Deciding When to Take Social Security: A Comprehensive Guide to Early Claims
One of the most significant decisions on the road to retirement is determining when to start claiming Social Security benefits. While the earliest eligibility age is 62, making the decision to take Social Security early is nuanced and requires careful consideration. In this blog post, we’ll guide you through the essential factors to help you decide if claiming Social Security early aligns with your financial goals and lifestyle.
Assessing Your Financial Landscape:
1. Understand the Basics:
Start by familiarizing yourself with the fundamental aspects of Social Security. Learn about the eligibility age range (62 to 70) and the impact of waiting on your monthly benefits. Recognize that your unique circumstances will play a pivotal role in the decision-making process.
2. Evaluate Your Health and Longevity:
Consider your current health and family history. Assessing your potential lifespan is crucial when deciding on the optimal age to start claiming benefits. While waiting may result in higher monthly payouts, your health should be a significant factor in this decision.
Weighing the Financial Impact:
3. Assess Your Financial Needs:
Take a comprehensive look at your financial needs and obligations. Consider your monthly expenses, outstanding debts, and any unforeseen costs. Determine whether an early boost in income from Social Security aligns with your current financial requirements.
4. Explore Other Income Sources:
Evaluate your overall retirement income strategy. If you have additional income sources, such as pensions or investments, factor them into the decision-making process. A holistic approach to your financial portfolio can provide a clearer picture of your overall stability.
Factoring in Lifestyle Priorities:
5. Consider Your Bucket List:
Reflect on your life priorities and aspirations. What are the items on your bucket list? If claiming Social Security early could facilitate the pursuit of long-held dreams or enhance your lifestyle, it becomes a crucial factor in the decision-making process.
6. Explore Flexibility in Retirement:
Assess the flexibility in your retirement plans. If you have the option to reduce work hours or pursue part-time opportunities, claiming Social Security early might be a viable choice. Flexibility can contribute to a more fulfilling retirement.
Seek Professional Guidance:
7. Consult with Financial Advisors:
Seeking advice from financial professionals can provide valuable insights. Discuss your specific situation with a financial advisor who can offer personalized guidance based on your unique circumstances, helping you make an informed decision.
Conclusion:
Deciding when to take Social Security is a significant milestone in your retirement journey. By carefully assessing your financial landscape, considering lifestyle priorities, and seeking professional advice, you can make an informed decision that aligns with your goals and enhances your overall retirement experience. Remember, the choice is personal, and finding the right balance for your unique circumstances is key.
The Fragile Decade: Avoid These 10 Common Retirement Planning Mistakes
If you find yourself in the age bracket of 55 to 65, welcome to what financial experts often dub the “Fragile Decade.” This crucial period poses the highest risk to your dream retirement due to decisions surrounding social security, pensions, Medicare, taxes, and employment. In this blog post, we’ll explore the top 10 mistakes commonly made by individuals in their 50s and 60s as they prepare for retirement.
#1 Taking Social Security at the Wrong Time: Many individuals underestimate the impact of the timing of their Social Security decisions. Discover why choosing the right moment to start receiving benefits is crucial for maximizing your income during retirement.
#2 Lack of Tax Reduction Planning: Taxes can be a significant drain on your retirement income if not managed strategically. Learn why having a solid plan to reduce taxes in retirement is essential and how it can safeguard your financial future.
#3 Paying off the Mortgage Too Early: While the idea of a mortgage-free retirement is enticing, paying off your mortgage prematurely may not always be the wisest decision. Explore the reasons behind this and find out how to strike a balance between debt and financial security.
#4 Incorrect Cash Flow Calculations: Accurate cash flow calculations are the backbone of a stable retirement plan. Uncover the common errors people make when estimating their cash flow and discover how to ensure your calculations align with your financial goals.
#5 Misguided Investments: Investing $3 million is not the same as investing $10,000, and yet, many individuals treat them similarly. Delve into the intricacies of investing during the Fragile Decade, and understand how to tailor your investment strategy to your evolving financial landscape.
