Most people know you can claim your retirement benefits as early as age 62. (It's age-weighted). However, if you claim your retirement income benefits early, they give you a haircut. And if you take it at age 62, it's 75%. So, to put some numbers in your head, let's say at age 66 your social security benefit will be $2,000 a month. You decide to take it at age 62 instead and you get $1,500 a month. So now that's your base rate. If you delay until the maximum age of 70, instead of that $2,000 a month, we talked about at age 66; it would now be about $2,700 a month. So there's a tremendous difference of getting $2700 a month, versus $1500. Wouldn't you agree? Oh yeah - this is a big decision.
Retirees obviously struggle with this because nobody knows how long you're going to live. Let's say you're going to wait until age 70, but you die at 69. Well, there goes tens of thousands of dollars you could have received from 62 until you're dead. If you take it at age 62, like in the above example, and you live to 100, you're going to really miss the difference between the $1500 and the $2000 a month, aren't you? You're going to miss it downstream. Well, I used to run these elaborate spreadsheets and projections, and to help people make smart decisions about this. Mainly, I understood that this is a huge decision.
I have seen couples argue in my office about this because this is a real big deal to them. Sometimes that's the case, of one of the spouse's wanting to boost their income now. Perhaps at age 62, the other spouse is looking further down the road is more interested in boosting their future income down the road. When I say the word “boost”, that is if it's all that you're going to retire on are two social security payments of around, let's say, $3500 a month, it's going to be tough financially. I'm hoping you have investments, pensions, and other sources of income. It's all right for social security to be a key, perhaps 30 - 50%. However, in my experience, that would be tough to have a retirement with just that. This brings me to the Marshmallow Test. I've seen people ponder this decision for years, and I mean years, before they qualified to get early retirement benefits at 62. And struggle with it for years until age 70. But thankfully, at age 70, there are no more decisions to be made. Quite frankly, it seems lately some of the people that retire early, pretty much just use their social security payment to pay their health insurance between 62 and 65, when they qualify for Medicare.
THE MARSHMALLOW TEST
I first heard of this marshmallow test back in 2010. It is apparently a very famous piece of social science research. All you do is you put a marshmallow in front of a child. Tell her that she can have a second one if she can go 15 minutes without eating the first one, and then leave the room. When you come back you can determine if she's patient enough to double her payouts that's above the indicative of willpower that'll pay dividends down the line. I watched a YouTube video of an instructor putting a marshmallow in front of these multiple kids, and watching their reaction as the instructor leaves the room. So they have 15 minutes, and they all start out that they're going to wait. And within a few seconds of not waiting, some of them are licking; some of them are trying to entertain themselves. I mean, actually, this video's three or four minutes, called The Marshmallow Experiment - Instant Gratification. It's a pretty interesting video to see what really the kids do.
Now you may think, what does this have to do with taking social security? Well, folks, quite frankly, you have to make the same kind of decision as the children. The decision is to take a known quantity now, or delay gratification and take more down the road. It has been through my experience that people struggle with this because it really comes down to them being unsure of their income streams coming in.
It can be either an easy or a hard decision to make. However the decision may seem easier to make if someone has medical issues. If somebody has health problems and does not have a normal life expectancy due to some medical issues, well the decision is pretty easy to make. Take your social security as quickly as you can in this kind of situation. If your parents haven't lived past 68, your doctor says you've got five years to live, and you turn 62, I think most people would go ahead and take the benefit, and hope that that was a wrong decision.
Let's get back to the marshmallow test. I have found people will make the wrong decision based on math mainly because of the uncertainty they have. In today's world, it's not like it used to be, where people retired with three really good sources of income; like a guaranteed pension, or maybe interest payments from CDs, and/or social security. People pretty much knew how much they were getting on interest on their CDs, they're pension was guaranteed, and their social security as well. For example, if you had a rather large pension, and had plenty of interest coming in from bank-type accounts, you would go ahead and eat that marshmallow right? You don't necessarily need the money right now, because remember, with social security, any time you want, you can claim it. Well unfortunately in today's world it's not the same like it used to be. There are not many people are walking around with huge pensions and there's very little interest coming in from CDs. So, really, people are sitting there with the uncertainty of the market and the uncertainty of their future income streams.
