Strategies for Optimal Social Security Payouts

Social Security benefits are typically synonymous with retirement income. It would be inefficient to create a retirement plan without first estimating how much you will receive from the government.1 According to a 2018 report, Social Security benefits represent approximately:2

  • 33% of elderly income
  • 50% or more of income for about half of elderly married couples
  • At least 50% of income for 71% of elderly singles
  • At least 90% of income for 23% of married couples and 43% of singles

In a recent survey, more than half of pre-retirees said they expect Social Security to be their primary source of retirement income.3 With so many people relying on Social Security payouts, it makes sense to explore strategies to receive the largest possible distribution. In some cases, this could mean tapping into your personal investment portfolio to delay drawing Social Security.

If you’d like to discuss various insurance and investment strategies to help supplement part-time income or bridge the gap between retirement and Social Security, please come talk to us.

The earlier you start drawing benefits, the lower the payout will be — and your payout level is locked in for life (with the exception of periodic cost of living adjustments). Unfortunately, the most common age that people start taking benefits is the first year they are eligible. If possible, it often makes sense to wait longer so that benefits can accrue.4

If you can wait until age 70, benefits will earn an additional 8 percent a year past full retirement age for a maximum boost of up to 32 percent. Delayed retirement credits are technically accrued on a monthly basis, so even if you don’t wait until age 70, every month you delay past full retirement age will increase your payout.5

Delayed retirement credits also apply toward surviving spouse benefits. In other words, should you pass away before drawing benefits, your spouse will receive the amount you qualified for as of the month of your death.6

Social Security benefit strategies are complex, but considering the importance this income is to most retiree households, it’s a good idea to learn as much as possible to help optimize benefits for your particular situation. This Social Security quiz is a good place to start.7

Content provided by Kara Stefan Communications.

1 Social Security Administration. 2018. “Retirement Estimator.” https://www.ssa.gov/benefits/retirement/estimator.html Accessed May 1, 2018.

2 Social Security Administration. 2018. “Fact Sheet.” https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf.

Accessed May 1, 2018.

Mary Beth Franklin. Investment News. April 25, 2018. “Future retirees expect Social Security to be main source of income.” http://www.investmentnews.com/article/20180425/BLOG05/180429953/future-retirees-expect-social-security-to-be-main-source-of-income. Accessed May 1, 2018.

Ray Martin. CBS News. April 30, 2018. “How to claim your Social Security benefits wisely.” https://www.cbsnews.com/news/how-to-claim-your-social-security-benefits-wisely/. Accessed May 1, 2018.

5 Rachel L. Sheedy. Kiplinger. February 2017. “Why Your First Social Security Check May Be Smaller Than Expected.” https://www.kiplinger.com/article/retirement/T051-C000-S004-when-delayed-social-security-credits-get-delayed.html. May 1, 2018.

6 Laurence Kotlikoff. Forbes. April 27, 2018. “Ask Larry: ​​​​​​What If Either Of Us Dies Before 70?”

https://www.forbes.com/sites/kotlikoff/2018/04/27/ask-larry-%E2%80%8B%E2%80%8B%E2%80%8B%E2%80%8B%E2%80%8B%E2%80%8Bwhat-either-of-us-dies-before-70/#6f18b1ea4081. Accessed May 1, 2018.

Mary Kane. Kiplinger. April 18, 2018. “Do You Really Understand Social Security?” https://www.kiplinger.com/quiz/retirement/T051-S009-do-you-really-understand-social-security/index.html.

Accessed May 1, 2018.

We are able to provide you with information but not guidance or advice related to Social Security benefits. Our firm is not affiliated with the U.S. government or any governmental agency.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Economic Growth Prospects for the Future

Are life-changing innovations a thing of the past in the United States? While today’s technology seems to advance in leaps and bounds, one economist believes it won’t change the fabric of the average American’s life the way inventions like electricity, indoor plumbing and the elevator did in the 20th century.1

Yes, the internet is an amazing resource, and smartphones are nearly ubiquitous, but in terms of economic growth and productivity, they have not contributed as much as you might expect. Social media and infinite sources of information actually may serve to reduce our productivity both at home and at work.2

Nearly everyone can think of ways innovations have increased productivity, whether it’s looking up information online rather than consulting the library or using modern kitchen appliances that make cooking prep and cleanup much easier. However, this increased technology and efficiency may not translate to any improvement in one’s financial situation. While technology and online tools can allow you to better monitor your finances, please feel free to contact us for help in assessing your current retirement income strategy. As an independent financial services firm, we help people create retirement strategies using a variety of insurance products to custom suit their needs and objectives.

