“File and Suspend” your Social Security benefits to boost your household income now - and later

“File and Suspend” Your Social Security Benefits to Boost Your Household Income Now – and Later

What you don’t know matters just as much as what you do know! And in most of the cases that I’ve witnessed – in the personal finance arena, of course – it seems to be what we don’t know that prevents us from achieving our goals.

Jack, age 66, has been married to 63-year-old Maggie for nearly 44 years. Maggie never worked outside the home, but Jack has worked for a local company for the past 36 years. In recent months, some things have changed that have created the need for the couple to bring in a little more income. Maggie thought that since he’s reached 66, his full retirement age (FRA) for Social Security purposes, Jack should apply for his benefit to meet their needs.

There was a problem, though. Jack wants to work for four more years – waiting until he reaches 70 to retire – so that he can receive the maximum Social Security benefit possible. Understandably, there was a bit of tension between the usually happy couple. The great news, however, is that it was completely unnecessary. You see, Jack and Maggie didn’t know that they were perfect candidates for the “file-and-suspend” strategy of claiming Social Security.

First of all, although Maggie hasn’t worked outside the home and therefore has no work record of her own, she qualifies for benefits on Jack’s record, now that he’s reached his FRA. In fact, she could have qualified once she reached the age of 62, although her benefits would have been reduced since she’s younger than her FRA.

The second piece of great news for this couple is that Jack can stick to his plan of working four more years without losing any benefits. He will still earn the 8 percent increment over the next four years.

Here’s the strategy: Jack files for benefits but does NOT collect anything. Sounds kind of odd, but they are two different things, filing and collecting. Although Maggie qualifies for benefits based on Jack’s record, Maggie cannot collect her benefits until Jack has filed but not necessarily collected his benefit. So Jack files and immediately suspends his benefits – so he wouldn’t actually collect anything in his name. Jack’s benefit today is about $1,700 a month, but because he’s suspending it, he will grow it by 8 percent a year until he reaches 70, at which time he’ll begin collecting about $2,300 a month (in today’s dollars). Maggie, on the other hand, gets to collect a reduced spousal benefit of about $680 immediately.

It’s a great ending for everyone. Maggie brings in an extra $680 a month to tackle their needs today. Jack continues to earn delayed retirement credits, therefore increasing his benefit. Interesting isn’t it? To learn more about this and other incredible ways to maximize your family’s Social Security benefits download our complimentary special report. What you don’t know indeed matters!

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 Do you have questions or concerns about your finances and retirement investments? Call us today at  877.656.9111  or visit us on the Web to schedule your no-strings-attached consultation!

Little-Known Tax Perk Could Get Your Household Up to $2,000 from the IRS!

Little-Known Tax Perk Could Get Your Household Up to $2,000 from the IRS!

One of the fiscal perks of the U.S. Tax Code is the Retirement Savings Contributions Credit, or simply “Savers Credit,” which basically pays a dollar-for-dollar non-recourse credit of up to $1,000 (or $2,000 for married filing jointly) to certain taxpayers for retirement savings. 

Obviously, this could be a pretty sweet deal for those who are eligible because it’s a direct dollar-for-dollar reduction in taxes which could wipe out any tax owed – down to zero. But most of those who qualify aren’t even aware that any such thing exists – not that I’m blaming them, though. In fact, a recent study by the TransAmerica Center for Retirement Studies found that only 12 percent of those households earning less than $50,000 a year were aware of this valuable perk.

Interestingly enough, whenever this comes up during one of the Continuing Professional Education courses we offer, you’d be lucky to find more than a couple – literally speaking, here – in a roomful of retirement/financial professionals who knows about the Savers Credit. Seems fair to unload some responsibility for the lack of awareness here, doesn’t it?

* You must be at least 18 years old.

* You must not be a full-time student.

* No one else may claim a dependent exemption for you on their tax return.

* Your AGI may not exceed certain limits, depending on your filing status.

 

Depending on your AGI and filing status, the credit is calculated as one of three percentages (10 percent, 20 percent, or 50 percent) of the first $2,000 that you contribute to your 401(k), 403(b), 457, SEP, traditional IRA, or even Roth IRA. Thing to note here is that you receive this credit only on “your own” contributions, not any portion of your employer’s contribution.

Like most tax stuff, the AGI thresholds change frequently. For the 2012 tax year, you’d get:

Amount of Tax Credit	Single, Married Filing Separately, or Qualified Widow/er	Head of Household	Married Filing Jointly
50 %	AIG up to $17,250	AIG up to $25,875	AIG up to $34,500
20 %	AIG between $17,251 and $18,750	AIG between $25,876 and $28,125	AIG between $34,501 and $37,500
10 %	AIG between $18,751 and $28,750	AIG between $28,126 and $43,125	AIG between $37,501 and $57,500

As you can tell, the lower the income, the higher the credit because it is intended to help low- to moderate-income taxpayers who save for retirement.

