When to Take Your Social Security Early

As most readers of this blog know, I am a big proponent of waiting as long as possible before you begin to take your Social Security benefits.  This is because the longer you wait, the larger your check will be each month.  This has always seemed like an easy, clear-cut decision for me, and I often wondered why intelligent people I knew were choosing to take their benefits early.

Recently, in a conversation with one of my friends, I realized that waiting to take your benefits until you are age 66 or older is not the best business decision for everyone.  In fact, for many people, it can be a much better financial decision to take your benefits early.  If you need to stop working before you reach age 66, it can take ten to twelve years to make up for the money you would lose by going without Social Security for a couple of years.  In fact, as result of this conversation and a meeting I had at the Social Security office, I have actually decided to go ahead and apply for my benefits at age 64.

Reasons to Take Social Security Early

1.  In my situation, my husband has a serious illness which may shorten his life.  Although we hope he will live many more years, if he does die before me I will receive Social Security widow's benefits based on his earnings.  Meanwhile, since I recently retired from a job at age 64, I can go ahead and collect my own benefits now, which will amount to about 42 percent of my husband's Social Security.  We decided together that there was no reason to postpone my benefits for two years, during which time I would have lost over $24,000, since it would take more than a decade for us to make up that amount of money from the slightly increased benefits I would have received by waiting.  In other words, if the family breadwinner is in poor health, it may be wise for the spouse to begin collecting benefits as soon as possible.  If my husband manages to live another 15 or 20 years with his illness, we might regret the decision.  However, that was a risk we were willing to take.

2.  Even if there is no spouse involved, you may be wise to take your Social Security benefits early if you do not expect to live until your late 70's or early 80's.  Many people with a debilitating chronic illness may choose to make this choice.  Although you will receive a smaller payment when you collect early, you could receive the payments for many more years.  According to estimates by the Social Security Administration, a person who begins to collect at age 62 will receive payments that are only about half as large as a person who waits until they are 70 years old.  However, because they will receive benefits for eight additional years, the break-even point will occur in their late 70's.  If your health makes it likely that you will not live until your late 70's, then you may receive more in total earnings by collecting early.  In addition, if you don't need to use all the money in your early 60's and you invest some of it, the break even age may even be older.

3.  Some people may also decide to take their benefits early because of lifestyle choices.  For example, if they want to travel or pursue a second career, taking their benefits early may make it possible for them to pursue their goals while they are still young enough to enjoy the experience.  However, in this case it is important for people to realize that they are making a life-long decision.  Once they are tired of traveling or pursuing the second career, they cannot go back and ask for more money.  This choice is more risky than the ones mentioned above that were based on life expectancy.  If you are healthy and live a long time, you may end up regretting your decision to collect your benefits early, since your income will be so low.

4.  A fourth legitimate reason why some people may choose to take their Social Security benefits early is when unemployment or illness leaves them with no other income options.  In many cases, people are grateful that they have earned these benefits so that they have some source of income when it is no longer possible for them to earn money any other way.  Of course, most financial planners still recommend that people rely on some other source of income, if at all possible, and postpone collecting their Social Security as long as possible.  If they do this, the income they receive later may be even more meaningful.  However, if you have no other choice, you may be grateful that you have the money available.

No matter when you decide to collect your Social Security benefits, between the ages of 62 and 70, you need to do research and talk to representatives in the Social Security office before making a final decision.  Everyone's situation is different.  Do not base your decision on what your friends are doing.  Finally, despite the reasons I gave above for collecting early, if you can postpone collecting for a few years, it is still the best decision for many people.

Source:

http://www.dailyfinance.com/2013/04/07/taking-social-security-early-isnt-as-dumb-as-many/

If you are planning your retirement, you may also want to check out the index articles below.  Each of them contains links to a variety of articles on that topic:

Gifts, Travel and Family Relationships

Great Places for Boomers to Retire Overseas

Great Places to Retire in the United States

Health and Medical Topics for Baby Boomers

Money and Financial Planning for Retirement


You are reading from the blog:  http://baby-boomer-retirement.blogspot.com

Copy of old Social Security card courtesy of www.en.wikipedia.org/commons

Have a Better Cruise Experience

Going on a cruise is one of my favorite vacation experiences and apparently this is also true for many other Americans, especially retirees.  I love being able to visit multiple locations without having to arrange for transportation from city to city.  I also enjoy the freedom from constantly packing my luggage and moving to a new hotel every few days.