Most of the kids that I watched through the Marshmallow video broke down and ate the marshmallow. There was a known quantity, and they just weren't going to wait. A Princeton behavioral economist wrote a book back in 2013 that detailed how poverty can lead people to opt for short-term rather than long-term rewards; the state of not having enough can change the way people think about what's available now. In other words, a second marshmallow seems irrelevant when a child has reason to believe that the first one might vanish.
https://www.theatlantic.com/family/archive/2018/06/marshmallow-test/561779/
CAN I HELP?
I realize the only way that I can help people make a smart decision about this is to produce a written document that shows them a written report that doesn't project out what the market's going to do or it is not, but it shows them different avenues to produce predictable income streams for different periods of times of their lives. And with this knowledge, I found a lot of people will go ahead and delay, because it's back to that old thing. It's like when we talked earlier about the pension and the interest. In today's market, very few people, especially people that have been through the last two big bear markets, really know. So this is how I can help. If you'd like to sit down and take a look at how to produce predictable income streams, while still having growth, maybe this will help you make what you feel is a smart decision about your money.
Sincerely,
John Romano, CFP®
John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years experience in the financial field. John is a Registered Representative with Securities America, Inc. (member of the FINRA and SIPC), and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.
Securities offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated.
Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated.
John Romano, CFP®
305 Skyline Drive, Suite 3, Lady Lake, FL 32159
Phone: 352-753-8590
Email: John@RomanoJohn.com
======================================
Most retirees are concerned today about outliving their income. Very few have a written income plan. Most realize we are the tail end of a great bull market, but all good things come to an end. This may be a good time to stress-test your retirement plan. Maybe I can help. Send me an email or schedule a phone time.
I will get back with you within one business day.
===================================================================
What if I take Social Security early ?
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Social Security Retirement Benefit Basics
Social Security benefits are a major source of retirement income for most people. Your Social Security retirement benefit is based on the number of years you've been working and the amount you've earned. When you begin taking Social Security benefits also greatly affects the size of your benefit.
How do you qualify for retirement benefits?
When you work and pay Social Security taxes (FICA on some pay stubs), you earn Social Security credits. You can earn up to 4 credits each year. If you were born after 1928, you need 40 credits (10 years of work) to be eligible for retirement benefits.
How much will your retirement benefit be?
The Social Security Administration (SSA) calculates your primary insurance amount (PIA), upon which your retirement benefit will be based, using a formula that takes into account your 35 highest earnings years. At your full retirement age, you'll be entitled to receive that amount. This is known as your full retirement benefit. Because your retirement benefit is based on your average earnings over your working career, if you have some years of no earnings or low earnings, your benefit amount may be lower than if you had worked steadily. Your age at the time you start receiving benefits also affects your benefit amount. Although you can retire early at age 62, the longer you wait to begin receiving your benefit (up to age 70), the more you'll receive each month.
You can estimate your retirement benefit under current law by using the benefit calculators available on the SSA's website, ssa.gov. You can also sign up for a my Social Security account so that you can view your online Social Security Statement. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivor, and disability benefits. If you're not registered for an online account and are not yet receiving benefits, you'll receive a statement in the mail every year, starting at age 60.
Retiring at full retirement age
Your full retirement age depends on the year in which you were born. If you retire at full retirement age, you'll receive an unreduced retirement benefit.
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If you were born in: Your full retirement age is
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 or later 67
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Note: If you were born on January 1 of any year, refer to the previous year to determine your full retirement age.
Retiring early will reduce your benefit
You can begin receiving Social Security benefits before your full retirement age, as early as age 62. However, if you begin receiving benefits early, your Social Security benefit will be less than if you wait until your full retirement age to begin receiving benefits. Your retirement benefit will be reduced by 5/9ths of 1 percent for every month between your retirement date and your full retirement age, up to 36 months, then by 5/12ths of 1% thereafter. For example, if your full retirement age is 66, you'll receive about 25% less if you start benefits at age 62 than if you wait until your full retirement age (30% less if your full retirement age is 67). This reduction is permanent — you won't be eligible for a benefit increase once you reach full retirement age.
