Social Security Questions – The Most Popular FAQs

Like taxes, Social Security manages to get people all mixed up just when they are the least capable of dealing with it. The Social Security rulebook is a monster with rules so tangled up and complicated that certified public accountants often have as much trouble as the rest of us. Ahhh, so many social security questions!

Things aren’t the same today as they were. Many people have had a member of the family lose a job. As such, most people simply have to delay retirement, keep working either full-time or part-time, to keep themselves afloat.

Let us look at some of the most important Social Security questions people have these days about benefits in today’s situation.

3 Common Social Security Questions

Question: There is a rumor out, that you can file for Social Security, but then apply to have it suspended even before you collect your first check. And this lets you be on the record with Social Security as someone who’s never claimed his benefits, but it lets your wife or husband collect their spousal benefits – their part of your Social Security deal. However, the people at the Social Security office claim that such a thing doesn’t exist. What is true?

Answer: Social Security is such a complicated thing that you cannot really blame those poorly paid clerks for not having all their strange rules at their fingertips to be able to answer deep Social Security questions with. This is indeed possible; what you need to do and see when you are flat-out denied by the clerk out front, is to ask to talk to the technical experts at the office. There are other ins and outs to these social security questions. If you have started claiming your benefits already, you can still pay the Social Security office ever cent back, and wait until a later time when your check is likely to be higher. Plus, your spouse who claims spousal benefits at full retirement age, can turn his or her own benefits whenever needed.

Question: Same sex couples are not recognized by the government; and columns that answer Social Security questions don’t really approach this subject much. For being a part of a same sex couple how much trouble do people come by trying to gain Social Security benefits?

Answer: Yes, this is a bit of a sensitive topic for some people to address publicly.  And yes, it is true that same-sex couples really do function out of a handicap. In civil unions or legal domestic relationships, these partners are complete  strangers as far as the regulations go. The first thing to go here is the spousal benefit – not for death, for disability, or anything. All they can do is buy term insurance for themselves and save hard for any misfortune. If your partner’s personal Social Security brings home, say $15,000 a year, you’ll want to make arrangements to have that money replaced, should your partner die. That would mean buying a policy worth about $300,000. Of course, that would cost you between $2000 and $3000 a year in premiums. There are no easy solutions.

Question: if you begin to draw your benefits the moment you qualify at 62, but you invest it instead of spending it, would you be better off than those who put off their benefits until say, the age of 70?

Answer: If you could get 7% or 8%, you might well come out ahead. If you are going to be getting $14,000 a year waiting for full retirement age, but choose instead to cash in now at 62, for $10,000 a year, and if you invest it for four years at a great return like 7%, you would have at the end a tidy sum. If you happen to draw down that money at $300 a month, it should last you past the age of 100. But if you only earn 3% on it, it should last you no longer than 80. That is quite a risk there. These are complex social security questions that need you to weigh all kinds of possible factors; how long do you expect to live given your current health situation? How much does your spouse make in Social Security benefits, – that type of thing. These answers could possibly help you get started with ideas on how to tackle your specific situation.

If you have specific social security questions you would like to ask, please contact me on the site.

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The Places you Probably Don’t Want to Buy your Retirement Home

Where should you buy your retirement home? Most people know where the best spots are – if you don’t mind the expense, you can head for Sarasota, Asheville or Sedona. It’s warm there, there is a lot of entertainment in these cities, and there are lots of activities for retirees.

While most people talk about the best places to retire, it might also be interesting to note where you should NOT retire. So, what are the most unrewarding places to settle into your retirement home?

Buying Your Retirement Home – The Worst States

The worst places to settle down, buy a retirement home and to spend your golden years are usually the states of New York, California, New Jersey, Wisconsin, Massachusetts, Nevada in Connecticut.  At the top of the list though is Illinois.

Why are these the worst places to call home after you retire?  It is because they have some pretty dismal records when it comes to what they tax you, how well the state does in general, and what the weather is like.

Many of these states have actually been identified by the Pew Center for States as being close to fiscal catastrophe. Certainly, California may be in bad shape and may be very well known for such. But other states such as Florida, Illinois, Michigan, Oregon and Arizona, for instance, are going down the same road. You don’t want to be settling into these places and buying a retirement home there, since they have no choice but to raise their taxes and cut spending on public services.

