The decision of when to begin receiving Social Security benefits can be a bit daunting, because there are many things to take into account when making this decision. The basic concept of the lifetime value of benefits taken at various ages is the most common thing to consider, when this is really not as important as you might think. This is especially true for single person – since the benefit reduction and increase factors are designed to achieve a similar lifetime result for the average lifespan. In other words, if you are an average person with an average lifespan, it won’t make much difference at what age you file for benefits, as you’ll receive approximately the same amount by the end of your average life, whenever you begin receiving the benefits. However. Another factor that you need to keep in mind is how Social Security benefits are treated, tax-wise. At […]
Social Security
What is WEP?
WEP, in Social Security parlance, is the Windfall Elimination Provision. So, if that’s all you wanted to know, you’re good to go. You wanted more though, right? Okay, here we go: WEP is the provision of the Social Security rules that provides for reduction of your Social Security benefit when you are receiving a pension from a job that was not covered by Social Security. Usually these jobs are government-related, including state and federal government employees, teachers, and the like. In addition, pensions from work done in other countries would also fit into this category, as long as the work was not covered by US Social Security. How it Works When your Social Security benefit is calculated, if you’ll recall from this earlier article on benefit calculation, your Average Indexed Monthly Earnings (AIME) factor is divided into three portions, bounded by bend points. The first bend point is multiplied by […]
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Important Ages for Social Security
There are many specific important ages to know as you’re planning your Social Security filing strategy. The ages can become quite confusing and jumbled together as you plan. It’s important to know at what age you can take specific actions, as well as what the consequences can be if you take a particular action earlier than it is appropriate. These ages are pervasive throughout this blog and my book, but I hadn’t compiled all of the important ages into a single place, so listed below are what I have determined to be the most important ages with regard to Social Security, as well as what is important about that age. Enjoy! Age Description 22-62 This is the forty years during which your monthly earnings are compiled to develop your initial Average Indexed Monthly Earnings (AIME). This figure is then used to determine your Primary Insurance Amount (PIA) which is used […]
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Book Review: Control Your Retirement Destiny
This new book is the first book from my colleague Dana Anspach. Dana has been writing and blogging for quite some time now, primarily as the voice behind Money Over 55 for About.com (www.moneyover55.about.com). Dana also is a practicing financial advisor and respected speaker. If you’re looking for a nuts-and-bolts, do-it-yourself primer on all things related to retirement, this is your book. Ms. Anspach has put together a very complete overview of all of the areas that you need to consider in order to “Control Your Retirement Destiny”. By following the advice in this book, you can figure out how much money you need to have to retire, where to put it (meaning, what types of accounts to use), how to invest it, and all of the other important topics that you need to know about. Along the way, you’ll learn what’s important to know about Social Security, taxes, investment […]
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The Real Breakeven Point for Delaying Your Own Social Security Benefit and Taking the Spousal Benefit
Recently there was an article that I was involved with where we were reviewing the strategies of taking a restricted spousal benefit and therefore delaying your own benefit versus taking your own benefit. An astute reader (Thanks BL!) pointed out that there was a bit of a flaw in the logic on the costs of delaying, and therefore a significant difference in the breakeven period. Briefly, the example went as follows: Say the wife, Michelle, has a PIA of $1,300 and Mike has a PIA of $2,500. They’re both age 66, and Michelle files the restricted app and is eligible to receive $1,250 (half of Mike’s), which is only $50 less than she would receive if she filed for her own benefit. After four years of delay, she has given up $2,400 ($50 times 48 months) but now her benefit is $1,716 – $416 more than she would have received […]
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3 things you can do if you’ve filed for Social Security benefits too early
I often hear from people who, for whatever reason, decided to file for their Social Security retirement benefit immediately upon reaching 62 (or 66, or whatever age), and now they have found out that this wasn’t necessarily the best option for them to maximize their lifetime Social Security benefits. There are several things that you can do about this – three that come to mind at the moment. Below we’ll work through each of these ways to fix a situation where you filed too soon. Pay it back If it’s been less than 12 months since you filed, it’s possible for you to withdraw your application for benefits and pay back all that you’ve received to date. Once you’ve done this, as far as Social Security is concerned, you never filed. All of your benefit options are intact, just as if you hadn’t filed in the first place. If your […]
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Family Maximum and File & Suspend
Note: with the passage of the Bipartisan Budget Act of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details. I recently received the following email from a reader: I am 66 and my wife is 45, and our son is 12. I intend to delay my filing for Social Security benefits until age 70 in order to provide the highest survivor benefit for my wife since I’m so much older than her. But I also realize that my wife and son may be eligible for benefits now if I file and suspend. According to my SSA statement my benefit now at age 66 is $2,576. Since my […]
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Book Review: How to Retire Happy
