Q: I will be 70 next September and will start taking my Social Security at that time. My wife, who will reach full retirement age for Social Security in March has been receiving Social Security Disability payments for years. Do we need to do anything to have her Social Security payments go up to her full payment in March so she can receive the higher spousal benefit?
A: From what I have experienced, the Social Security payment will automatically increase without you having to notify the Social Security Administration. If you do not receive any increase, make an appointment with the Social Security office in your area to address any changes that need to be made to get the higher benefit.
I love questions. Questions allow you to learn about people. You can find out about someone’s background, their likes and dislikes, and what they plan for their future. Questions can be fun, questionnaires on the other hand, not so much fun. We have an Investment Questionnaire that is only 13 questions long but feels like so much more. Many clients have commented that it really seems like 3 questions asked in several different ways. We use this questionnaire for two reasons; first it is required by the regulators in our business, second it allows me to assess a clients’ feelings about risk of investments over different periods of time. It allows me to put together a sound investment mix geared toward their tolerances to risk over their investing lifetime. If you are interested is taking our Investment Questionnaire, please email me at firstname.lastname@example.org.
A number of people I have spoken with recently have been retired sooner than they had planned. Many are not sure what to do with their 401(k) accounts, some like their investments within the plan and would like to keep them. Here are three points I think you should consider if you find yourself in this position:
I am not a fan of keeping money where you no longer are. Often, plans, and the investments within them change. If you are no longer employed where the plan was offered, you may find out about these changes when it is too late to act in your best interest.
Many 401(k) plan have higher internal investment fees vs. holding the same funds outside of that plan.
If you find you need to withdraw funds you will pay an automatic 20% Federal Income Tax when withdrawing from a 401(k). You may not be in a 20% tax bracket. When you withdraw from and IRA, you can pick your tax withholding.
If you find yourself in this situation, establish a Rollover IRA, then directly transfer the funds from the 401(k) to that account.
Recently, a client told me that her tax preparer told her not to pay Social Security tax because it will not be there when she wants to use it. That is the absolute wrong advice to take.
Most taxpayers have to pay Social Security taxes on their income, regardless of whether they work for an employer or are self-employed.
Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $137,700 (in 2020), while the self-employed pay 12.4 percent.
Social Security tax it not a choice. I told her she was not to use that tax preparer again.
This is the $64,000 question.
What Does the Upcoming Election Mean to My Investments? This is a question I am asked at almost every meeting I have had lately. Let’s look at a few things:
Here is a graph from Kiplinger magazine about the impact of elections on the markets
My advice to you is, don’t panic. There will be some volatility, please do not try to time the markets. Remember that investments, especially your retirement investments, are for the long term. It is not as important how your investments are doing at this moment as it is to make sure they will last over your lifetime.
If you have not retired and are still adding to your retirement accounts, a dip in the markets is a gift. You will be able to purchase shares of your funds at a lower price, thus accumulating more. This could give you more shares to provide income in your retirement years.
The newest fad in investing is buying by the slice. We were used to buying traditional open-end mutual funds, then came exchange-traded funds, now we can buy stocks or funds by the slice, what does this mean?
If you wanted to buy $5 worth of a stock that costs $800 per share, you can make that happen by buying a slice for $5. That fraction of a share remains yours until you sell it. When you want to sell a slice you can simply enter how much of the value you want to sell. . You can invest $1,000 into one company, or $1 into a thousand companies—the choice is yours.
This seems, on the surface, to be an easy way to own stock in your favorite companies with little equity risk due to being able to spend so little money to invest. Many of the trading services that offer this option state they are commission and fee free, but how do they make money. You know that nothing is free.
Here is one example of how these firms make money. One of the most popular “stock slice” buying firms, advertised that it only two revenue sources: fees for its margin-trading service and interest collected on customer deposits. They failed to mention payment for order flow, even though the payments to high-speed traders were detailed in regulatory disclosures available elsewhere on the website.
I applauded anything that makes it easier for everyone to own a piece of the American Dream, but please, do your homework and have all of the facts at hand before buying your slice.
Generally, when you procrastinate it creates problems. When you are thinking about retirement I would like you to consider a few points first.
You don’t have enough savings to cover your basic living expenses. This one’s pretty much a no-brainer. …
You’ve saved enough to cover the basics, but not leisure. …
You’re still in debt. …
You love your job. …
You don’t know what you’ll do with your time in retirement.
If you do not have positive answers to these questions, you may want to procrastinate with your retirement date.
This past February was the first time in 36 years in business I went to all cash for a couple of clients. The pandemic had just started and two clients insisted I sell all of their holdings – I agreed after much discussion. Two weeks later they wanted to know my strategy for getting back in the market. I used the time-tested dollar-cost-averaging method to reinvest. Once again, with a heated election just a few months away, the question has come up again from a client. I repeated that I am not a fan of going to all cash, they have fundamentally sound investments, and we need to talk. One solution may be to take all of their investments back to their original cost. This will do two things – take gains off the table and reallocate them, and keep their fundamentally sound investments on the books. This may be a win- win strategy for those who insist on going to cash.
A number of clients have found themselves retired early due to the Covid-19 shutdowns. Here are a few points I have been sharing with my clients:
First off, don’t panic. We have retirement cash flow plans in place, but now we need to reassess the retirement needs.
Second, remember you will be in retirement for many, many years. You will not need all of your money right now.
Third, it does not matter how much has been saved for retirement as how you manage your spending is the bigger part of the equation.
Lastly, we have to be flexible. Once a withdrawal pattern is set in place, remember we may have to adjust the flow up or down depending on circumstances from year to year.
We will get through this with a level head and communication.
There are a lot of questions related to receiving a stimulus check provided by the Government during this pandemic. Many taxpayers think they have to pay tax on the stimulus they received, the opposite is actually the truth.
You don’t have to pay your stimulus check back to the government, and it will not reduce your tax refund for the year. The stimulus check is a new federal tax credit available in 2020 that the government has decided to give people now to help them through the pandemic and the recession. Tax credits provide a dollar-for-dollar reduction of your tax liability for the year, resulting in either a smaller tax bill or a larger tax refund.
So take a breath, and don’t worry about having to pay tax on this check.