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Signing up for Social Security
According to the Social Security Administration, you should apply for Social Security
benefits approximately three months before your retirement date. To apply for Social
Security benefits, you can fill out an application online or call or visit your local Social
Security office. You can also call the SSA at (800) 772-1213 to discuss your options
or to get more information about the application process.
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However even though your benefit will be less, you might receive the same or more total lifetime benefits as you would have had you waited until full retirement age to start collecting benefits. That's because even though you'll receive less per month, you might receive benefits over a longer period of time.
Delaying retirement will increase your benefit
For each month that you delay receiving Social Security retirement benefits past your full retirement age, your benefit will permanently increase by a certain percentage, up to the maximum age of 70. For anyone born in 1943 or later, the monthly percentage is 2/3 of 1%, so the annual percentage is 8%. So, for example, if your full retirement age is 66 and you delay receiving benefits for 4 years, your benefit at age 70 will be 32% higher than at age 66.
Monthly benefit example
The following chart illustrates how much a monthly benefit of $1,800 taken at a full retirement age of 66 would be worth if taken earlier or later than full retirement age. For example, as this chart shows, this $1,800 benefit would be worth $1,350 if taken at age 62, and $2,376 if taken at age 70.
Working may affect your retirement benefit
You can work and still receive Social Security retirement benefits, but the income that you earn before you reach full retirement age may temporarily affect your benefit. Here's how:
* If you're under full retirement age for the entire year, $1 of your benefit will be withheld for every $2 you earn over the annual earnings limit ($17,040 in 2018)
*A higher earnings limit applies in the year you reach full retirement age, and the calculation is
different, too — $1 of your benefit will be withheld for every $3 you earn over $45,360 (in 2018)
Once you reach full retirement age, you can work and earn as much income as you want without reducing your Social Security retirement benefit. And keep in mind that if some of your benefits are withheld prior to your full retirement age, you'll generally receive a higher monthly benefit at full retirement age, because after retirement age the SSA recalculates your benefit every year and gives you credit for those withheld earnings.
Retirement benefits for qualified family members
Even if your spouse has never worked outside your home or in a job covered by Social Security, he or she may be eligible for spousal benefits based on your Social Security earnings record. Other members of your family may also be eligible. Retirement benefits are generally paid to family members who relied on your income for financial support. If you're receiving retirement benefits, the members of your family who may be eligible for family benefits include:
- Your spouse age 62 or older, if married at least 1 year
- Your former spouse age 62 or older, if you were married at least 10 years
- Your spouse or former spouse at any age, if caring for your child who is under age 16 or disabled
- Your children under age 18, if unmarried
- Your children under age 19, if full-time students (through grade 12) or disabled
- Your children older than 18, if severely disabled
Your eligible family members will receive a monthly benefit that is as much as 50% of your benefit. However, the amount that can be paid each month to a family is limited. The total benefit that your family can receive based on your earnings record is about 150% to 180% of your full retirement benefit amount. If the total family benefit exceeds this limit, each family member's benefit will be reduced proportionately. Your benefit won't be affected.
For more information on retirement benefits, contact the Social Security Administration at (800) 772-1213 or visit ssa.gov.
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Securities offered through Securities America, Inc., A Registered Broker/Dealer, Member FINRA/SIPC. Neither Forefield Inc. nor Forefield AdvisorTM provides legal, taxation or investment advice.
All the content provided by Forefield is protected by copyright. Forefield claims no liability for any modifications to its content and/or information provided by other sources.
John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years experience in the financial field. John is a Registered Representative with Securities America, Inc. (member of the FINRA and SIPC), and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.
Securities offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated.
Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated.
