This sobering question was the topic of discussion at the latest Central Jersey Think Tank meeting held April 25 at the Renaissance in Ocean Township. The answer, delivered by Chartered Financial Consultant and CJTT member Richard Pasick, was, “It depends on your date of birth and the age at which you retire.”
Pasick is the latest business expert to speak at the Think Tank which meets once a month to discuss critical issues facing NJ business owners. The Central Jersey Think Tank is sponsored by the Ocean Township accounting firm of Lawson, Rescinio, Schibell.
Pasick, a Senior Vice President of C&A Financial Group in Wall laid out an effective strategy to help maximize Retirement Income. He answered four critical questions:
Will social security be there for me?
“Most people don’t realize the Social Security Trust Fund stands at $2.85 trillion and is still growing,” he said. “It grew by $35 billion in 2016. But with more people coming on board and living longer, payable benefits will exceed income by 2034. There are a number of proposals to protect its solvency, but as it stands now, baby boomer benefits are not likely to be affected. However, if you’re a post-baby boomer, you’re on the wrong site of the chart.”
How much can I expect to receive?
“Your benefits will depend upon how much you earned over your working career and the age at which you apply for benefits,” he added. “Your highest 35 years of earnings are averaged and used to determine your monthly benefit. Naturally, if you are still in your higher earning years, the longer you stay employed, the higher the benefit.
“Secondly, the SSA ‘rewards’ you if you stay working until your full retirement age which is 66 for people born before 1955 and 67 for people born in 1960 or later. Retire before your full retirement age and you receive a portion of your benefit—even after you reach full retirement age”, he added.
“If you delay collecting beyond your full retirement age, you can earn an additional 8% annual credits. For example, a 70 year old born before 1955 can expect to collect 132% of his full retirement benefits if he or she waits until his or her 70th birthday to apply.”
When should I apply for social security?
Pasick explained that not everyone has the opportunity to wait until they are 70. “Social Security is designed to be there when you need it. So if health or employment issues dictate you retire sooner, you do so.” Pasick noted that the decision to apply should be considered in the context of ones overall retirement plan. “The longer you wait, the more money you will receive, especially if you live longer. Keep in mind, the decision impacts survivor benefits as well. Surviving spouses are entitled to the higher amount of SS benefits”. he added.
How can I maximize my benefits?
Pasick laid out a series of strategies to help maximize benefits. “First off, improve your earnings record. Be sure it is accurate and no years are missing. Earnings records are the basis of the benefits formula. If you can improve it by working longer, consider it,” he suggested.
Secondly apply at the optimal time taking into account your income needs now and in the future, your life expectancy, and your spouse’s life expectancy. You also want to coordinate spousal benefits. Depending upon who made more money (and how much more) there are numerous ways to maximize lifetime benefits via some strategic planning,” he explained.
Pasick also suggests a visit to ones accountant to minimize taxation of benefits. “Most retirees have other income sources besides social security. The judicial spend-down of these assets can save you significant taxes. A good accountant and a good financial planner should be consulted.”
Keep in mind that Social Security will not likely be enough to live on. Consider Social Security in the context of pensions, IRAs and 401Ks, investment portfolios and your ability to work.” Pasick is available to speak at other business organizations or for one on one consulting. He can be reached at 732-528-4800 extension 214 or at [email protected]. Contact Sal Schbiell at [email protected] for more Social Security tax advice.