Today, two of the fastest-growing industries in the U.S. are construction and computer systems design.3 While both of these disciplines certainly have the capacity to improve people’s lives and productivity, they are not likely to present the quantum leap of, say, refrigeration.

One industry poised for rapid growth is satellite manufacturing. While costly in its upstart, prices are likely to align with greater demand for navigation, transportation management, disaster management, military intelligence and telecommunication applications.4

Some say the advancement of automation will replace jobs, but proponents are quick to point out that automation can help the American workforce become more productive. Amazon is a good example of a company that has embraced automation yet continues to offer more new jobs.5

What’s interesting is that while we measure economic growth on a national scale, contributions are not balanced. Certain regions, states and metropolitan areas contribute more substantial gains to the U.S. growth rate than others. For example, the labor force in Massachusetts is currently growing at the fastest rate in the country, having added 300,000 more jobs in the past 10 years. This is primarily because the state is home to a variety of strong and growing industries such as health care, financial services, high-tech manufacturing and higher education.6

And while controversial in its mix of documented and undocumented workers, the Latino population is considered a major contributor to U.S. GDP. Between 2010 and 2015, the Latino workforce increased by about 2.5 million while non-Latino workers shrank by about 4,000. This may be explained in part by the willingness of this demographic to pursue a higher education. Latino college graduates grew by 40.6 percent in that same timeframe, compared to 13.6 percent for non-Latinos.7 Economists tend to agree that the better educated the workforce, the higher a country’s economic growth prospects.

Content prepared by Kara Stefan Communications

1 Knowledge@Wharton. Feb. 3, 2016. “Are America’s Best Years of Innovation Over?” http://knowledge.wharton.upenn.edu/article/dazzling-yet-disappointing-why-u-s-growth-productivity-will-underperform-the-past/. Accessed Sept. 4, 2017.
2 Ibid
3 Mary Ellen Biery. Forbes. April 9, 2017. “The 10 Fastest-Growing Industries in The U.S.” https://www.forbes.com/sites/sageworks/2017/04/09/the-10-fastest-growing-industries-in-the-u-s/#56fdb5471ef2. Accessed Sept. 4, 2017.
4 Business Insider. Sept. 4, 2017. “Satellite Bus Market Worth $13.64 Billion USD by 2022.” http://markets.businessinsider.com/news/stocks/Satellite-Bus-Market-Worth-13-64-Billion-USD-by-2022-1002306432. Accessed Sept. 4, 2017.
5 Steve Cousins. TechCrunch. Sept. 4, 2017. “Can robots help the U.S. get its economic mojo back?” https://techcrunch.com/2017/09/04/can-robots-help-the-u-s-get-its-economic-mojo-back/. Accessed Sept. 4, 2017.
6 Shira Schoenberg. MassLive.com. Sept. 4, 2017. “Study: Massachusetts has fastest growing labor force in US.” http://www.masslive.com/politics/index.ssf/2017/09/study_massachusetts_has_fastes.html. Accessed Sept. 4, 2017.
7 Mark Bloomfield. The Hill. Aug. 14, 2017. “Look to Latinos to drive US economic growth.” http://thehill.com/blogs/pundits-blog/economy-budget/346464-latinos-could-lead-us-out-of-economic-malaise. Accessed Sept. 4, 2017. 

This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Financial Stress and What You can do About It

About half of the participants in a recent survey described financial security as not having to worry about day-to-day expenses.1 Unfortunately, the study revealed that 85 percent of Americans suffer from anxiety over their financial situation, especially how they would pay for an emergency expense. Sixty-seven percent believe financial stress affects their health, 61 percent admit it impacts their home life and more than half say it affects their social life.2

Another survey found that half of respondents were living paycheck to paycheck.3 It didn’t matter how much they earned; they all experienced relatively the same degree of financial stress. Even people earning more than $100,000 said they had a hard time putting money away for the future.4

Consider the following tips to help mitigate financial anxiety:

  • Create a budget to help keep track of incoming funds and outgoing expenses.
  • Establish a list of financial priorities for your discretionary income.
  • Develop a three-to-six month budget plan that includes larger, intermittent bills throughout the year, such as car and homeowner insurance and property taxes. Plug these line items into your master budget so you’ll know to apply discretionary income to those bills.
  • Stop ongoing expenses that you don’t use, such as a gym membership or subscriptions.
  • If you’re paying down revolving debt, consider ending your use of credit cards altogether.
  • Set specific financial goals, such as how much money you want to have saved by retirement. Then regularly save a fixed amount toward that goal.
  • Downsize your home or car for lower payments, insurance, taxes and maintenance bills.