“The 12 most important decisions you must make before you retire” Author Stan Hinden, who is the former syndicated Washington Post “Retirement Journal” columnist, has just released his Fourth Edition of this book. The book is Hinden’s commentary and advice, as well as a sort of journal, as he and his wife Sara entered into and have been living in retirement over the past 17 years. Hinden retired in 1996 at the age of 69, at which time he began writing the “Retirement Journal” column. He was nominated for a Pulitzer Prize in Commentary in 1998 for his work. This book is an excellent read for folks who are planning toward retirement or have recently retired. Hinden has organized the process into 12 decisions, some of which include: “Am I Ready to Retire?”, “What Should I Do with the Money in My Company Savings Plan?”, and “Where Do I Want […]
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Another “Swim with Jim” Interview on Social Security
I recently once again was honored to be interviewed on the radio by Mr. Jim Ludwick. Jim is a CERTIFIED FINANCIAL PLANNERTM professional, and his practice is based in Odenton, Maryland with additional offices in Washington, DC, Santa Barbara, California, San Mateo, California, and New York City. Jim also is a fellow member of the Garrett Planning Network. We discussed the recent new edition of my book, A Social Security Owner’s Manual, 2013 Edition, and the new information that has been provided there. We also reviewed some of the reasons that the Social Security benefits calculation process is so complex, as well as the concept that, in many cases, it can be more efficient to use IRA resources to help you get by until your Social Security benefits can be maximized. I reviewed a case like this recently in an article at credit.com, entitled My Smartest Money Move: Taking More […]
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Computing Your Social Security Monthly Benefit
When planning for Social Security retirement benefits, it is important to know how to compute the amount of your benefit at various ages. The amount of your benefit will be different depending upon your age when you begin drawing the benefit, as well as your record of earnings over time. Below are the factors that are needed in order to determine the amount of your Social Security benefit: Your Primary Insurance Amount, or PIA Your Full Retirement Age, or FRA, which is determined by your year of birth Your age when you will begin drawing benefits Whether or not the Windfall Elimination Provision (WEP) applies to your benefits This earlier article has information about the PIA, and you can find your PIA on your Social Security statement. Your FRA, if you were born between 1943 and 1954, is 66. If you were born in 1955 or after, FRA gradually increases […]
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Restricted Application is Available via the Online Application
I learn something new almost every day. Today (well, not today but recently), I learned something about the online application for Social Security that I didn’t know: the restricted application for Spousal Benefits is available as a choice when you apply using the online application system! (If you want more information on why a restricted application is important, see this article about Leaving Money on the Table.) For quite a while now I’ve been telling folks that the best way to apply for the restricted application is to go to your local office. When you get there and explain that you want to submit a restricted application for Spousal Benefits only, the first person that you talk to will likely tell you that you can’t do this, because your own retirement benefit is greater than half of your spouse’s PIA, or something like that. Then my advice has been to […]
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Social Security Benefits and Taxes
When you’re receiving Social Security benefits, you may be subject to income tax on those benefits. At the end of the year, you’ll receive a form SSA-1099 from the government that details the benefits that you’ve been paid, as well as the amount that has been deducted for Medicare premiums, and any federal income tax that you’ve had withheld from the benefit checks. When you prepare your tax return for the year, if you’re using a software program (does anyone prepare them by hand any more?), the program will give you a place to enter the figures from your SSA-1099 form. Then after you’ve entered all of your other income information into the system, it will calculate how much of your Social Security benefit is subject to income tax. But that’s no fun, is it? How do you know how much of your benefit is going to be taxable? Here’s […]
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Notify Social Security of Major Changes in Your Life
You know how, after you’ve put your kids through college and they go off on their own, sometimes you don’t hear from them as often as you’d like? Major things occur in your kids’ lives and you don’t know about them until after the fact, possibly long after. So you get onto them about it, and ask the kids to call more often (or you call them more often) so that you can keep up with what’s going on… It’s kinda like that with the Social Security. They want to know when major changes occur in your life, as soon as possible. This is primarily due to the fact that, quite often, these changes will result in adjustment to your Social Security benefits. The first one that comes to mind is the death of a Social Security recipient. Naturally you need to notify the Social Security Administration as soon as […]
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Earnings Tests Apply to Spousal and Survivor Social Security Benefits As Well
If you’re receiving Spousal or Survivor Social Security benefits and you’re under Full Retirement Age, you need to know that any earnings that you have can have an impact on the benefits that you’re receiving. These are the same limits that apply to regular retirement Social Security benefits, and they apply in the same manner. For 2013, if you will not reach Full Retirement Age during this calendar year, the earnings limit is $15,120, or $1,260 per month. For every $2 over that limit that you earn for the year, your Social Security benefit will be reduced by $1. For example, if you earned $20,000 for the year, you are over the limit by $4,880, and you’ll lose $2,440 of your benefit. If you will reach Full Retirement Age in 2013, the earnings limit is $40,080, or $3,340 per month – and the treatment is different. In this case, for […]
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A Quick and Dirty Way to Determine Your PIA
