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Why Social Security Decisions Are So Tough

decisionIf you’re facing the decision of when to file for your Social Security benefit, you’ve probably noticed just how confusing it can all be. There are so many decision-points in the system, it’s no wonder folks are confused.  Depending on your point of view and how you count the decision-points, each person facing this decision has thousands of possible combinations to consider as they decide when to pull the trigger and file for benefits.

Recently I was going over a decision tree that I had built to describe the decision-making process for filing, and within this review I have counted that for a single, there are 14 decision-points and a total of 96 months in which a filing decision can be made, for a total of 1,344 combinations.

If the single person chooses the option to file and suspend benefits to protect a filing date, this adds an additional 36 to 48 months of decision-points.

Add a spouse to the mix, and the decision-points increase to 21 for each spouse, with up to 96 months of filing options, for a total of more than 4,000 decision-points for a couple.

If you’ve been married previously and are now single (due to divorce or death of your spouse or ex-spouse), add more complexity. Exponentially more complexity ensues if you were married at least 10 years to more than one ex-spouse.

When you consider that a decision made in haste could mean a difference of up to $100,000 or more over your lifetime, as well as how many possible decision-points there are, it doesn’t surprise me at all that I’ve been hearing from a lot of folks lately.

How to Choose a Financial Planner

300px-Mark_Gorman_PreachingBefore you sign a contract or buy a product consider the following before choosing your financial planner.

  1. Make sure they’re a CFP®. At the very minimum, a CERTIFIED FINANCIAL PLANNER™ has the met the education, exam, ethics and experience requirements in order to be qualified to discuss your financial planning needs. Anyone can call themselves a financial planner, but not everyone is a CFP®. This should be the starting point of your search. Just because the planner is a CFP®, doesn’t mean you should automatically work with them.
  1. Make sure they’re a fiduciary. A fiduciary is legally required to act in your best interest – regardless of the financial outcome for the planner. Planners that have only a suitability requirement are not required to act in your best interest, but merely find a product suitable for your situation. In other words (and these are my words) they only need to rationalize why the product is a good fit for you, but it may not be in your best interest. Some planners are required to act in their company’s interest first, which means your best interests are secondary.
  1. Make sure they’re fee-only. This means that the planner’s only source of compensation is directly from you and not from the commissions on the sale of mutual funds or insurance products. That is, you pay them directly for advice and they work for you. Fee-only can be an hourly rate or a percent fee on your money if they invest your money for you.
  1. Make sure your personalities mesh. Nothing’s worse than getting butterflies every time you have to meet with your planner or your planner being reluctant to return your call. The relationship should be professional, yet enjoyable and even fun. Sometimes personalities don’t click and sometimes they mesh perfectly. Life’s too short and your money too hard-earned to be uneasy talking with your planner. The good news is that generally if the planner lines up with the first three points, it becomes easier to focus on the relationship and building trust together.

Interview a few planners that meet the descriptions above and see which one you like best.

IRS Gives 5 Good Reasons for Direct Deposit


Since we’re in the middle of income tax preparation season, I thought it was appropriate to share some of the tips that the IRS has put forth. Today’s tip is to take advantage of direct deposit for your tax refund. It can be very handy to have this option specified on your tax return, as you’ll see below. It’s faster, more secure, and much more convenient than the old paper check method.

Below is the text of IRS’ Tax Tip 2015-23, which details some of the reasons that it makes sense to use direct deposit for your tax refund.  Keep reading…

Looking for a tax preparer? IRS can help

prepping peppersAlthough there are literally tax preparers standing on the street corners (sometimes in ridiculous costumes), it can be tough to find a qualified income tax preparer near you. Of course, word of mouth is a good way to find a preparer, by way of your family or friends – but what if you still can’t find a qualified tax preparer that you can trust?  Keep reading…

How to Easily Maximize Your IRA

minimize taxesRecently I had a chance to have some fun with some of my undergraduate students. Polling my entire class I asked them to make a list of wants (not needs) that they frequently spent money on. Answers varied from smartphones (and the respective bill), cable and satellite TV, dining out, coffee shops, beverages (you know which ones), and appearance (spending extra to dye hair, pedicures, etc.).

Here’s a list of how each expense was broken down as told by the students. In other words, it was their numbers not mine.

Keep reading…

What Plans Can I Rollover My Retirement Plan To?

When you rolloverhave a retirement plan, or many different types of retirement plan, you may be faced with decision-points when it would be helpful to rollover one plan into another plan. But do you know which type of plan I can rollover my retirement plan into?

What follows is a description of the types of accounts that you can rollover each particular source account into, along with the restrictions for some of those accounts. The IRS also has a handy rollover chart which describes these rollovers in a matrix.  Keep reading…

IRS’s Dirty Dozen Tax Scams for 2015

dirty dozenThe IRS produces a list each year of the “dirty dozen” tax scams that they and taxpayers deal with.

I’ve kept track of these over the past several years, so I’ve included the changes to rankings from 2012 to this year for those items in the list that continue to be listed. Topping the list this year is phone scams, which was first listed in the dirty dozen in 2014, at #2.  Keep reading…

One of the Best Investments to Make

300px-Assorted_United_States_coinsTraditionally when we think of investing our minds turn to stocks, bonds, mutual funds or real estate. While these may or may not be the best investments for an individual’s portfolio there is one investment that is almost always the right choice for any individual – human capital.

Human capital is an individual’s worth of their own potential. Coined by economist Theodore Schultz, human capital can be invested in like any other asset in order to add value to an individual’s life through earnings, health, and quality of life.  Keep reading…

WEP Impact Calculation Factors

big windfallIn this blog we’ve covered the Windfall Elimination Provision (WEP) from many different angles. Here we’ll go into some more depth on the actual calculation of the WEP, including how some of the factors are determined.

