A few days ago I attended the Pasco School District Back to School Expo and benefits fair at Pasco High School, my alma mater. It was a chance to talk with teachers and staff a little bit about their jobs and their plans for the year. Since I didn't have a fancy table display, I brought along my cool, old letterman's jacket with all my sports patches and pins. Everyone loved the 80's hairdos of my volleyball teammates, shown in a picture on one of the pins.
Since I am "just" a few years out of high school, it seems there are fewer and fewer district employees that I know or who worked with my mom back when the district was much smaller. But it is still a great opportunity to meet new teachers and see old friends, like Diana, an old UW friend now teaching in Pasco. It reminds me that even as things change, they still stay the same. The high school looks completely different than when I was there, but the thrill I got just walking past the gym brought me right back to my high school sports days. And being back in the new cafeteria with its high ceilings and wall of windows, doesn't even begin to resemble my old, stuffy cafeteria. But I can clearly remember many, many lunches in that room with friends or maybe by myself if no one was daring to eat school lunch that day. But a buck and a quarter, couldn't beat that for lunch.
I am doing a class at the end of September called Savvy Social Security Planning: What Baby Boomers Need to Know to Maximize This Million Dollar, Lifetime Benefit and so I was telling people about this. I was surprised to learn that many who were still working had already started collecting their social security, many as early as age 62. I let them know that there were strategies that may have helped them maximize their annual and cumulative social security benefit and we would learn about these in my class. Unfortunately for those that have already started to collect there isn't much they can do unless they were willing to suspend and perhaps even pay back the benefits they had earned, but only if they had started less than 12 months ago.
However, if their spouses hadn't started to collect there still might be hope for them to pick up a spousal strategy that might increase their combined lifetime benefits. The thing about SS is there are about a million permutations of ways to do it, and it really pays to learn about some of the ways you personally could make SS work more in your favor.
So I'll be back at PHS next year to keep spreading the word because I really believe this is an area that affects everyone, especially women, and what you don't know can hurt you.
One of the things I do is teach a class on smart Social Security strategies. Married spouse, divorced-spouse, survivor and divorced-survivor strategies play an important role in a woman's retirement plan. Because women live longer than men and traditionally earn less over their lifetime, Social Security planning is really too important to ignore.
In 2006, 43.4% of all elderly unmarried females receiving Social Security benefits relied on Social Security for 90% or more of their income. With the average monthly benefit in 2011 being $1,181.60, that describes a less than comfortable retirement.
One of the strategies I'd like to share here is for a divorced women (it works for men too) who was married at least 10 years and is currently unmarried. Social Security is gender neutral so any strategy that works for a woman, will apply to a man as well.
You may take your divorced-spouse benefit at age 66 and allow your own benefit to earn delayed credits up to age 70. Your divorced-spouse benefit will be one-half of your ex-spouse's Primary Insurance Amount or PIA. The PIA is the dollar amount at age 66-67 found on your Social Security statement. The PIA is basically your base amount that all other amounts are calculated from.
If you have been divorced more than two years, your spouse doesn't need to have filed for their own benefit, but must be over age 62 (and eligible for SS benefits). Typically SS likes to give you the highest benefit you are entitled to receive, even though it may not be the preferred strategy that you are trying to implement. So even if your own PIA is higher, you don't want to take your own but restrict your application to your divorced-spouse benefit. In this case, your own PIA is irrelevant. It will become relevant when at a later date, preferably age 70 for the greatest growth in your benefit due to delayed credits, you will then apply for your own benefit. If you were in your highest earning years during this time as well, your own benefit will be even greater at age 70.
Too many women make the mistake of taking benefits too early, at age 62. We find that many want to take it because they don't know if it will be here later and they just want to start getting that check. Delaying the start of benefits to at least full retirement age (age 66-67) can make a tremendous difference in the amount one receives at age 80 or 90.
One of the best parts of this strategy is that the ex-spouse will never know that your are utilizing this strategy. They will never be notified and their own benefits are not affected. This strategy is especially beneficial for divorced women in order to allow them to maximize their own benefit and lifetime income from Social Security.
It's very important to understand that there are many things to consider when deciding when and how to start Social Security and realize there are many smart strategies out there that may help you maximize your lifetime benefit. Be sure to do some research or consult with an advisor when deciding on your strategy.
The American Dream of retiring comfortably may be impossible for many. A recent study by the National Institute on Retirement Security (NIRS), whose mission as a non-profit is to contribute to informed policymaking by understanding of the value of retirement security, illustrates the retirement crisis that will be playing out in front of us. They find that the median retirement account balance for all working-age households is just $3,000. For households near retirement, the median balance is just $12,000. That includes all households, including those who haven’t saved anything. If you take out households that haven't saved anything, the median balance among working-age households who do have a retirement account raises to $40,000, while those closer to retirement have a median balance of $100,000. More than 38 million Americans, or 45%, have no retirement assets, NIRS found. Among those near retirement, more than 40% have saved nothing.
