Creative Generosity

“I have no interest in learning about finances. My [husband/wife] takes care of that.”

I have heard this statement from many clients throughout my career, and I understand the sentiment that prompts this response. Human nature has shown that when groups of people come together, they divvy up tasks to different individuals based on their strengths or roles in the group. You see this in many different groups, including families. My wife cooks dinner, and I’m great at taking out the garbage. With my siblings, I’m great at being the peacemaker while my sister knows how to shine a light on different perspectives. These established roles help our family units function smoothly and effectively…

Until one of the pieces of our unit is no longer around.

I’ve seen it far too many times. Clients come in distraught and overwhelmed because they’ve lost a loved one who typically acted as the family’s Chief Financial Officer. Sometimes they don’t know if there is a will or where legal documents are saved. Perhaps they are aware of a family safety deposit box, but they’re not sure where it is or how to access it. They aren’t sure about account balances or how to read statements. They may not even have access to critical accounts because the deceased was the one who knew the passwords. Now they are dealing with grief and heartbreak, compounded by confusion as to what the next steps are for maintaining their family’s financial solvency.

This is why I insist that both parties in a marriage are involved in financial planning meetings and decisions. I also recommend, especially for my senior clients, that other family members or loved ones are aware of the basics of their financial plans. It makes things so much simpler if all important documents, including a list of passwords, are stored together. If security is a concern, there are plenty of third party vendors that will virtually store that information for you. In most cases, though, a virtual safekeeper of your important information isn’t ideal. What is really needed is someone who will help guide your loved ones during that difficult time. That’s when a financial advisor can be an invaluable asset. I have had many Trilogy clients express how relieved they are to know that their financial advisor will be around to guide and assist the loved ones after he or she has passed. At Trilogy Financial, we don’t consider it a job. We consider it an honor and a calling.

There is a saying that it takes a village to raise a child. The truth is, it takes a village to care for anyone. Please make sure that your village is prepared and has the proper tools to take care of you. If you’re not sure where to begin, you may want to meet with a financial advisor. Our Trilogy Advisors are not only trained to assist your family on how to prepare for the future, but will also be there to provide support and service during a difficult and overwhelming time.

Created during the Great Depression as a retirement safety net, Social Security now covers an estimated 96% of Americans. These days, a record high of around 167 million people are working and paying into the system that provides benefits for over 63 million people. In fact, the majority of retirees get more than half of their income from Social Security. Security can be complicated to navigate at times, but since it’s so vital to your retirement income plan, it’s important to make wise decisions and create strategies first.

Delay Benefits

Social Security benefits are calculated using complex actuarial equations based on life expectancy and estimated rates of return. Deciding the best time for you to claim your benefits depends upon how you compare to the averages. As of today, a man turning 65 is expected to live until age 84.3 and a woman of 65 until age 86.6.

If based on your health and your family history of longevity, you believe you will live much longer than that, your overall lifetime benefit will be greater if you delay claiming your benefits to increase your benefit amount. If the opposite is true and you see little chance of making it into your mid 80’s, you would receive a greater lifetime benefit by taking it sooner, even though it is a smaller monthly payment.

Several helpful calculators are available on the Social Security Administration website. With the Retirement Estimator at www.socialsecurity.gov/estimator, most people can receive an estimate of their benefit based on their actual earnings record and manipulate the numbers to reflect different strategies. They also have Social Security Benefits Calculators that can be used to calculate future retirement benefits.

Research Investment Opportunities?

While it will differ for everyone, research from Fidelity shows that most people need to replace between 55% and 80% of their pre-retirement, pre-tax income after they stop If you are in a position where you will not be reliant on Social Security to cover your basic needs in retirement, you may be better off claiming early and investing your benefit amount in an effort to earn better rates of return. In this way, although you’d start with a smaller monthly payment, you may end up with more money than if you had waited to receive the Social Security Administration’s increased payment due to the growth from your investments.

Which Coordinate with Your Spouse

If you are married, you have the choice to receive your own benefit or a spousal benefit of50% of your spouse’s benefit. By coordinating properly, married couples can increase their total monthly benefits.

The Society of Actuaries recommends that the lower-earning spouse begins collecting benefits early while the higher-earning spouse waits as long as possible. That way, you can make use of the lower benefit while maximizing the higher benefit. In most situations, it is the husband with the greater benefit and the wife with the lower one. Women also tend to live longer than men. By following this strategy, you not only maximize the husband’s retirement benefit for use while he is alive, but it also maximizes the wife’s survivor benefit when he passes away.

Consider the Effect of Additional Income on YourBenefitsSubmit

Once you reach full retirement age (FRA), having earned income will have no effect on yourSocial Security benefit payments. However, if you begin receiving benefit payments before FRA, your earnings will decrease your payments.

Income Earned the Year You Reach FRA

The income restrictions change in the year in which you reach FRA. That year there is a higher limit; $45,360 for 2018. Once your income exceeds that limit, your Social Security benefit will be reduced by $1 for every $3 you earn. For example, if between January 1 and your birthday you earn $48,360, you have earned $3,000 more than the limit. That $3,000 excess will reduce your Social Security payments by $1,000. As soon as you have your birthday and reach FRA, though, there are no more limits. You can earn as much as you want and it has no effect on your Social Security retirement benefits.

Continuing to work into retirement may be beneficial even if your current benefits are reduced. If your income is within the top 35 years of your earnings, you will increase your aim, which is the average used to calculate your benefit. By continuing to pay into SocialSecurity as a worker, you can increase your retirement benefit even after you have begun collecting it.

Work with an Experienced Professional

A 2015 Voya Retire Ready Study found that those who consult a financial professional are more than twice as likely to have calculated how much income they need to live a rich life in retirement. Working with an experienced professional can help you navigate your SocialSecurity options and optimize your total lifetime benefit. If you have any questions or would like to see how Social Security will impact your retirement plan, I am here to help. Take the first step by reaching out to me for a complimentary consultation by calling (949) 221-8105 x 2128 or emailing michael.loo@trilogyfs.com.