Month: April 2015

Social Security Traps That Cost You Money

Social Security Traps That Cost You Money

Most people assume that Social Security will take care of them when they retire; however, some things that people do jeopardize the amount of their Social Security benefit because they do not fully understand all of the rules and regulations about Social Security. These Social Security traps can hurt you and your spouse’s financial well-being. Learning about Social Security traps and how to avoid those traps are the best way to ensure that you are fully prepared for your retirement.

Three Social Security Traps to Avoid

Social Security Trap Number 1: Taking Money Too Early

It seems each year that the Social Security Administration raises the age for retirement. Currently, the age for full retirement benefits is 67; however, you can retire at age 62 but with penalties. If you retire at age 62, you only receive 70% of your Social Security benefits. This will last for five years until you reach the full age of retirement at 67. However, you receive several benefits if you wait until 67 to retire. First, if you wait until your full retirement age, your monthly benefit will be larger. Second, if you continue to work after the age of 62 and contribute to the Social Security fund, you will receive a higher monthly benefit than you would have received if you quit work at age 62. Third, the SSA calculates the cost of living adjustment (COLA) on the amount of your monthly benefit. If you decide to take your Social Security benefits at the age of 62, your COLA will be less than if you wait until 67 to begin receiving benefits.

Social Security Trap Number 2: Working Income

The Social Security Administration does permit individuals who are 62 years of age to begin receiving benefits while continuing to work; however, there is a penalty. If you decide to take your Social Security benefits beginning at age 62 while you are still working, your monthly benefit will be reduced. In 2015, the reduction rate is $1 for every $2 of earned income above $15,720. This reduction continues, based on your earnings from employment, until you reach the full age of retirement. The good news is that your benefits are not lost – they are simply deferred and credited to your account until you reach full retirement age.

Social Security Trap Number 3: Spousal Benefits

The Best Inheritance is Still Family Values and Family History

The Best Inheritance is Still Family Values and Family Historyfamily-trust-planning

According to a 2012 study sponsored by Allianz Life Insurance Co. of North America, baby boomers and senior citizens considered family values and family history among the most important things that you can pass on to your children. Most of them viewed passing on family values, traditions and history as more important than the monetary inheritance you leave your children. The study entitled, “Allianz Life American Legacies Study” was published in 2012.

The study was a follow-up to an original study the company conducted in 2005. In both studies, there were very high percentages of individuals who believed that it is very important that parents pass on the family legacy including life lessons, values and stories. It appears that passing along values in addition to money is still a high priority; however, according to an article in The Dallas Morning News, parents are also very concerned about teaching their children the value of money rather than just giving them an inheritance.

This trend about teaching the importance of money as well as passing along family traditions, values and history is an extension of the results of the 2012 and 2005 Allianz studies. In both studies, only four percent of the boomer participants said that an inheritance is “owed” to them. Twenty-two percent of the senior citizens felt that they owed their children an inheritance in 2005; however, by 2012, that number had decreased to fourteen percent. This could be a result of the economy or the fact that some senior citizens are outliving their inheritance.

Planning for the Future High Priority for Both Groups

Both the boomers and the senior citizens made planning for the future a high priority. Over eighty percent of the individuals in both groups emphasized the importance of having a plan in place in the event they were to become seriously ill, terminal or permanently unconscious. Another desire is to avoid family conflict for both monetary and health decisions.

Is a Revocable Living Trust Right for You?

Is a Revocable Living Trust Right for You?     Trust

Revocable Living Trusts have become the basic building block of estate plans for people of all ages, personal backgrounds, and financial situations. But for some, a Revocable Living Trust may not be necessary to achieve their estate planning goals or may even be detrimental to achieving those goals.

What Are the Advantages of a Revocable Living Trust Over a Will?

Revocable Living Trusts have become popular because when compared with a Last Will and Testament, a Revocable Living Trust offers the following advantages:

  • A Revocable Living Trust protects your privacy by keeping your final wishes a private family matter, since only your beneficiaries and Trustees are entitled to read the trust agreement after your death. On the other hand, a Last Will and Testament that is filed with the probate court becomes a public court record which is available for the whole world to read.
  • A Revocable Living Trust provides instructions for your care and the management of your property if you become mentally incapacitated. Since a Last Will and Testament only goes into effect after you die, it cannot be used for incapacity planning.
  • If you fund all of your assets into a Revocable Living Trust prior to your death, then those assets will avoid probate. On the other hand, property that passes under the terms of a Last Will and Testament usually has to be probated. A probate could add thousands of dollars of costs at your death.

Why Shouldn’t You Use a Revocable Living Trust?

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