While I already consider cruising one of the easiest forms of travel, I also have a few tips that may make it an even more practical travel choice.  While you may not want to try all these things, pick out a few and see if they make your next cruise even more pleasurable:

Tips for a Better Cruise

Limit your luggage.  I usually take far too much clothing on my cruises.  Depending on whether you are going to a tropical location or cruising near Alaska or North Europe, you should be able to get by with just a few color-coordinated outfits that work well if you mix and match them.  Throw in one dressy outfit.  A knit "little black dress" is practical and it won't wrinkle easily.   You can change the look with a dressy jacket, jewelry or scarves. Your room will be more comfortable if you don't overpack and you  may not have to wait to have your luggage delivered to your room if you are able to just carry your bag on board by yourself.

Don't overspend on cruise extras.  For example, your regular dinner table will serve fabulous meals every evening.  Do you really want to spend extra money to go to a specialty restaurant on the ship?  You may also want to steer clear of the gift shops.  Often they carry the same lines of high priced souvenirs that are for sale in upscale hotel gift shops everywhere.  Unless you forgot to pack a swimsuit or you really want a sweatshirt with the name of your cruise line printed on it, you can probably skip most of the items in the gift shops.

Don't spend all your days in port taking excursions. Instead, spend some time exploring the ports on your own, especially if you can rent a car or take a cab and get away from the tourist sites that are clustered near the port. One of the delights of traveling to new locations is getting to experience new adventures.  If you are cruising in Hawaii, for example, you may want to visit the erupting volcano on the Big Island and tour the Pearl Harbor Memorial on Oahu, and it may be easiest to see these attractions if you sign up for a tour.  However, you do not want to spend all your time and money on excursions.  You can happily wander around many of the port towns on your own.  When we have traveled in Hawaii, the Caribbean, Alaska and Europe, whether we were on a cruise or not, my family and I enjoyed getting away from the tourist attractions and exploring the towns on our own.  We signed up for a few excursions and tours, but we always left ourselves plenty of free time, too.

Eat right and get exercise.  While you are on your cruise, it is easy to eat all day long.  Food is available almost everywhere!  However, if you sit around on deck chairs, eating and drinking all day, you will start to feel sluggish after a few days.  Take advantage of the fitness facilities.  I enjoyed taking a yoga class and my husband competed in a golf tournament on one of our cruises.  Rather than going to the breakfast buffet, where we knew we would be tempted to overeat, we asked to have a bowl of fruit, tea, coffee and oatmeal delivered to our cabin each morning.  We also tried to eat a reasonable lunch.  After being good during the day, the generous five course dinners we enjoyed each evening were a luxury that we could consume with less guilt.

Don't forget to enjoy all the on-board opportunities to do something new.  The cruise social director has usually planned lots of fun activities for your enjoyment.  Take a dance class, enter a talent competition, learn a few new casino games, and watch the world-class entertainers.  There are always exciting activities going on aboard a ship.  Have fun and participate.  You might not have the chance to see or do some of these things again.

For more helpful tips, you may also want to read my recent blog post:   Is It Safe to Cruise on Your Next Vacation?

If you are retired are approaching retirement, you may also want to check out the index articles below.  Each one contains links to a number of articles on that topic:

Gifts, Travel and Family Relationships

Great Places for Boomers to Retire Overseas

Great Places to Retire in the United States

Health and Medical Topics for Baby Boomers

Money and Financial Planning for Retirement

You are reading from the blog:  http://baby-boomer-retirement.blogspot.com

Photo of cruise ship courtesy of morguefile.com

Explore the Ed Slott Retirement Rescue Plan

On several occasions in this blog I have mentioned the fact that many Baby Boomers are not prepared for retirement.  I frequently encourage people to postpone their retirement as long as possible in order to maximize their Social Security.  I have also given suggestions to help readers find a fun retirement job.  However, for most people these actions will need to be supplemented with at least some retirement savings.  This reality may be discouraging to those of you who know that you have not done enough financial planning.  Fortunately, for most of us it is not too late to turn things around, protect our assets, and have a more financially secure retirement.  With just a little information and a few simple steps, you can get started on the road to a better retirement.

Ed Slott is a highly respected investment advisor, CPA and IRA specialist who was recently featured on PBS in a program called "Retirement Rescue."  In this televised program, he outlined what people should be doing in order to have a financially secure financial plan for retirement.  Listed below are some of the suggestions he has, as well as a link to Ed Slott's books from Amazon.  It wouldn't be fair to review his ideas without giving you an opportunity to buy his books directly, so he can profit if you decide to use some of his advice.