#6 Overlooking Healthcare Costs: Failing to account for potential healthcare expenses can be a grave mistake. Explore the importance of factoring in healthcare costs into your retirement plan to avoid unexpected financial burdens.
#7 Ignoring Long-Term Care Planning: Long-term care can quickly deplete your savings. Learn why overlooking long-term care planning is a common misstep and how incorporating it into your retirement strategy can provide peace of mind.
#8 Underestimating Inflation Impact: Inflation erodes the purchasing power of money over time. Discover why underestimating the impact of inflation on your retirement savings can lead to financial instability and how to safeguard against it.
#9 Failing to Protect Assets from Legal Proceedings: Neglecting to shield your assets from potential loss due to legal proceedings is a critical oversight. Learn why asset protection is crucial and explore effective strategies to safeguard your hard-earned wealth.
#10 Neglecting Legacy Planning: Many retirees overlook legacy planning, assuming it’s only for the wealthy. Learn why neglecting this aspect can impact your estate and discover effective strategies for preserving your legacy for future generations.
As you stand on the precipice of the Fragile Decade, armed with the knowledge of potential pitfalls, you can steer your retirement plans towards greater resilience and success. Don’t let common mistakes hinder the realization of your dream retirement. Visit our page to uncover the complete list of the top 10 mistakes and equip yourself with the tools and strategies needed to navigate this pivotal phase with confidence. Your retirement journey starts with informed decisions – make them count.
****The opinions voiced in this material are for general
information only and are not intended to provide specific advice or
recommendations for any individual.****
Unlocking Financial Potential: Maximizing Social Security After Divorce
Divorce brings about significant life changes, and one area that requires careful consideration is Social Security. As a divorcee, understanding the nuances of Social Security benefits is crucial for securing your financial future. In this blog post, we’ll provide a comprehensive guide outlining important information for divorcees seeking clarity on Social Security.
1. Know Your Entitlements:
Spousal Benefits: If your marriage lasted for more than 10 years, you may be entitled to a spousal benefit. Explore how this benefit can enhance your monthly income during retirement.
Survivor Benefits: Learn about survivor benefits, which can provide financial support if your ex-spouse passes away. Understand the eligibility criteria and how it factors into your overall financial plan.
2. Strategic Timing Matters:
Filing Sooner for Spousal Benefits: Unlike most Social Security benefits, spousal benefits don’t continue to grow past your full retirement age. Discover why filing sooner might be advantageous for divorced individuals seeking a spousal benefit.
Understanding Full Retirement Age: Familiarize yourself with your full retirement age to optimize the timing of your Social Security benefits. We’ll break down the implications and guide you on making informed decisions.
3. Calculating Your Benefits:
Estimate Your Benefits: Utilize online calculators and resources to estimate your Social Security benefits. Understand how different scenarios, such as early or delayed filing, can impact your overall financial picture.
Consider Professional Advice: Consult with a financial advisor or Social Security specialist to receive personalized guidance based on your unique situation. Professional advice can provide clarity and ensure you’re making informed decisions.
4. Addressing Common Concerns:
Impact on Ex-Spouse: Understand how claiming Social Security benefits impacts your ex-spouse’s benefits. Clear any misconceptions and address concerns about potential impacts on your relationship with your ex-spouse.
Remarriage Considerations: If you remarry, be aware of how it may affect your Social Security benefits. Navigate potential complexities and plan accordingly to maintain financial stability.
5. Plan for the Long Term:
Healthcare Considerations: Social Security is just one aspect of your overall retirement plan. Factor in healthcare costs, investments, and other sources of income for a comprehensive financial strategy.
Legacy Planning: Consider how your Social Security decisions align with your broader legacy planning goals. Explore strategies for preserving your financial legacy for future generations.
Conclusion:
Navigating Social Security after divorce requires careful consideration of entitlements, strategic timing, benefit calculations, and addressing common concerns. Empower yourself with this comprehensive guide to make informed decisions that contribute to your long-term financial independence.