A lot of financial stress can be alleviated by creating a strategy; simply taking proactive control of a situation can be very empowering. Once you’ve tasted relief, explore ways to create that sense of release more often. Physical exercise, such as walking, swimming or biking regularly can help.

Also consider taking classes where you engage in social activity with new people, such as yoga, tai chi, pottery or painting. While you don’t want to spend a lot of money on a new hobby, social interaction that enriches your life can do wonders for stress.

You’ll come to appreciate that some of the finer things in life don’t necessarily cost all that much.

1 Kim Blanton. Center for Retirement Research at Boston College. July 14, 2016. “Financial Anxiety Amid Economic Growth.” http://squaredawayblog.bc.edu/squared-away/financial-anxiety-amid-economic-growth/. Accessed Feb. 8, 2017.

2 Ibid.

3 Kim Blanton. Center for Retirement Research at Boston College. Jan. 12, 2017. “Financial Stress Rings in the New Year.”  http://squaredawayblog.bc.edu/squared-away/financial-stress-rings-in-the-new-year/. Accessed Feb. 8, 2017.

4 Ibid.

Content prepared by Kara Stefan Communications & Advisors Excel. We are an independent firm helping individuals create retirement strategies using a variety of insurance products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic retirement income strategies and should not be construed as financial advice.

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

Retirement Matters 

If you’re wondering how much of a Social Security payout you may receive, one number to keep in mind is 35.

Your benefit is based on your 35 highest years of earnings. If you work less than 35 years, the calculation uses zero for your annual income in the years you’re short. Here is an article that provides a description of how Social Security benefits are calculated.1

Social Security benefits were established during the Great Depression to help ensure Americans would not retire in poverty.2 However, they’re not meant to be the “end-all” retirement income plan. If you haven’t taken a good, hard look at all of the savings and assets that you’ve acquired to create a financial strategy for retirement, that’s where we can help. We can help identify potential retirement income gaps and create a financial strategy using a variety of investment and insurance products to help you pursue your financial goals.

It’s also important to assess your current financial strategy and determine what assets to draw from first, particularly in light of their tax status during retirement and the option to delay taking Social Security to potentially optimize your benefit. You should talk to a financial advisor and tax advisor about how to create a tax-efficient retirement income withdrawal strategy.

A common mistake in retirement planning is underestimating your life expectancy — maybe based on your parents’ or grandparents’ age — and not saving as much as you need. However, it’s more likely for people to live longer than previous generations, and also have higher medical bills.3 Even if one spouse dies young, it doesn’t mean the other won’t live late into their 90s.

Women who took time out of the workforce to care for dependents can be particularly vulnerable during retirement. One recent study found that, in a 10-year break early in their career, the shortage of contributions to Social Security and a retirement plan could result in a loss of up to $1.3 million in retirement savings.4

You also should consider the impact of inflation throughout retirement. Even though the inflation rate has been low in recent years, it can still make an impact over the long term. For example, an average 2 percent inflation rate over a 20-year timeframe can reduce the buying power of a dollar to just 67 cents.5

Also investigate the investment fees associated with your retirement account, as they can have a tremendous impact. A recent analysis revealed that many teachers who invested in 403(b) retirement plans could have account balances 20 to 50 percent higher had they invested in lower-cost holdings over their savings period.6

The same issues can be found with company-sponsored 401(k) plans. A plan that offers funds from only one fund family may not give you enough choices. It is also important to understand the fees you are paying.7

Our firm is not affiliated with or endorsed by the Social Security Administration or any governmental agency and does not provide tax or legal advice.

Content prepared by Kara Stefan Communications. 