John Romano, CFP®
305 Skyline Drive, Suite 3, Lady Lake, FL 32159
Phone: 352-753-8590
Email: John@RomanoJohn.com
========================================
Most retirees are concerned today about outliving their income. Very few have a written income plan. Most realize we are the tail end of a great bull market, but all good things come to an end. This may be a good time to stress-test your retirement plan. Maybe I can help. Send me an email or schedule a phone time.
I will get back with you within one business day.
========================================
July 27, 2018
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018.
Social Security: What Should You Do at Age 62?
Is 62 your lucky number? If you're eligible, that's the earliest age you can start receiving Social Security retirement benefits. If you decide to start collecting benefits before your full retirement age, you'll have company. According to the Social Security Administration (SSA), approximately 7 1 % of Americans elect to receive their Social Security benefits early. (Source: SSA Annual Statistical Supplement, 201 6 , released May 2017 )
Although collecting early retirement benefits makes sense for some people, there's a major drawback to consider: if you start collecting benefits early, your monthly retirement benefit will be permanently reduced. So before you put down the tools of your trade and pick up your first Social Security check, there are some factors you'll need to weigh before deciding whether to start collecting benefits early.
What will your retirement benefit be?
Your Social Security retirement benefit is based on the number of years you've been working and the amount you've earned. Your benefit is calculated using a formula that takes into account your 35 highest earnings years. If you earned little or nothing in several of those years (if you left the workforce to raise a family, for instance), it may be to your advantage to work as long as possible, because you'll have the opportunity to replace a year of lower earnings with a higher one, potentially resulting in a higher retirement benefit.
If you begin collecting retirement benefits at age 62, each monthly benefit check will be 25% to 30% less than it would be at full retirement age. The exact amount of the reduction will depend on the year you were born. (Conversely, you can get a higher payout by delaying retirement past your full retirement age — the government increases your payout every month that you delay retirement, up to age 70.)
However, even though your monthly benefit will be 25% to 30% less if you begin collecting retirement benefits at age 62, you might receive the same or more total lifetime Social Security benefits as you would have had you waited until full retirement age to start collecting benefits. That's because even though you'll receive less money per month, you might receive more benefit checks.
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Even if you start collecting Social Security benefits at age 62, keep in mind that you still won't be eligible for Medicare until you reach age 65. So unless you're eligible for retiree health benefits through your former employer or your spouse's health plan at work, you may need to pay for a private health policy until Medicare kicks in.
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The following chart shows how much an estimated
$1,000 monthly benefit at full retirement age would be worth if you started taking a reduced benefit at age 62.
| Birth Year | Full Retirement Age | Benefit |
| 1955 | 66 years, 2 months | $741 |
| 1956 | 66 years, 4 months | $733 |
| 1957 | 66 years, 6 months | $725 |
| 1958 | 66 years, 8 months | $716 |
| 1959 | 66 years, 10 months | $708 |
| 1960 or later | 67 years | $700 |
Have you thought about your longevity?
Is it better to take reduced benefits at age 62 or full benefits later? The answer depends, in part, on how long you live. If you live longer than your "break-even age," the overall value of your retirement benefits taken at full retirement age will begin to outweigh the value of reduced benefits taken at age 62.
You'll generally reach your break-even age about 12 years from your full retirement age. For example, if your full retirement age is 66, you should reach your break-even age at 78. If you live past this age, you'll end up with higher total lifetime benefits by waiting until full retirement age to start collecting. However, unless you're able to invest your benefits rather than use them for living expenses, your break-even age is probably not the most important part of the equation. For many people, what really counts is how much they'll receive each month, rather than how much they'll accumulate over many years.
Of course, no one can predict exactly how long they'll live. But by taking into account your current health, diet, exercise level, access to quality medical care, and family health history, you might be able to make a reasonable assumption.
How much income will you need?
Another important piece of the puzzle is to look at how much retirement income you'll need, based partly on an estimate of your retirement expenses. If there is a large gap between your projected expenses and your anticipated income, waiting a few years to retire and start collecting Social Security benefits may improve your financial outlook.