Let me provide some examples. Illinois is in such bad shape that it has had to borrow money just to not default on its pension payments. California is nice and warm of course; but it has no option but to cut back on its services, and the state is terribly expensive. New York would be a bad choice to buy a retirement home, not because it is in bad fiscal shape, but because it is a state which imposes some of the highest taxes anywhere in the country.

As far as property taxes are concerned, New York’s are the fifth highest in the entire country. Certainly, pensions don’t attract any income tax in New York; but the cost of living in the state is up there in the stratosphere. New Jersey and Rhode Island are the same as far as taxes go. New Jersey has the reputation of being the state with the highest taxes anywhere in the country. They also have some terrible retirement pension payment problems.

Connecticut, usually, is well known for being home to some of the best towns to live in in the country. What’s wrong with Connecticut? To begin with, the state has high taxes; they even tax your Social Security. And then, the cost of living here can be very high too. Interestingly, Nevada, a place that has some of the cheapest retirement home options in the country and that has warm weather, is about the worst place to retire to and live in according to Money-Rates.com. Certainly, the state doesn’t have an income tax; but job opportunities, cost-of-living and crime rates in Nevada can be pretty discouraging.

Of course, what happens to be the worst state for you personally depends on what your expectations are. If you don’t need warm climate or if high taxes aren’t important to you – if being close to the beach and having great healthcare is all that you care for, you need to make your choice by your own right and expectations. Just be sure to go in understanding all the drawbacks before making the jump to buy a retirement home.

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Planning for a Steady Retirement Income when Pensions are a Thing of the Past

More and more over the years, working people in this country have found that the laws have been actively shifting responsibility for American workers’ retirement income survival away from the companies that employ them, onto the workers themselves. Apparently, the fact of the change hasn’t really sunk in yet, because there are far too many people who are still providing inadequately for a retirement income, come the day they need to step out of the workforce. It’s as if they still think that they have a comfortable pension to look forward to.

My father, in the middle of the cratering of the stock market two years ago, was just 60, and freshly retired. He had no pension, and his Social Security benefits were still years away. He had nothing to go on but his savings. He wanted to exercise the option of cashing out his stocks, but he was worried about how he would then have no retirement income to turn to if he lived to be 90.

When all these newly-retired people all around who had just been set free of a life of hard work watched their entire life’s work disappear as the stock market went up in smoke, the general advice they got back then, what my father got too, was to withdraw less each month to preserve their capital, and then to go work at Wal-Mart. Now my father did not want to do that; and his reasons were novel. He felt that he would only need to see his investments differently in his mind.

He visualized having two sets of investments – one was cash and bonds that could see him through the first half of his retired life; the other part was the stocks he held that had taken a beating in the recession. He thought he would leave his stock funds untouched, and believe that they would bounce back one day so that they could fund the latter part of his retirement income.

Believe it or not, this plan that my father has picked for himself is exactly the thing that experts recommend these days; in fact, it’s been bandied about for about two decades now. As long as you had a stock market that’s treating you well in retirement, the 4% rule, the undisputed benchmark in retirement planning, applied. The rule says that as long as things are going well, you’re supposed to invest your retirement income nest egg about 60% in stocks and 40% in bonds. You can start out withdrawing 4% a year, and go up on a sliding scale from there to keep up with inflation. They said that you had a 90% chance of staying solvent up until your last day this way. The rule however, does not really hold together in severely difficult times such as these.

Your Retirement Income Plan and Inflation

The main spanner in the works in finding a way to fund retirement income is inflation. If it weren’t for it, you would just need to invest in bonds to be set for life. But with inflation, you need to invest in something that will grow your fund because even with very low inflation, in 20 years, your dollar will buy you just half of what it does now.

A great way to guarantee a decent retirement income would be to divide into five-year periods the time you have after your retirement, and adopt a different strategy for each five-year period. In the first phase, as soon as you retire in a time like this when interest you get approaches zero, you put your money in an immediate payout annuity for a five-year period. Once this is done with, you’ll need to find a deferred annuity or a bond ladder to generate your retirement income. The idea is that each phase of your retirement income plan asks for a slightly more risky investment strategy to make up for your falling capital, and for rising inflation.

Of course there are some who say that this kind of measured response will do nothing through a difficult financial period such as this. They say that for your retirement income you must invest in mutual funds as aggressively as you can, because trusting in the markets is your best chance.

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