***The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual***
Offering Thanks-What to be grateful for this time of year
The
penultimate month of the year is often a time to reflect and offer thanks. And
while economic and geopolitical uncertainty can overshadow the positives, there
are things to be thankful for. Here is just some of what we’re thankful for,
now that we’re in the second to last month of the year.
· Resilient U.S.
economy. Coming into 2023, the
dreaded R word (recession) seemed a near certainty. But the most recent data
showed our economy grew at a strong 4.9% clip (annualized) during the third
quarter, the fastest rate since the initial COVID-19 recovery. Even though borrowing
costs are rising, the consumer remains in good shape, bolstered by a strong job
market and rising wages. While the economy is likely to slow in coming
quarters, it’s unlikely to slow enough to concern stock markets, given the
health of consumers and corporate America.
· End of the
earnings recession. Solid
third-quarter earnings (vs. expectations) mean the earnings recession is almost
certainly over. The market’s reaction to results has been mixed at best amid
all the uncertainty. But a 5% year over year increase in S&P 500 earnings
is a distinct possibility—perhaps 10% excluding the energy sector.
· Easing
inflation pressures. Surging
inflation and the Federal Reserve’s (Fed) aggressive response were the big
stories of 2022. But it seems inflation has eased enough to keep the Fed on
hold at its next few meetings, and potentially cut rates in 2024. Historically,
stock and bond markets have tended to perform well after rate-hiking campaigns.
· Fixed income
is an attractive asset class again, despite recent bond bumpiness. After nearly a decade of very modest returns, yields
for many fixed income investments are the highest they’ve been since 2007.
Starting yields are the best predictors of future long-term returns, so at
these higher yield levels, fixed income returns may be higher too. Moreover,
yields for some of the highest quality fixed income sectors are offering
attractive income again—which practically eliminates the need to invest in low
quality bonds to generate income.
There’s
no doubt this year has been challenging, given increased economic and
geopolitical uncertainty. But taking a balanced view on the economy and the
markets, we believe there are some positives that may help stocks finish the
year higher. Even in the face of potential volatility, focusing on longer-term
goals while tuning out short-term noise remains highly recommended.
What to do with your 401k once you leave your job
When you leave your job, you have several options when it comes to your 401k account.
One option is to leave your 401(k) with your former employer. If you have a balance of at least $5,000, you can usually keep your money in the plan and continue to manage it as you did while you were employed. However, it’s important to keep in mind that you may have limited investment options and may be charged higher fees if you leave your money in the plan.
Another option is to roll over your 401(k) into an individual retirement account (IRA). An IRA is a personal retirement account that offers more flexibility and potentially lower fees than an employer-sponsored 401(k) plan. You can choose from a variety of investment options and have more control over your retirement savings. To roll over your 401(k) into an IRA, you’ll need to open an IRA account and then transfer the funds from your 401(k) into the new account.
A third option is to cash out your 401(k). While this may be tempting if you’re in a financial bind, it’s generally not a good idea. Cashing out your 401(k) means you’ll have to pay income taxes on the funds, and you’ll also be hit with a 10% early withdrawal penalty if you’re under age 59½. This can significantly reduce the value of your retirement savings.
It’s important to carefully consider your options and the potential consequences before deciding what to do with your 401(k) when you leave your job. You may want to consult with a financial advisor or tax professional for guidance.
THERE IS NO SHAME IN BEING LAID OFF!
I have checked the “unemployed” box a couple times in my life. It stinks. It can also be scary, stressful, and lonely. But there is no shame in it (and don’t let your shoulder devil convince you otherwise!) There is also no shame in scrimping to save a couple bucks or being extra frugal while working hard to make ends meet. In fact, I think proactively meeting life’s challenges is noble and admirable.
If you, or someone you know, has recently lost their job, here is a framework for money-related moves to make.
You shouldn’t try and do everything at once. With that in mind, I have arranged them by “weeks” in the order I think they should be prioritized.
By the end of Week 1:
-Start applying for new jobs: Do this the first hour! Getting a new job is the most important thing. Delay only long enough to plan for what you need in a job, but then start sending resumes and networking. (Added plus, you can change the conversation from “I got laid off” to “I already found 3 positions I am excited about.”)
