The loss of a member of family might be devastating for family members, both equally psychologically as well as on a financial basis. Social Security is intended to be a survivor program in addition to a retirement program. We are going to discuss one-time lump sum social security death benefit, monthly social security survivor benefits, whom qualifies for survivor benefits, and how you can apply for benefits whenever a family member passes away. (more…)

In developing a retirement plan there are several factors to consider in addition to the amount you need or want to save.

1. Income Taxes.

The above discussion did not take into consideration income taxes. You might have to save more if you have to pay income taxes on all or part of your retirement benefit or your contributions. Distributions from qualified employer plans are always subject to retirement income tax. (more…)

As early as age 62, spouses can collect either on their own career benefits, or take 50 percent of their spouses’ benefits, whichever is greater. The non-working spouse can begin to collect on the other’s record only if the working spouse has already begun receiving social security spousal benefits, a small but very important point. If the non-working spouse is taking care of a child under the age of 16 or who is disabled, then those benefits can begin before the earliest retirement age of 62 under other circumstances. (more…)

These strategies can help recover lost income and/or assets following one or more of the life events described above. These strategies can also be used by late savers to make up for lost time and to prepare for a comfortable retirement.

Increase Contributions to Tax-Deferred Retirement Savings Plans. The 2001 tax law increased annual contribution limits for IRAs and employer 401(k), 403(b), and Section 457 plans, at least through 2010. Just a 1% increase in the amount of pay diverted to savings can result in thousands of additional dollars at retirement. Americans contributed an average of $3,514 to 401(k) plans in 2001 (Opdyke and Higgins 2002). The maximum plan contribution limits are $12,000 in 2003, $13,000 in 2004, $14,000 in 2005, $15,000 in 2006, and higher amounts adjusted for inflation thereafter. (more…)

You can retire at 62 and can consider it as early retirement, but it come with a penalty. You can also retire in the years between the earliest retirement dates and full retirement and get a bit more money with each passing year. Suppose you create a financial plan based upon the three-legged financial stool of personal savings, part-time income (by having retirement part time jobs), and getting Social Security Income (Social Security benefits). As your planned-for retirement date approaches, (more…)

In just a few years, the first of an estimated 77 million Baby Boomers will become eligible for benefits and will have to make that decision. A full 32 percent of the workforce has no retirement savings set aside and 80 percent have no private pension. About two thirds of retirees receive 50 percent of their income from Social Security. Today about 20 percent of Social Security recipients rely on their checks as their sole source of income. Taking the Social Security check early at age 62 versus age 65 currently costs recipients 24 percent of their monthly social security benefits and that penalty is going up to 30 percent. Unexpected taxes and additional penalties can literally take away the rest. (more…)

Once your Average In­dexed Monthly Earnings (AIME) is calculated, the Social Security Administration applies a percentage, called a Replacement Rate, to arrive at your monthly social security statement of benefits amount. The average Replacement Rate is 40 percent. However, the rate tends to be higher for low-income workers and lower for higher income workers. In this progressive way, lower-paid workers—who in theory would have less opportunity to save—get proportionally more of their incomes replaced by Social Security. (more…)

Retirement savings last longer when invested assets are withdrawn tax-efficiently. Generally, this means tapping taxable accounts or tax-exempt investments first, followed by retirement accounts made with after-tax dollars, and then accounts funded with before-tax dollars. Withdrawals from Roth IRAs contribution should be made last because they have no minimum withdrawal age and earnings grow tax-free. (more…)

For Early Retirement Incentive Plans within a defined pension plan, the most common incentive is the addition of age or service credits in calculating pension benefits. Typically, “5 and 5”—adding five years to age and/or five years to length of service—is offered. Other incentives may reduce or eliminate the penalty for early retirement, provide cash supplements until an employee is eligible for Social Security (in the main, at age 62, though some plans bridge payments to age 65), provision of life insurance, outplacement assistance, and less often, retiree health benefits (Hewitt Associates 1997). (more…)

In the late 1980s, the U.S. Department of Labor’s Bureau of Labor Statistics (BLS), the government agency that calculates the Consumer Price Index, was directed by Congress to calculate an experimental Consumer Price Index for the Elderly (CPI E). This experimental index for Americans 62 years old and older is based on existing data, re-weighted to reflect expenditure patterns in the older population. A comparison with published CPIs found that older adults experienced a higher rate of inflation from 1983 through 1999 than the rates reported for either the CPI W or the CPI U. However, it is important to remember that the Consumer Price Index for the Elderly is an experimental index and is not regularly published by the BLS. (more…)