We’ve gone over the long, painful, detailed way to calculate the Primary Insurance Amount (PIA) in many different articles and my book. The PIA is central to most of the calculations we do, such as your own benefit (reduced or increased if you file early or late), survivor benefits, and the like. Sometimes it is difficult to actually know find out what your PIA actually is. Here’s a quick and dirty way to figure it out: Go to the Social Security website and get your statement (www.socialsecurity.gov/mystatement). On page 2 at the top you’ll see either your Full Retirement Age (FRA) benefit amount, or the amount at your current age if you’re over FRA. Oftentimes we refer to this FRA amount as your PIA, but nearly always with a qualification. This is because the benefit amount illustrated on this statement is assuming that you continue earning at your current level […]
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Calculating the Reduced Social Security Spousal Benefit
Among the pile of very confusing calculations for various Social Security benefits is the incredibly confusing Spousal Benefit. This calculation becomes even more confusing when filed for prior to Full Retirement Age (FRA), as it is further reduced. Briefly, the maximum amount that a Spousal Benefit can be is 50% of the other spouse’s Primary Insurance Amount (PIA). PIA, if you’ll recall, is equivalent to the amount of benefit that the other spouse would receive in benefits at his or her own Full Retirement Age. The calculation is actually a bit more complicated than that. The Spousal Benefit for Jane (on her husband John’s record) is calculated as follows: John’s PIA times 50% minus Jane’s PIA times the early-filing reduction factor That amount is then added to Jane’s benefit, which could be reduced by filing early or enhanced by Delayed Retirement Credits for filing later, to come up with Jane’s […]
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Another Good Reason to Delay Social Security Benefits
As you likely know from reading many of my articles on the subject, I have long advocated the concept of delaying your Social Security benefit as long as possible. This shouldn’t be a surprise – many financial advisors have espoused this concept for maximizing retirement income. Lately there has been a white paper making the rounds, from a Prudential veep, Mr. James Mahaney, entitled Innovative Strategies to Help Maximize Social Security Benefits. The white paper supports the very theme that I wrote about a couple of years ago in the post Should I Use IRA Funds or Social Security at Age 62?. This paper seems to have struck a chord with a lot of folks, as I’ve received it no less than a dozen times from various folks wondering if the strategies Mr. Mahaney writes about would be useful to them. The point is very clear: It makes a great […]
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An Unexpected Result From Roth Conversion – Increased Medicare Premiums
Many folks took advantage of the one-time opportunity in 2010 to convert funds from traditional IRAs to Roth IRAs and subsequently spread the tax over the following two years, 2011 and 2012. This was a very good option for some folks who wanted to do the conversion and reduce future tax costs. However (and there’s always a however in life!), with the coming of 2013, many of these same folks are experiencing an unexpected result of the conversions: a significant increase in Medicare Part B premiums. Beginning after 2003, Medicare Part B premiums have been partly determined by income – primarily higher income. For 2013, the increased Part B premium begins for single folks with incomes above $85,000, married couples above $170,000. The income used to calculate the Part B premium is always based on the most recent tax return, which in this case would be the 2011 tax return. […]
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Are You Leaving Social Security Money on the Table? You Might Be, If You Don’t Understand and Use This One Rule
Note: with the passage of the Bipartisan Budget Bill of 2015 into law, File & Suspend and Restricted Application have been effectively eliminated for anyone born in 1954 or later. If born before 1954 there are some options still available, but these are limited as well. Please see the article The Death of File & Suspend and Restricted Application for more details. Many couples that have done some planning with regard to filing for Social Security retirement benefits have figured out how to coordinate between the higher wage earner’s benefit and the lower wage earner’s benefit. Often it makes the most sense to file for the lower wage earner’s benefit early, at or sometime near age 62, while delaying the higher wage earner’s benefit out to as late as age 70. This method allows for a maximization of those two benefits. If you’re really astute, you probably picked up on […]
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Social Security Bend Points in 2013
When the Social Security Administration announced the Cost of Living Adjustment (COLA) for 2013, this also allowed for calculation of the bend points for 2013. Bend points are the portions of your average income (Average Indexed Monthly Earnings – AIME) in specific dollar amounts that are indexed each year, based upon an obscure table called the Average Wage Index (AWI) Series. They’re called bend points because they represent points on a graph of your AIME graphed by inclusion in calculating the PIA. If you’re interested in how Bend Points are used, you can see the article on Primary Insurance Amount, or PIA. Here, however, we’ll go over how Bend Points are calculated each year. To understand this calculation, you need to go back to 1979, the year of the Three Mile Island disaster, the introduction of the compact disc and the Iranian hostage crisis. According to the AWI Series, in […]
Sterling Raskie, MSFS, CFP®, ChFC®
The latest in our Owner’s Manual series, A 401(k) Owner’s Manual, was published in January 2020 and is available on 
A Medicare Owner’s Manual, is updated with 2020 facts and figures. This manual is available on 
Social Security for the Suddenly Single can be found on Amazon at 
Sterling’s first book, Lose Weight Save Money, can be 
An IRA Owner’s Manual, 2nd Edition is available for purchase on Amazon. Click the link to choose the 
Jim’s book – A Social Security Owner’s Manual, is now available on Amazon. Click this link for the 
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