-Make a new budget: If your income has changed, your expenses need to change with it. Take a hard look at where you are spending and ask yourself where cuts can be made. Streaming services, eating out, and home improvement projects are good places to start.
-Get your benefits in order: You may qualify for unemployment benefits. APPLY! You may need short term Health Insurance, GET IT! Your previous employer may still owe you for hours worked-REALLY GET IT!
By the end of Week 2:
-Have a family council: Kids can especially benefit from being included in this conversation. Discuss near and long-term spending habits. Talk about the plan, and the steps both individuals and family members can take to help. Emphasize that the family will get through this. By opening up the dialogue, you may also grow closer as a family unit.
-Talk to anyone you owe money to: This may include credit card companies, utilities providers, and mortgage lenders. Some groups have programs to help. Ask about these. They may be able to suspend payments, interest, or fees. Ask telephone, internet, and TV providers if they can switch you to a lower payment or reduced services plan.
-Avoid credit card debt: While you will need to spend from your savings, be very cautious about using credit cards to finance your life. It may seem like the only way, but too often accumulating debt creates a bigger problem. Family, friends, and community organizations can help you obtain the necessities of life (food, shelter, etc.), but rarely can they pay down your credit cards.
–Retirement accounts are for retirement: Raiding retirement accounts can be a tempting way to make ends meet. But if you are less than 59, there may be penalties for doing so. Additionally, many retirement accounts are protected in the event of bankruptcy. If you deplete these accounts to make ends meet, you risk losing this protection.
By the end of Week 4 (and beyond):
-Open a dialogue with those around you: Most people are willing to help if they can, but if they aren’t a hiring manager (or their company has been hit by layoffs too) they may not know what you need. Ask for help in different ways. Things like “can you write me a letter of recommendation?” or “do you have any contacts at company XYZ because there is a position I am interested in?” are concrete ways to get help, even if there isn’t an immediate opening.
-Enter the gig economy: Looking for a full-time position can take a lot of effort, but usually you can’t send resumes 12 hours a day for weeks on end! Ride share, online tutoring, or meal delivery offer a flexible schedule. A few hours a week may not seem like a lot of money, but it adds up. Perhaps more importantly, your body and mind are used to going out and working. Sitting at home waiting for job responses can erode your wellbeing. Getting out and working helps. If you don’t feel like doing gig work, consider volunteering. Animal shelters and food banks can be a great place to start.
-Stick to your new budget: After 1 month, you should be settled into your new budget. If you haven’t, get there quick! Find a way to live within your means. Even once you have gotten a job, keep these spending habits as you are rehabilitating
your financial circumstances.
Finding a new job takes lots of effort and lots of time. Be realistic. Don’t plan to have a job in 1 week. Think in terms of months, form a plan, and be proactive.
And remember! There is NO shame in losing your job. You are more than your occupation and you will get through this!
How to Think Slow About Your Investments
The stock market is crushed! Do you feel a pit in your stomach when you look at your portfolio balance?
It’s time to THINK SLOW.
Daniel Kahneman (winner of the Nobel Prize in economics) has written that there are 2 types of thinking:
System 1 is Fast. It is driven by instincts and emotion
System 2 is Slow. This system is more logical and deliberate.
Each system is important. System 1 helps us complete routine and simple tasks with minimal effort: Drive on an empty road, detect hostile sounds, read short sentences, answer 2 + 2 questions.
System 2 is used when a problem is uncommon or needs more attention: Choosing which washing machine to buy, filling out a tax form, walking faster than normal.
When you first pull up your investment portfolio, chances are the number at the top of your screen is invoking a System 1 pattern of thinking.
No one sets out to make emotional responses when it comes to investing. Yet often we do because we don’t take time to engage the slow and deliberate system of decision-making.
Here are some questions that you can ask yourself to help engage System 2.
1) What do I think is going to happen? What specifically will cause this?
2) Is this what I think, or is this what I feel right now?
3) What do I think is going to happen in 5 years?
