116%, and so forth, up until age 70. After age 70 retirees cannot earn any more delayed credits. Therefore, it does not pay to wait until after age 70 to apply for Social Security. POP QUIZ #3: Are Social Security benefits tax free? Short answer: No. Currently, up to 85% of a retiree's benefits may be taxable. Long answer: Obviously, there's much to know about Social Security and retirement planning, from taxes to timing to tactics. No one likes surprises, especially if one is a Baby Boomer who might make a wrong decision now about Social Security that could interpret into a loss of thousands of dollars later. It's savvy to explore all of the details and facts BEFORE one decides to take the giant leap into retirement, said Doug English. And the difference of a right or wrong financial decision could mean a retirement that is truly golden -- or one that is a golden pain in the pocketbook. TO LEARN MORE
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