Here are a couple final key points. Even if you’re already retired, collecting a pension, and saving money in, say, a Roth IRA, you can still claim this credit, insofar as you meet the income and dependent requirements. Also, it is extremely critical to note that this credit is not available to folks who use Form 1040-EZ to file. To claim the Savers Credit, you must use the 1040, 1040-A, or 1040-NR form.

 

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 Do you have questions or concerns about your finances and retirement investments? Call us today at  877.656.9111  or visit us on the Web to schedule your no-strings-attached consultation!

Are You Leaving Social Security Money on the Table?

Are You Leaving Social Security Money on the Table?

When it comes to maximizing Social Security benefits, many – sadly including so-called financial advisors – are under the wrong notion that there are only two basic options: (1) collecting at early retirement or (2) waiting until full retirement age (FRA). As this complimentary special report shows, whether you’re married, divorced, or widowed, you have several options and strategies that could get you more money than you might imagine.

How is that possible when you’re not even aware of all your options in the first place? Or even worse, when your advisor is one of the many who doesn’t know what he or she doesn’t know in this regard?

Deb’s retirement advisor is a trusted family friend she’s known and worked with for years. She’s looking forward to retiring in eight months when she turns 66. Her advisor has determined that between Deb’s pension and Social Security, she’ll be OK, so she really didn’t see any need to seek a second opinion. However, her coworker strongly encourages her to do so – after all, it’s complimentary! So she reluctantly makes an appointment to see yours truly.

During our meeting, I discover that, although currently single, Deb was married for nearly 35 years – and that’s the game changer! Wondering why? Her financial advisor was completely wrong in thinking she could only – and therefore  must – apply for Social Security benefits based on her “own” work record. The thing is, she also qualifies for benefits based on her ex-husband’s work record. Yes, and it’s completely legal!

In this particular instance, such a move is even better, because her ex-husband earned so much more money that it turned out her monthly benefit would be almost $300 more than if she based her claim on her own record.

And it gets better still! By going this route – and getting more income now – Deb also has the opportunity to earn “delayed retirement credits,” which increases her “own” benefit amount by 8% a year for the next four years, until she reaches age 70. As the math turns out, at that time, she will switch from her current claim to her “own” much larger maximum benefit. Yes, that’s right: she gets more today, and even much more at age 70 and beyond.

By the way, all of this is completely legal, totally acceptable, and will not affect her ex-spouse and his new wife’s benefits in any way. Not too shabby, right?

To be clear, I don’t expect every financial advisor to become a Social Security expert. However, given the role that Social Security benefits play in retirement, is it too much to ask that every so-called retirement consultant have some basic knowledge of all the possible options?

Of course, everyone’s situation is different. But are you sure you’re aware of ALL of your options when it comes to maximizing Social Security payouts, not just for yourself, but for your immediate family as well? You can start by downloading a complimentary copy of my special report.

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 Do you have questions or concerns about your finances and retirement investments? Call us today at  877.656.9111  or visit us on the Web to schedule your no-strings-attached consultation!

Dear Tax Preparers, Stop Misleading Us!

Dear Tax Preparers, Stop Misleading Us!

All tax preparers (and/or tax preparation software) are not created equal. And in a free market society, one should expect fierce competition as preparers attempt to differentiate themselves. However, that doesn’t and shouldn’t mean stretching the truth or duping the folks they purport to serve with bogus information.

If you’ve paid attention, most of the advertising seems to suggest that if you employ “them” or use “their” software, you will somehow get “more” money back – money you wouldn’t otherwise receive. Is this really true?

One particular ad got my attention – in a negative way. It features a lady who claims to have read the entire ObamaCare Act and is therefore so familiar with it that she will (in this case, it’s her company and their software) “save” her clients money “this year” (i.e., on their 2012 tax returns). I’m singling this one out because it’s such a stretch!

Not that I’m an expert on ObamaCare by any measure, but I don’t know of any aspect of that law for which we are filing taxes on “this year” – 2012. In early January, I attended a workshop organized by the Maryland Society of Accountants on the ins and outs of this law. What was unique about this particular workshop compared to all the others I’ve attended on this subject is that it was led by three esteemed attorneys, one of whom is the nation’s foremost expert on healthcare law.

Guess what? He’s still trying to decode all the ramifications of the "Affordable Care Act." In fact, the IRS is still developing the framework, writing the tax rules, and getting things ready for the 2013 tax season, by which time this law will really have kicked in. Which leaves one to wonder what, exactly, the lady in that ad might be talking about – and as a result makes it a very bogus ad.

Of course, tax prep is a crowded field, and the bigger one’s market share in any industry, presumably the better. But shouldn’t we at least begin with candidness? While an experienced preparer who knows what they’re doing will make a difference, by and large, there’s absolutely no magic that will give you more money than is legally due you under IRS rules – unless you and/or your preparer are willing to commit tax fraud.

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 Do you questions or concerns about your finances and retirement investments? Call us today at  877.656.9111  or visit us on the Web to schedule your no-strings-attached consultation!