If you continue to work and wait until your full retirement age to start collecting benefits, your Social Security monthly benefit will be larger. What's more, the longer you stay in the workforce, the greater the amount of money you will earn and have available to put into your overall retirement savings. Another plus is that Social Security's annual cost-of-living increases are calculated using your initial year's benefits as a base — the higher the base, the greater your annual increase.
Will your spouse be affected?
When to begin receiving Social Security is more complicated when you're married. The age at which you begin receiving benefits may significantly affect the amount of lifetime income you and your spouse receive, as well as the benefit the surviving spouse will be entitled to, so you'll need to consider how your decision will affect your joint retirement plan.
Do you plan on working after age 62?
Another key factor in your decision is whether or not you plan to continue working after you start collecting Social Security benefits at age 62. That's because income you earn before full retirement age may reduce your Social Security retirement benefit. Specifically, if you are under full retirement age for the entire year, $1 in benefits will be withheld for every $2 you earn over the annual earnings limit ($1 annual earnings limit ($1 7,040 in 201 8 ).
Example: You start collecting Social Security benefits at age 62. You continue working, and your job pays
$30,000 in 201 8 . Your annual benefit would be reduced by $6, 480 ($30,000 minus $1 7,040 , divided by 2).
Note: If your monthly benefit is reduced in the short term due to your earnings, you'll receive a higher monthly benefit later. That's because the SSA recalculates your benefit when you reach full retirement age, and omits the months in which your benefit was reduced.
Other considerations
In addition to the factors discussed here, other financial considerations may influence whether you start collecting Social Security benefits at age 62. How do other sources of retirement income factor in? Have you considered how your income taxes will be affected?
What about personal considerations? Do you plan on traveling, volunteering, going back to school, starting your own business, pursuing hobbies, or moving to a new location? Do you have grandchildren or elderly parents whom you want to help take care of? Every person's situation is different.
For more information
Social Security rules can be complex. For more information about Social Security benefits, visit the SSA website at ssa.gov, or call (800) 772-1213 to speak with a representative. You may also call or visit your local Social Security office.
----------------------------------------------------------
Securities offered through Securities America, Inc., A Registered Broker/Dealer, Member FINRA/SIPC. Neither Forefield Inc. nor Forefield AdvisorTM provides legal, taxation or investment advice.
All the content provided by Forefield is protected by copyright. Forefield claims no liability for any modifications to its content and/or information provided by other sources.
John Romano, CERTIFIED FINANCIAL PLANNER™, has over 30 years experience in the financial field. John is a Registered Representative with Securities America, Inc. (member of the FINRA and SIPC), and an Investment Advisor Representative with Securities America Advisors. He has prepared hundreds of reports for retirees to assist in their retirement income planning needs. He is dedicated to providing portfolio analysis, dividend and income information, and investment management services to retirees (and those preparing to retire) in The Villages, Florida, and throughout the United States.
The opinions and forecasts expressed are those of the author, and may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. Past performance does not guarantee future results.
Securities offered through Securities America, Inc. Member FINRA/SIPC, John Romano CFP® Registered Representative. Advisory Services offered through Securities America Advisors, Inc. John Romano Investment Advisor Representative. Romano Income Strategies and Securities America are not affiliated.
Trading instructions sent via e-mail may not be honored. Please contact my office at (352)753-8590 or Securities America, Inc. at (800) 747-6111 for all buy/sell orders. Please be advised that communications regarding trades in your account are for informational purposes only. You should continue to rely on confirmations and statements received from the custodian(s) of your assets. The text of this communication is confidential and use by any person who is not the intended recipient is prohibited. Any person who receives this communication in error is requested to immediately destroy the text of this communication without copying or further dissemination. Your cooperation is appreciated.
John Romano CFP®
305 Skyline Drive, Suite 3, Lady Lake, FL 32159
Phone: 352-753-8590
Email: John@RomanoJohn.com
=========================
Most retirees are concerned today about outliving their income. Very few have a written income plan. Most realize we are the tail end of a great bull market, but all good things come to an end. This may be a good time to stress-test your retirement plan. Maybe I can help. Send me an email or schedule a phone time.
I will get back with you within one business day.
=========================
July 27, 2018
Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2018.