Squared-Away Blog. Center for Retirement Research at Boston College. Oct. 20, 2016. “Your Social Security: 35 Years of Work.” http://squaredawayblog.bc.edu/squared-away/your-social-security-35-years-of-work/. Accessed Oct 23, 2016.
2 Ibid.
3 Jeff Brown. U.S. News & World Report. Aug. 3, 2016. “What’s Your Plan B for Retirement?” http://money.usnews.com/investing/articles/2016-08-03/whats-your-plan-b-for-retirement. Accessed Oct. 23, 2016.
4 Financial Planning. Oct. 9, 2016. “How retired clients can deal with small COLA: Retirement Scan.” http://www.financial-planning.com/news/how-retired-clients-can-deal-with-small-cola-retirement-scan. Accessed Oct. 23, 2016.
5 Jeff Brown. U.S. News & World Report. Oct. 13, 2016. “Pros and Cons in Investing with TIPS.” http://money.usnews.com/investing/articles/2016-10-13/pros-and-cons-in-investing-with-tips. Accessed Oct. 23, 2016.
6 Tara Siegel Bernard. The New York Times. Oct. 21, 2016. “Think Your Retirement Plan Is Bad? Talk to a Teacher.” http://www.nytimes.com/2016/10/23/your-money/403-b-retirement-plans-fees-teachers.html?_r=0. Accessed Oct. 23, 2016.
7 Jill Cornfield. Bankrate.com. Sept. 27, 2016. “Q&A: Fees and Your Retirement Plan.” http://www.bankrate.com/one-to-million/qa-fees-and-your-retirement-plan/. Accessed Oct. 23, 2016.

This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference. 

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Retiring Takes Effort 

The first things that come to mind when thinking about retirement may be rest and relaxation, but before you reach that point, you need a financial strategy that can support your post-career plans.

A recent study found many current retirees are worried about just making day-to-day expenses:1

  • The median annual income for married retirees is $48,000; $19,000 for singles
  • 25% of today’s retirees are still paying off credit card debt
  • 60% retired sooner than expected, typically due to downsizing or other employment-related reasons or health issues

Even if you are sufficiently prepared for retirement, it’s good to establish a budget and stick to it. The Employee Benefit Research Institute recently found that nearly half of households spend more money in the first two years of retirement than they did while they were still employed.2

It’s important to recognize that retirement is much like your career — you get out of it what you put into it. That goes for both your finances and your enjoyment. Being financially prepared for retirement means more than just having enough income, you also need to plan for unexpected expenses, potentially large health care bills and the possibility of long-term care.3

We’re here to help you create a financial strategy to help you feel confident that these types of expenses won’t prevent you from living your preferred retirement lifestyle.

But let’s talk about something other than financial preparedness for just a moment. Keeping in mind that people live longer — but not necessarily healthier — lives these days, have you thought about what you’ll do on a day-to-day basis during retirement? Without a “lifestyle plan,” many retirees sink into a state of isolation, lack of mobility and bad habits.

Some people think, “I’m doing nothing but playing golf when I retire” — an admirable goal indeed. But if you eventually grow tired of walking the course five to seven days a week, it’s good to have fallback options to fill your schedule. Here’s a possible idea: Most community colleges offer courses for retirees, so why not go back to school and study something you’ve always been interested in? Not only will you engage your mind, you’re likely to meet other retirees who share your interests. Maybe team up and start an “encore career.”4

In Australia, a nonprofit organization started an initiative called the “Men’s Shed,” a place where retired men show up every day to drink coffee, debate the issues and work on community projects.5

There are plenty of occupations and hobbies out there that let you work on what you enjoy, without the constraints of working 40 hours a week. Whether you’re already retired or getting ready for it, just remember that what you put into retirement is often what you’ll get out of it.

Content prepared by Kara Stefan Communications.

Transamerica Center for Retirement Studies. April 2016. “The Current State of Retirement: A Compendium of Findings about American Retirees.” http://www.transamericacenter.org/docs/default-source/retirees-survey/tcrs2016_sr_retiree_compendium.pdf. Accessed Sept. 29, 2016.
2 Tanisha A. Sykes. USA Today. Sept. 28, 2016. “More free time could mean risky spending for new retirees.” http://www.usatoday.com/story/money/personalfinance/2016/09/28/spending-overspending-new-retirees-free-time/90498760/. Accessed Sept. 29, 2016.
Emily Zulz. ThinkAdvisor. Oct. 3, 2016. “Morningstar’s ‘Must-Know’ Stats About Long-Term Care.” http://www.thinkadvisor.com/2016/10/03/morningstars-must-know-stats-about-long-term-care. Accessed Oct. 11, 2016.
4 Knowledge@Wharton. Jan. 14, 2016. “The Retirement Problem: What Will You Do with All That Time?” http://knowledge.wharton.upenn.edu/article/the-retirement-problem-what-will-you-do-with-all-that-time/. Accessed Sept. 29, 2016.
Gavin Fisher. CBC News. March 17, 2016. “Kelowna’s ‘Men’s Shed’ replaces isolation with purpose in retirement.” http://www.cbc.ca/news/canada/british-columbia/kelowna-s-men-s-shed-replaces-isolation-with-purpose-in-retirement-1.3496600. Accessed Sept. 29, 2016.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the complete loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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Retirement Plan Fees: Know What You Are Paying

Many large companies offer employees a 401(k) plan with some degree of matching contribution. Although this is a good employee benefit to have, you always should pay attention to the fees involved in your plan. Your plan provider charges various fees to invest, manage and administer the plan, and those fees are passed on to the participants who invest.