Crisis lives in the moment, but our goal is to make investment decision based on the future.
It may be that you need changes to your financial plan, or maybe not. If you do need some updates, make those changes in a logical and deliberate way.
Taking the time to THINK SLOW now, may set you up for greater success in the future.
Our Most Important Work
You’ve kept us extra busy these days, working with people you’ve sent who are going through transitions right now. It’s been a reminder that we don’t always pick the time when retirement savings are needed to fund the next chapter, when a death turns someone who is married into a survivor, or when a job change cascades through our other plans and planning.
An uncertain economy and volatile markets compound these tasks. We so appreciate your confidence in suggesting to people you care about that they talk to us, when they need to. These transitions are key, important times – we respect the time and attention people need in sorting through the issues. This may be our most important work, and you help us be there for people who need it. Thank you again.
We are equally grateful for the chance to talk to so many of you! As market uncertainty continues, it becomes invaluable for us to understand your priorities, goals, and concerns. While we never try and time the market, many of you have inquired whether this is a buying opportunity or if market downturns are jeopardizing the things that matter most to you. Keep those calls coming! We will review our strategy together and make sure we are taking appropriate steps for your future.
Our investment philosophy is built on 2 pillars. 1) Only take appropriate risks and 2) Buy high quality companies and investments. This approach has a history of building wealth over time and in a variety of market cycles.
We continue to believe in this philosophy even amid the global economic and geopolitical uncertainty. We are encouraged that the core domestic economy is still quite stable. Additionally, the economy is expected to grow in the latter part of this year after a surprise contraction in the first quarter, though the growth path may be bumpy as monetary policy is recalibrated from exceedingly loose to moderately tight and consumers and businesses adjust to higher borrowing costs.
We believe patient investors stand a better chance of meeting their long-term goals. No one has a crystal ball, but at lower valuations, history suggests the chances of above-average returns going forward may be rising. It’s tough to do during times like this, but we encourage long term investors to stick to their game plan.
5 Millionaire Behaviors For When The Stock Market Is Retreating
1) Stay Committed, Stay Goals Focused
First and foremost, resist the urge to run. It is natural and normal to think, “I could just sell everything and reinvest when the markets start to trend up again.” Please don’t do this. Millionaires are strategic. They have an emergency fund, balanced portfolio, and cash flow that allows them to stay invested even during volatile markets.
These strategies are best implemented during good times. If you find yourself overextended, it may be helpful to get professional advice on how to get back on course.
2) Remember the BIG picture, take SMALL actions
Millionaires invest with 5–10-year time frames. They focus on the long-term potential of investments. Big ideas and big picture concepts dominate their investing strategy. Things like the economy, technology innovation/adoption, consumer spending habits, and business fundamentals. However, the actions they take during bear markets tend to be small and measured. They rebalance and trim positions when appropriate, but they avoid the urge to change their strategy based on today’s sentiments and market prices.
3) Be systematic, not dramatic
The actions millionaires take during bear markets are often automated. They rebalance at set intervals and add to their investments in a predetermined manner (think: dollar cost averaging).
One way to emulate this behavior: Create a monthly plan to maximize your retirement account contributions for this year. Add every month and buy quality investments whether the market is going up or down.
Contrary to popular stories about going “all in”, most established investors avoid the dramatic actions that make for a sensationalized story. Rather, they create systems and behaviors that build success over time.
4) Know what you own
Millionaire investors focus on buying quality investments. When there is a downturn, understanding what they own is a shield against breaking rule #1 (and running for the hills).
Even great companies and investments can fall out of favor. Industry standard companies like Amazon, Microsoft, Apple, Walmart, IBM, and Boeing have had periods where their stocks are <50% below all time highs.
If you find yourself obsessively checking the balance of your investment portfolio each day, I suggest you spend at least a few minutes of that time researching the investments you hold. Not just the price of the investment, but the companies, bonds, or commodities that make up the holding.
As you learn about your investments, rank them. If you feel you should take some small steps (see point #2) concentrate your investment around high conviction holdings. These should be investments you feel good about and are well-positioned for the future.