Do you fall into this group? What can you do?
** Know what you earn and what you spend.
** Make a plan.
** Start saving. Any amount possible.
** Learn about your company retirement plan. If you don't have one, learn about individual retirement accounts.
** Invest your savings so they will grow.
** Seek help from a Certified Financial Planner™ Professional.
** Just start. Doing nothing and avoiding the inevitable is not a plan.
Source: The National Institute for Retirement Security
As a born and bred Tri-Citian, I have Hanford Nuclear Reactor site history running through my veins. If you've lived here long enough you have worked there, someone in your family has worked there, or you know of lots of people who have worked or currently work there.
Today I had the pleasure of doing the B Reactor tour with my family. It's been on our To Do list for a while. I took lots of pictures that I will post here.
A couple of cool tidbits. Enrico Fermi who was the brains behind this whole accomplishment was codenamed Eugene Farmer.
DuPont was asked to be the main contractor building the plant and ancillary facilities but they got so much flak from profiting during WWI that they would only do it if they were paid $1. And because they finished early, were only paid $.67 (or so the story was told).
The engineering, design and technological accomplishment this structure exhibits in history, is really unprecedented. I highly encourage you to attend one of the Hanford Site Tours (main website) for either the B Reactor Tours or the Hanford Site Public Tours. Each has its own restrictions on age and nationality so read carefully before signing up. Also I heard the docent say that if you show up for a B Reactor tour, they try very hard to get you a spot, even if they are full.
I help take care of several 401k plans and after 2008 came along, this question came up a lot from callers to my office.
I start by trying to put myself in the shoes of the caller, trying to understand their motivation for wanting to cash out. Most are under 59 1/2 which means they will be penalized 10% for early withdrawal. 10% doesn't really mean anything to the person hearing that. It just doesn't. It has no real impact. And if they haven't paid taxes on the deferrals, the cash out will count as taxable income for that year. The big thing is the mandatory 20% withholding that gets taken out before they even get the check. Then what happens if they don't have some extra money saved by tax time to cover any increase in taxes owed due to this windfall of income? That's just one more thing they might not have considered when thinking about cashing out.
So when they do get their check and that big balance is reduced by potentially $1000s of hard dollars, suddenly those ethereal percentages have meaning.
Not only that, but it is hard for people, particularly young people, to envision a day when they are no longer 28, don't want to or no longer can work. That money that was cashed out so easily could have grown exponentially over time to provide some future relief and security. That measly $10 grand could grow to $110,000 over the next 40 years, when that 28 year old was now 68, without even adding a dime, at a rate of return of 6%.
Oftentimes people forget how long it took to get that measly $10 grand saved up in the first place. But it sure is easy to cash out.
So I try to advise people to really consider these lesser known points when deciding to cash out. It's almost never in your best interest.
Looooooooong but worth the look.
The last few months of a year often prompt people to think about goals they want to pursue in the year ahead. If your goals include investment issues, an annual review with your financial advisor is an excellent opportunity to focus on what you need to do to pursue them. Every person's goals are unique, but you may want to think about the following areas when preparing for your review
Today, many Americans feel entirely on their own when it comes to retirement income.
To manage their anxiety, retirees must learn to separate fact from fiction when it comes to generating the income needed for their sunset years. Let’s first get the fallacies out of the way:
- You should rely primarily on safe, income-producing investments to create income in retirement
- There is a one, magic withdrawal rate that will ensure you will never run out of money.
- It's a bad idea to spend capital from the retirement portfolio.
Now for the facts. Here’s what really matters to a retiree drawing out income from his or her retirement savings:
- Taxes matter.
- Timing matters.
- Spending matters more than investments.
Read the entire article at Let's Make a Plan.
Washington Education Association Member Benefit For Free Legal Services
Last month I was a part of the Pasco School District back to school Expo and there I learned of a great benefit to members of the Washington Education Association (WEA) which includes many employees of our local area school districts. The law firm of Kuffel, Hultgrenn, Klashke, Shea & Ellerd located in Pasco WA www.khkslaw.com, offer members and their immediate family, two free 30 minute consultations with one of the lawyers, annually. Then if you retain their services, you are intitled to a 30% (WEA) or 15% (PSE) discount off that lawyer's hourly rate. Some limitations apply but if you are in need of legal help, such as completing your will (about 50% of Americans haven't), it is worth looking into and passing this tip on to area educators.
Angie Furubotten-LaRosee, CFP® is a financial planner who helps regular people with "big picture" planning, focusing on their money and their lives.
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