The Center for Retirement Research at Boston College reports that, in recent years, the fees charged by actively managed mutual funds — including those in 401(k) plans — have dropped. Since 2015, the average fee dropped from 0.78 percent to 0.75 percent. Around 15 years ago, fees averaged about 1 percent. However, fees for passively managed index mutual funds, generally referred to as index funds, average significantly less at 0.17 percent. Index funds passively track the investments of a specific market index; there is no manager actively choosing investments for the fund on a day-to-day basis.1

If you have a 401(k) plan through a current or former employer, we’re happy to help you determine what you are paying in fees and help you assess your financial situation. In many cases, the more investors learn about fees, the more they start choosing investments that cost less. The Center for Retirement Research suggests this by sharing that U.S. investors withdrew $627 billion from actively managed funds that charged the highest fees and invested $429 billion into lower-fee index funds in 2015 and 2016.2

The Department of Labor’s fiduciary rule, which took partial effect in June, has made it easier for investors to know what they are paying for by requiring the disclosure of all fees and commissions. This information must be in dollar form.3 In addition, FINRA, a self-regulatory organization that regulates broker-dealers in the United States, offers a Fund Analyzer tool on its website that can help investors estimate the impact of fees and expenses on an investment and research applicable fees and available discounts for specific funds.4

Are fees really that important? It can depend. If you are paying a money management firm to select investments and it does a great job of providing consistent performance over time, it may be worth what you pay in fees. But it may also be worth considering how your investments compare with the overall market. For example, over the past three years, the S&P 500 has increased by 26 percent (as of mid-June 2017).5 If you were invested in a low-expense S&P 500 index fund, you would have experienced impressive returns. But if you had been paying a high fee for an active manager yielding the same performance, it may not have been worth the expense.

Speaking of fees, be aware that the IRS permits investors to deduct certain expenses incurred on taxable investments, such as:6

  • Fees for investment counsel, including subscriptions to financial publications
  • IRA or Keogh custodial fees (if paid by cash outside the account)
  • Transportation to your broker’s or investment advisor’s office
  • Safety deposit box rent if you use it to store certificates or investment-related paperwork

If you have a 401(k) plan through a current or former employer and would like help determining what you are paying in fees, we’re happy to help you assess your financial situation. Using a variety of investment and insurance products, we can create a financial strategy that can help put you on the path toward your financial goals.

Content prepared by Kara Stefan Communications.

1 Center for Retirement Research at Boston College. June 29, 2017. “Mutual Fund Fees: Here’s What Matters.” http://squaredawayblog.bc.edu/squared-away/mutual-fund-fees-heres-what-matters/. Accessed July 5, 2017.

2 Ibid.

3 Investopedia. July 5, 2017. “DOL Fiduciary Rule Explained as of July 5th, 2017.” http://www.investopedia.com/updates/dol-fiduciary-rule/. Accessed July 13, 2017.

4 FINRA. “Fund Analyzer.” http://apps.finra.org/fundanalyzer/1/fa.aspx. Accessed July 5, 2017.

5 Dayana Yochim. Atlanta Journal Constitution. July 5, 2017. “This May Be Why You’re Down in an Up Market.” http://www.ajc.com/business/consumer-advice/this-may-why-you-down-market/hQWTwwUWlBhEKX8tJoyNHL/. Accessed July 5, 2017.

6 Rande Spiegelman. Charles Schwab. March 15, 2017. “Investment Expenses: What’s Tax Deductible?” http://www.schwab.com/insights/taxes/investment-expenses-whats-tax-deductible. Accessed July 5, 2017.

Neither the firm nor its agents or representatives may give tax advice. Be sure to speak with a qualified professional about your unique situation.

We are an independent firm helping individuals create retirement strategies using a variety of insurance and investment products to custom suit their needs and objectives. This material is intended to provide general information to help you understand basic financial planning strategies and should not be construed as financial advice. All investments are subject to risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. 

The information contained in this material is believed to be reliable, but accuracy and completeness cannot be guaranteed; it is not intended to be used as the sole basis for financial decisions. If you are unable to access any of the news articles and sources through the links provided in this text, please contact us to request a copy of the desired reference.

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