5) Keep draw downs in perspective
During a market correction, it’s easy to forget that this volatility is quite normal. Millionaires often have the advantage of having lived (and invested) through multiple corrections. They have felt the drops, but also the recoveries. Here are some data points to consider:
· The S&P 500 Index averages a peak to trough fall of 14% across all years.
· During midterm election years, the average stock market correction is 17%, but stocks rebounded 32% on average in the 12 months following those midterm year lows.
· Of the last 21 times the S&P 500 has been down double-digits since 1980, stocks rallied back to end the year positive 12 times.
· During those 12 positive years, the average gain has been a stellar 17%.
These are just historical numbers, not a prediction of the future. There are no guarantees stocks will rally. But Millionaires tend to be optimists* and invest with a belief in long-term growth.
Important Information
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.
References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.
All data is provided as of April 28, 2022.
Link to https://www.businessinsider.com/studying-millionaires-showed-me-the-importance-of-optimism-2016-2 is an outside article and is not affiliated with the author or related businesses.
Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities.
All index data from FactSet.
This articles contain research material prepared by LPL Financial, LLC. All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
How to be a “Dispassionate” investor.
Just like scientific training, good investor behavior is a learned skilled.
Rigorous scientific training teaches us to become dispassionate about our data. To be dispassionate means a removal of biases. A dispassionate scientist may create a hypothesis (prediction), but they don’t care if they are right or wrong. They only want to discover the truth.
This can be difficult for 2 reasons.
· Scientists are naturally passionate about their work! Long hours and a 90%+ fail rate are overcome by a love of the discovery process, the patients we serve, and deep curiosity.
· When you work hard to generate data, it is easy to become attached.
However, good scientific behavior requires us to be detached from the results. Dispassion is created by learning sound scientific principles and applying them in a systematic fashion.
When investing, it is natural to desire an increase in in our portfolio value. Thus, we may become emotionally tied to an investment’s performance. When we select investments, it feels good to be validated in our choice when they go up, and it can hurt when they go down.
Despite any emotional connection, good investors avoid emotional decisions. Like a good scientist, they too are dispassionate.
Here are 3 steps you can take to be more disciplined in your investment decisions.
1) Define your time horizon.
A time horizon refers to how long you plan to hold a given investment in your portfolio. In general, riskier investments should have a longer time horizon, and short-term investments should be made in more stable assets. A diversified portfolio may hold both long-term (risky) and short-term (safer) investments depending on the goals of the investor.
When making an investment, decide from the beginning the amount of time you plan to hold it.
2) Make decisions by degrees.
Too often, investors make decisions based on ideas they have only partially researched. They learn of an idea and want to act “before it is too late.” One way to mitigate this type of “leap as you look” behavior, is to make investment decisions by degrees.
For example, let’s imagine you have learned about a new investment opportunity. After your initial research, you decide you would consider investing a maximum of $20,000 into it. Instead of investing $20,000 right off, start with $10,000. Continue learning and monitoring the position for 3 months. If you still feel good about the investment, add $5,000 more, and then another $5,000 3 months after that (A similar strategy can be employed when selling an investment).
3) Seek the advice of others.
Scientists learn early about the value of collaboration. Especially from researchers who think differently than you do. I have never met a scientist that would only show their data to peers at the time of publication.
Similarly, good investors seek the opinion and perspective of others. Don’t create your financial plan or investment strategy in a bubble. Find peers you trust and get their advice. A professional advisor, colleagues, and friends are great resources. If you are naturally aggressive in your decisions, consider finding cautious voices, and vice versa.
There is a popular investing “legend” about Fidelity doing an internal review of their most successful customer accounts. What they found, was that these customers had either forgotten they had an account at Fidelity or had died.
This story is probably not true, but it has become popular because it vividly depicts a true principle: When investing, our natural behaviors tend to work against us. While it’s nearly impossible to eliminate all our biases, cultivating a dispassionate attitude towards our investments (and our data) helps position us to make well-reasoned decisions.
