Hope you all are enjoying Happy Easter Fri
My Mother is 64, she wants to work another 2-3 years. She has a healthy income at her job and a couple of home to rent out for dividends. What age should she file for social security? Any Ideas. Her health may not too good with diabetes and bad blood pressure controlled and eye issues from macula degeneration.
Thank you for any suggestions
Social Security: Is the Best Age to Take It 62, 66, or 70?
Forget Wall Street -- Social Security provides the best rate of return for retirees today. Maximizing your benefits is as important as managing your investments. Here's how.
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Jack Hough
April 12, 2014
Bond yields have crept higher over the past year, but Wall Street still doesn't offer a product that yields 6%, is backed by the U.S. government, and comes with an annual pay raise to offset inflation. A deal that good comes only from Social Security.
Many retirees can secure outsize returns simply by delaying benefits to the maximum age of 70, rather than starting at 62, the minimum and most common starting age. For couples, in particular, getting the timing right could be worth $250,000 or more, based on the present value of future, extra income. There's even a way for couples to bring in cash while deferring and growing benefits -- but the tactic might not be available much longer.
Deciding whether to delay Social Security payments is a lot like shopping for an insurance product called a second-to-die annuity, in which savers can set aside money today to pay for a future stream of lifetime income for two. But in this case, the "insurance company" -- Social Security -- is giving away the store, because it hasn't adjusted its prices much since the 1950s, even though life expectancies have soared since then, making lifetime payments much more costly. In 1955, a 65-year-old had a 50/50 chance of living another 12.5 years. Now the 50/50 mark is 20 years. Social Security also bases benefit adjustments on normal interest rates, not today's rates, which are just above generational lows.
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Stuart Goldenberg for Barron's
FULL RETIREMENT AGE is 66 to 67 for those born in 1943 or later. At that age, workers may collect their primary insurance amount, or PIA, based on past earnings. Early filers can start drawing benefits at age 62, though they'll only receive 75% of their PIA. If retirees wait until age 70, they can collect 132% of their PIA.
Figuring out the benefit increase is easy, but determining the financial return for waiting is more complex, because those who start payments later collect fewer of them, and forgo interest on the payments they miss. Marital status, income, health, and other factors play a role.
Married couples get the sweetest deal, says John Shoven, a Stanford professor and Social Security expert, because when one spouse dies, the other collects the higher of the two benefits. That means the higher earner's benefits could extend beyond his or her death. By Shoven's math, the return for waiting is often 5% to 6% a year for higher-earning spouses. The best comparison is with Treasury Inflation Protected Securities, which are government-backed and adjusted for inflation, like Social Security. Ten-year TIPS recently yielded 0.6%. TIPS last yielded 5%, well, never, at any maturity from five to 30 years, since the Treasury began issuing them in 1997.
For lower-earning spouses, the return for deferring payments is 1% to 2% a year, reckons Shoven. That's a good deal at the moment, but not always. The 10-year TIPS yielded a monthly average of 2% from 2005 through 2009. Couples who need the cash should try to get by on other savings and the smaller benefit while deferring the larger benefit. Tapping a retirement account to delay Social Security payments can actually extend the life of the portfolio by reducing needed distributions down the road, according to an April 2012 paper in the Journal of Financial Planning. For an estimate of benefits based on earnings records, see ssa.gov/estimator.
For single people, the return for waiting is often in the 2.5% to 3% range. That can be worth $50,000 to $100,000 in present value of future payments. Women get a better deal than men because they live longer. Health matters, but remember, the larger benefit for a married couple lasts for two lifetimes, so a fit wife can make up for a worse-for-wear husband. Look for life-expectancy calculators online; Bankrate.com has perhaps the simplest of those that include a couple of health and lifestyle factors. (If nothing else, the math will encourage smoking cessation.)
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Social Security also pays spousal benefits to married couples, and even to divorced couples, provided they were married at least 10 years. A wife, for example, may collect 50% of her husband's PIA, starting at her full retirement age. Spousal benefits are lower for those who start them early, but they don't increase beyond full retirement age. Those who claim both a spousal benefit and a benefit based on their own earnings get the higher of the two amounts. Amazingly, a higher-earning husband, say, can file for benefits at full retirement age in order for his wife to qualify for spousal benefits, then immediately suspend his own benefit so it continues to grow, a tactic called file-and-suspend. Typically, one spouse should collect spousal benefits starting at full retirement age, says Shoven.
ALL OF THIS DEPENDS upon Social Security remaining solvent. Its trustees say there's enough money to pay full benefits through 2033 and three-quarters benefits thereafter. Changes for future retirees, like higher retirement ages, could offset any shortfalls. More likely than a funding shortfall for near-term retirees is a crackdown on file-and-suspend. President Barack Obama's 2015 budget "proposes to eliminate aggressive Social Security claiming strategies, which allow upper-income beneficiaries...to maximize delayed retirement credits."
Speaking of maximizing delayed credits, MaximizeMySocialSecurity.com sells $40 software for the task and gets an approving nod from Shoven. He's on the board of another company, Financial Engines, that advises employees at big companies on retirement planning, and is adding Social Security assessments. T. Rowe Price has a free Social Security Evaluator on its Website. As the number of such benefit-maximizing tools grows, Congress may indeed tighten some terms. But workers who are close to retirement now can get a plum deal.
Comments
Let's say she wants to leave you the largest possible inheritance. Then it might be better for her to take SS as soon as possible and not spend money from her assets.