As you are likely aware, the Windfall Elimination Provision or WEP impacts your Social Security benefit when you are receiving a pension based on work where Social Security tax was not applied to the earnings. The point of WEP is ostensibly to act as an offset, since the reason no Social Security tax was applied to the earnings is because the pension is intended to replace Social Security benefits for that worker. WEP impact is applied as a reduction to the first bend point of the calculation of the Primary Insurance Amount. (Calculation of the PIA is explained further here.)  Keep reading…

5 Tips to Lower Your Tax for 2015

3446025121_072700607f_n2With 2014 over and 2015 well on its way you may be finding yourself gathering all of your 2014 tax information and getting ready to file your income taxes. Some folks will be expecting refunds while others will woefully dread writing out a check to the IRS.

If you find yourself in the group of folks that will be writing a check to Uncle Sam, here are some tips to reduce your tax burden for 2015.

Keep reading…

What the Health Care Law Means to You

health care lawSince the Affordable Care Act has been in place for over a year now, it’s important to understand what affects the health care law will have on you and your tax situation.

Recently the IRS issued a Health Care Tax Tip (HCTT-2015-06) which details how the health care law can effect you. The actual text of the Tip is reproduced below:  Keep reading…

Forget to Take Your RMD?

6629120915_556a318093_nIn case you forgot to take your required minimum distribution (RMD) for 2014 there’s still hope in order to avoid the 50% (yes, that’s FIFTY percent) penalty of the amount not withdrawn.

If you missed taking the RMD for 2014 here’s what you can do. According to the IRS the penalty may be waived if you can establish that it was due to reasonable error that you didn’t take the RMD and that reasonable steps are being taken to remedy the error. That is, take the 2014 RMD right away (or as soon as you can let your custodian know) and it might not be a bad idea to take the RMD for 2015 as well (just to be on the safe side).

Once that’s done you or your tax professional need to fill out Form 5329 as well as a letter explaining the reason for not taking the RMD. And to quote my parents, “Don’t let it happen again!”

More information regarding required minimum distributions can be found here.

Exploring free tax filing

free tax filingTax filing season is upon us! As you consider all of your options for filing your return this year, you might consider some of the exploring free tax filing for your return. Recently the IRS published their IRS Tax Tip 2015-06, which details information about two of the options for free tax filing that you might be able to take advantage of. The actual text of the Tip is below:  Keep reading…

Are YOU ready for retirement?

Photo courtesy of David Marcu on

Photo courtesy of David Marcu on

In this time of disappearing pensions, corporate downsizing, and high unemployment it becomes a great concern that many folks are still not saving enough for retirement. This may be due to a failure to realistically assess future costs or because we’re spending too much without saving – which is a hallmark of the baby-boom generation. Granted, there are plenty of good reasons why spending is out of control – with healthcare costs increasing all the time, for example. But I suspect that much more of the blame for our low savings balances is due to poor savings habits in the first place.

Keep reading…

How to Save More Without Making More

7214454962_e2050bb2c3_mHere’s a pretty neat strategy that you can try if you’re looking to save a bit more for retirement, college or even paying down debt. It works like this:

Whenever we’re out shopping or online shopping there’s always the temptation to purchase things we really don’t need. For example, I was at the store the other day and tried on a few pairs of jeans. Did I really need them? No. Did I want them? Of course. You may have seen yourself in a similar situation – wanting something but knowing you most likely didn’t really need it.

Keep reading…

Uncoupling File & Suspend

suspended bridgeBy now you should be somewhat familiar with the File & Suspend strategy, where an individual files for Social Security benefits and then immediately suspends them. This strategy is often used so that the individual can enable other dependents’ benefits (such as spousal or children) based upon his or her record, while delaying receipt of his or her own benefits in order to accrue delay credits on his benefit.

What you may not realize is that you don’t have to file & suspend at the same time. These actions can be decoupled – in other words, you could file for benefits at any time that you’re eligible, and then later (as long as you’re at least at Full Retirement Age) you could suspend your benefits.

Keep reading…

A Financial Checklist for 2015

checklistAs 2015 begins and the New Year’s resolutions start to fade, here’s a financial checklist for 2015 that can help make those resolutions a reality or enforce some good habits you’ve started.

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Illinois’ Automatic Roth IRAs for Employees

automatic roth ira - as easy as coffeeRecently Illinois’ Governor Pat Quinn signed into law the Illinois Secure Choice Savings Plan. This plan provides an automatic Roth IRA via payroll-deduction for some employees who do not have an employer-sponsored retirement savings plan.

Essentially this law will require employers with 25 or more employees to establish a payroll deduction program permitting the workers to defer earnings into a Roth IRA, beginning in June 2017.  Employees will be automatically enrolled (hence an automatic Roth IRA), but the workers will have the opportunity to opt out of the program. The automatic enrollment includes a 3% salary deferral, but the employee can increase the deferral amount, up to the legal limitations (in 2015 it’s $5,500, $6,500 for folks over age 50). There is no company matching with this program.  Keep reading…

Debt Consolidation Loans Don’t Work (But You Might Get it to Work For You!)

wallet-squeeze instead of debt consolidationYou’ve likely heard or seen the commercials that urge you to consolidate your debt into “one low payment”. The concept makes logical sense and promises to free up some cash so it is easier to live paycheck to paycheck. The reason this usually doesn’t work is that it doesn’t address the real problem. The reason we get into this mess is because we have not learned how to spend within our income. What we need is a method to manage and organize our money so we make conscious decisions about how we spend it. A good book that I’ve used is “Your Money or Your Life” by Joe Dominguez.

How to Get Started

To get started you might try the following:

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