Avoid Taxes

No matter how much or how little you have saved towards retirement, you want to make sure you get to keep as much of it as possible.  Ed Slott recommends that you make a plan to minimize the taxes you will pay after retirement.  You don't want to give the government any more money than necessary.

Move you money from accounts that are taxed to accounts that will not be taxed.  Yes, it really is possible!  In fact, I've made this same suggestion in my blog in the past.  My husband and I recently moved our investments from a traditional IRA to a Roth IRA.  We paid taxes on the value of the investments we currently have in the account.  However, the investments we have can now grow and, when we withdraw the money in our 70's, we will not have to pay income taxes on our withdrawals.  In other words, we paid taxes on our retirement assets now so we won't have to pay taxes on them later ... which is exactly what Ed Slott recommends.  There is a waiting period before we can can begin to withdraw the profit on our retirement savings, but it is worth it to us.

Another advantage of the Roth IRA is that we will not have to begin withdrawing the money as soon as we turn 70 1/2.  Our money can continue to grow tax free until we want to withdraw it.  There are no mandatory withdrawal rules.

Mr. Slott also says that another way to reduce your taxes is by purchasing permanent life insurance.  There is a federal tax exemption for the proceeds of a life insurance policy.  This is a major benefit for your dependents, and can be particularly helpful for a spouse who is left behind when the breadwinner dies.  Mr. Slott believes that permanent life insurance is an investment.  The money that is paid in premiums grows tax free and you can tap into the value, while you are still alive, if you need the funds to help fund your retirement.  Whatever is left becomes cash to help support your dependents.  If you decide to buy life insurance for this purpose, make sure you are buying permanent life insurance that builds a cash value.  It costs more, but it can benefit both you and your heirs later on.  Since I am no insurance expert, you may want to read one of Mr. Slott's books in order to be certain your fully understand this option.

Minimize Your Investment Risk

Mr. Slott also believes that the majority of people should not rely on the stock market for their investments.  It is much too volatile and unpredictable for people who are retired or near retirement age.  He points out that far too many people lost a substantial amount of their retirement savings in the last stock market decline.  Consequently, he recommends that people put some of their money into annuities that will give them a guaranteed stream of income for the rest of their life.

One suggestion he has that intrigued me is to buy annuities in a Roth IRA.  This will provide a guaranteed income stream that is tax free!  He also points out that it is important that you use a reliable, well-known annuity company and respected money managers when you choose an annuity.

I have to note that annuities are one area that is controversial.  Some retirement specialists believe in annuities and others strongly believe that they are a bad idea and that you can do better if you invest your money conservatively in dividend paying stocks, government bonds or similar investment products.  You will want to consult your own investment adviser (or perhaps several) before making a final decision on which investment instrument is the best way to provide you with supplemental retirement income.  Some advisers recommend finding funds that pay dividends and also allow your principle to grow. 

A Better Approach to Saving Money

We all like to save money and this desire may cause some people to be reluctant to spend money on their retirement planning.  However, now is the time to spend the necessary money needed to invest in your retirement.  Pay taxes now; buy life insurance; buy annuities or invest your money in funds.  According to Mr. Slott, it is important to spend some money now, so that you can have a much larger retirement income later.

Reduce Uncertainty

We all want to avoid uncertainty about our future financial security.  Ed Slott points out that following his program will reduce or eliminate the amount of insecurity and uncertainty you will have about your financial future.  If you follow his recommendations exactly, it is true that you will have avoided uncertainly by avoiding taxes and buying annuities.  You will know exactly how much your assets are worth and how much income you will have.  This is why he says you can rescue your retirement by simply following his suggestions.

Avoid Inactivity

Finally, Ed Slott also says that one of the worst killers of retirement planning is inactivity.  If you don't take any of these steps to protect your assets and rescue your retirement, the inactivity could result in disaster.  The sooner you begin to take at least some of the steps mentioned above, the better your results will be.  No matter how old or young you are, everyone should sit down and make a plan that will maximize the amount of retirement income they will have after they retire.

Where to Get More Information

You will almost certainly want to get more specific information on how to follow this investment program if you decide to give it a try.  If so, you can use this link to order Ed Slott's Retirement Rescue books from Amazon.

Obviously, I cannot include all of the details of his plan in this blog post ... and it wouldn't be fair to Mr. Slott if I did.  However, I have found his advice to be so thoughtful and helpful that I wanted to be sure that my followers knew about it.  The whole goal of this blog is to make sure that as many people as possible have a satisfying, comfortable and fun retirement.  Financial insecurity will go a long way towards making sure that happens.

