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Social Security or IRA: Which Comes First in Retirement?

8/29/2018

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For retirees, one of the most challenging questions is how to generate income. After you stop working, you’ll need to find a way to ensure your financial stability for the long term. Two predominant ways people use to have income in their post-work years is through either an IRA or Social Security benefits.
 
If you have a decent amount of savings in an IRA, you may decide to take distributions from that. Or you could file for Social Security benefits as soon as possible. Some retirees choose to use both sources, while others might have the ability to use one and save the other. But which scenario is best for you?


Why tap into your IRA first?
 

One reason to hold off on Social Security is that the longer you wait to file, the higher your benefit will be. Your full benefit amount is based on your filing when you reach your full retirement age (FRA), which for most people lands between their 66th and 67th birthdays. You can file as early as age 62, but doing so usually results in a permanent reduction in benefits.1
 
You can also wait past your FRA to file and net a permanent 8 percent credit on your benefit amount per year. You can’t delay filing past age 70, though. For instance, if your FRA is 66 and you file at age 70, you will receive a total 32 percent increase on your benefits.2
 
Utilizing your IRA before you file for benefits might help you delay Social Security and increase your benefits as a result.


Why file for Social Security first?
 
Filing for Social Security first may allow you to keep growing your IRA on a tax-deferred basis. This strategy can also give you a liquid asset class that can help you pay for emergencies. Life can be unpredictable. As you age, you may need long-term care, or you may need to pay off expensive medical bills.
 
Also, your primary goal may be to leave assets for your spouse, children or other loved ones after you pass away. If that’s the case, it may be a better idea to use your Social Security benefits and preserve your IRA. If you have a traditional IRA, you will have to start taking distributions at age 70½. If you have a Roth IRA, however, you can delay distributions as long as you want.


Consult with a professional.
 
Deciding whether to claim your benefits or hold off can be a tricky question to answer. One of the best ways to ensure you’re meeting your retirement goals is to consult with a financial professional. Working with an adviser, you can determine your goals and needs and find the best path to meet them.
 
Ready to learn more about retirement planning? We can help you evaluate your objectives and needs, and then develop a strategy. Let’s connect soon and start the conversation.
 

​
1https://www.ssa.gov/planners/retire/retirechart.html
2https://www.ssa.gov/planners/retire/delayret.html
This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
 
The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov
16161 - 2016/10/18
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Avoid These 3 Social Security Mistakes

8/28/2018

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​If you’re like most retirees, Social Security is likely to play an important role in your retirement. The Social Security Administration estimates that 90 percent of all Americans over age 65 receive Social Security benefits. In fact, 50 percent of married retirees and 71 percent of singles say they count on Social Security for more than half of their retirement income.1
 
As you approach retirement, you’ll likely have to make a number of important financial decisions. One of the biggest may be when and how to file for Social Security benefits.  Without a solid strategy in place, you could face financial challenges. You may even be unable to fund the kind of retirement you’d like for yourself. Below are a few common Social Security mistakes. If you can avoid these, you’ll minimize your risk and save yourself some financial headaches.

Filing for early benefits while continuing to work.
 
You’re eligible to file for Social Security benefits as early as age 62. In fact, that’s when many retirees do file for benefits. However, if you file before your full retirement age (FRA), you could see your benefits reduced as much as 35 percent.2
 
However, that reduction could be far greater if you file for benefits while you’re still working. If you file before the year of your FRA, Social Security allows you to earn as much as $17,040 with no penalty. However, your benefit is reduced by $1 for every $2 you earn past that threshold.3 You can file at your FRA and continue working and see no reduction in benefits.

Expecting too much income from Social Security.
 
Expecting to use Social Security benefits to fund most of your lifestyle in retirement? You may want to rethink that strategy. While Social Security is a helpful resource, for most people it’s not enough to cover all expenses. The average monthly Social Security benefit is just over $1,300. In fact, Social Security benefits are capped at nearly $2,700.4
 
It’s likely that you’ll need some income above and beyond your Social Security benefit. This income could come from savings and investments, a pension or possibly even part-time work. If you don’t know where your additional income will come from, now may be the time to develop a strategy.

Forgetting to budget for Medicare premiums.
 
Medicare is another valuable resource for retirees. The Medicare program offers several different types of coverage, known as “parts.” Part A, which is standard and free for all retirees, covers hospitalizations and emergency treatments. Part B covers doctor visits and outpatient services, while Part C offers supplemental coverage and Part D covers prescription drugs.
 
It’s important to remember that Part A is the only coverage that does not have a premium. All the other parts do have premiums, which are usually paid out of your Social Security benefit. Be sure to get an estimate of those premiums before you file so you can project your net Social Security benefit and budget accordingly.
 
Ready to plan your Social Security strategy? Let’s talk about it. Contact us today at UBC Retirement Income Planning. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
 
1https://www.ssa.gov/news/press/factsheets/basicfact-alt.pdf
2https://www.ssa.gov/planners/retire/agereduction.html
3https://www.ssa.gov/planners/retire/whileworking.html
4https://www.fool.com/retirement/2016/12/04/25-social-security-facts-figures-you-need-to-see.aspx
 
Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. This information has been provided by a Licensed Insurance Professional and is not sponsored or endorsed by the Social Security Administration or any government agency.
The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit www.ssa.gov
17846 - 2018/7/30

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Oscar Vega, RICP®

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Advisory Services offered through Change Path, LLC an Investment Advisor. UBC Wealth Management and Change Path, LLC are not affiliated.

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation.
  • Home
  • About
  • Services
    • The 3 Step Process
  • Indexes
  • Resources
  • Client Login
    • Athene
    • ChangePath Portal
    • Charles Schwab
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  • 305-301-7760