In addition, you may want to get information on other retirement issues by checking out the index articles below.  Each one contains links to a number of related articles on that topic:

Gifts, Travel and Family Relationships

Great Places for Boomers to Retire Overseas

Great Places to Retire in the United States

Health and Medical Topics for Baby Boomers

Money and Financial Planning for Retirement


You are reading from the blog:  http://baby-boomer-retirement.blogspot.com

Photo of Ed Slot courtesy of www.en.wikipedia.org/commons

Colonial Heritage near Historic Williamsburg, Virginia

Do you love history, yet you want to live in a modern retirement community with lots of popular amenities such as golf, swimming pools, a clubhouse and exercise facilities?  If so, you should consider moving to the charming Colonial Heritage over-55 retirement community by Lennar Homes near historic Williamsburg, Virginia.  It's the perfect spot for people who enjoy both early American history as well as the comforts of modern America.

Whether you are interested in volunteering as a docent in Colonial Williamsburg, or you want to spend your days playing golf, working with wood or enjoying other community activities, this is a wonderful place to retire.

Facts about Retiring in Virginia

Before you decide on a retirement community, of course, you need to decide if retiring in Virginia is the right choice for you.  One of the appeals of Virginia is that home prices and the overall cost of living is reasonable as soon as you get away from the Washington, DC area.  One of our daughters went to college in Virginia and, when we visited her, we fell in love with the charming small towns, quaint farms, and the drive along the Blue Ridge mountains.  The entire state only had a population of about 8 million people in 2012.

If Social Security is going to be your primary source of income after retirement, there is another reason why you might love living in Virginia.  Your Social Security benefits are exempt from income taxes.  In addition, the real estate websites tout the fact that there are no state inheritance taxes.

Williamsburg, Virginia

 According to Money Magazine, Williamsburg is Number Five on their list of the "Best Places to Live". 

In additional to the interesting attractions in the township of Colonial Williamsburg, the city has two hospitals ... important for residents who are planning to age in the area.  Both the Norfolk and Richmond airports are less than an hour drive away.

The weather in the mid-Atlantic states is more temperate than you'll find in the Northeast.  The average high temperature in July is 89 degrees, and the average January low is 28 degrees.  Thunderstorms are common, with July being the wettest month of the year.  We have experienced a few Virginia thunderstorms, and they are quite dramatic, so be prepared!

Residents of Williamsburg are also a short drive away from the Virginia coast.

Amenities at the Colonial Heritage Retirement Community

Once you have decided that living in the Williamsburg, Virginia area is the right choice for you, you need to decide whether you would prefer to live in the town or in a nearby master planned community.  While the town has a lot to offer, here is a list of the amenities available in the lovely Colonial Heritage retirement community.

Over-55 gated community
Elegant clubhouse
18 hole championship golf course
Tennis courts
Indoor pool with floor to ceiling windows
Outdoor resort style pool
Ballroom
Two community restaurants
Meeting rooms, card rooms and a billiards room
Fitness room / Athletics center
Arts and crafts room
Woodworking shop
A variety of community organizations including the history and culinary clubs.

Homes and Home Prices

Lennar Homes, a respected national home builder, is the developer of Colonial Heritage.  They are actively in the process of building a neighorhood of charming low-maintenance homes on 1500 acres.

In 2013, home prices in the community ranged from about $260,000 to $460,000 for a single family home.

Homeowner's dues in 2013: $258 a month.

Contact Information

Colonial Heritage
7015 Statesman
Williamsburg, Virginia 23188
(877) 785-3662

ColonialHeritageVA.com

More Information:

If you are interested in learning more about historic Colonial Williamsburg, you may be interested in reading one of these books from Amazon:

Insider's Guide to Williamsburg 16th: and Virginia's Historic Triangle

Official Guide to Colonial Williamsburg

Resources:

"50 Best Master-Planned Communities in the U.S." Where to Retire Magazine, July/August 2013.

http://www.colonialheritageclub.org/home.asp

 http://www.topretirements.com/state/virginia.html

If you are currently planning your retirement, you may also want to look through the index articles below.  Each one contains links to a variety of additional resources.

Gifts, Travel and Family Relationships

Great Places for Boomers to Retire Overseas

Great Places to Retire in the United States

Health and Medical Topics for Baby Boomers

Money and Financial Planning for Retirement

You are reading from the blog:  http://baby-boomer-retirement.blogspot.com

Photo of Colonial Williamsburg courtesy of www.en.wikipendia.org/commons