Monthly Social Security payments differ substantially depending on when you start receiving benefits.

The Social Security program allows you to start receiving benefits as soon as you reach age 62. The question is, should you?

Monthly payments differ substantially depending on when you start receiving benefits. The longer you wait (up to age 70), the larger each monthly check will be. The sooner you start receiving benefits, the smaller the check.

From the Social Security Administration’s point of view, it’s simple: if a person lives to the average life expectancy, the person will eventually receive roughly the same amount in lifetime benefits, no matter when they choose to start receiving them. In actual practice, it’s not quite that straightforward, but the principle holds.

The key phrase is “if the person lives to average life expectancy.” If a person exceeds the average life expectancy and has opted to wait to receive benefits, they will start to accumulate more from Social Security.

The chart shows how Social Security benefits accumulate for individuals who started to receive at ages 62, 67, and 70. The person who started to receive benefits at age 62 would accumulate $384,451 by the age of 85. Conversely, the person who started to receive benefits at age 70 would accumulate $454,019 by the age of 85. The example assumes a retirement benefit of $1,907 at age 67. It does not assume COLA.

Source: Social Security Administration, 2024

There is no single “right” answer to the question of when to start benefits. Many base their decision on family considerations, economic circumstances, and personal preferences.

If you have a spouse, the decision about when to start benefits gets more complicated – particularly if one person’s earnings are considerably higher than the other’s. The timing of spousal benefits should be factored into your decision.

When considering at what age to start Social Security benefits, it may be a good idea to review all the assets you have gathered for retirement. Some may want the money sooner based on how assets are positioned, while others may benefit by waiting. So, as you near a decision point, it may be best to consider all your options before moving forward.

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Loss of income from disability has the potential to cause financial hardship. Disability insurance can help.

According to the Social Security Administration, a 20-year-old has more than a 25% chance of becoming disabled before reaching retirement age.1

Loss of income for such a duration has the potential to cause significant financial hardship. And while Social Security Disability Insurance may help, it’s critical to understand that about two-thirds of initial applications are denied and the average SSDI payment is only $1,534 a month.2,3

Disability coverage may be available through your employer, who may pay all or a portion of the cost for your coverage.

Employer plans typically pay up to 50% to 60% of your income. This limited coverage might not be enough to meet your bills, which is why you may want to supplement employer-based coverage with a personal policy. Supplemental policies may be purchased to cover up to about 70% of your income.4

Taxation of Disability Benefits

When you purchase a personal disability policy, the benefit payments are structured to be income tax-free. Consequently, you may not be eligible for coverage that equals your current salary since your take-home pay is always less.

If your employer paid for your coverage, then the income you receive generally will be taxable. If you paid for a portion of the employer-provided coverage, then the pro rata amount of the benefits you receive are structured to be tax-free.

Choices, Choices, Choices

Consider the waiting period before disability payments begin. A longer waiting period saves you money, but it also means that you may have to live off your savings for a longer period. You are the best judge of how much of this risk you are comfortable assuming.

You also may want to coordinate the waiting period with any short-term disability benefits you could have. For example, if your short-term disability covers you for 90 days, look to have at least a 90-day waiting period so that you can potentially lower the cost of the long-term policy.

Ask how a policy defines an inability to work. Some policies will say “the inability to do any job or task;” others will say “own occupation.” You may prefer the latter definition so you’re not forced to perform some less-skilled, lower-paid work. That type of work may not help you meet your bills.

 

1. Social Security Administration, 2024
2. Disability-Benefits-Help.org, 2024
3. SSA.gov, 2024
4. Investopedia.com, July 23, 2023
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Understanding how capital gains are taxed may help you refine your investment strategies.

Chris Rock once remarked, “You don’t pay taxes – they take taxes.” That applies not only to income but also to capital gains.

Capital gains result when an individual sells an investment for an amount greater than their purchase price. Capital gains are categorized as short-term gains (a gain realized on an asset held one year or less) or long-term gains (a gain realized on an asset held longer than one year).

Keep in mind that the information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation.

Long-Term vs. Short-Term Gains

Short-term capital gains are taxed at ordinary income tax rates. Long-term capital gains are taxed according to different ranges (shown below).1

Long Term Capital Gains Tax Brackets (for 2024)

Tax Brackets

It should also be noted that taxpayers whose adjusted gross income is in excess of $200,000 (single filers or heads of household) or $250,000 (joint filers) may be subject to an additional 3.8% tax as a net investment income tax.2

Also, keep in mind that the long-term capital gains rate for collectibles and precious metals remains at a maximum of 28%.3

Rules for Capital Losses

Capital losses may be used to offset capital gains. If the losses exceed the gains, up to $3,000 of those losses may be used to offset the taxes on other kinds of income. Should you have more than $3,000 in such capital losses, you may be able to carry the losses forward. You can continue to carry forward these losses until such time that future realized gains exhaust them. Under current law, the ability to carry these losses forward is lost only on death.4

Finally, for some assets, the calculation of a capital gain or loss may not be as simple and straightforward as it sounds. As with any matter dealing with taxes, individuals are encouraged to seek the counsel of a tax professional before making any tax-related decisions.

 

1. IRS.gov, 2024
2. IRS.gov, 2024
3. Investopedia.com, November 28, 2023
4. IRS.gov, 2024
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

When to start? Should I continue to work? How can I maximize my benefit?

 
Social Security is a critical component of the retirement financial strategy for many Americans, so before you begin taking it, you should consider three important questions. The answers may affect whether you make the most of this retirement income source.

  1. When to Start? You have the choice of 1) starting benefits at age 62, 2) claiming them at your full retirement age, or 3) delaying payments until age 70. If you claim early, you can expect to receive a monthly benefit that will be lower than what you would have earned at full retirement. If you wait until age 70, you can expect to receive an even higher monthly benefit than you would have received if you had begun taking payments at your full retirement age. The decision of when to begin taking benefits may hinge on whether you need the income now or can wait, and whether you think your lifespan will be shorter or longer than the average American.
     
  2. Should I Continue to Work? Work provides income, personal satisfaction, and may increase your Social Security benefits. However, if you begin taking benefits prior to your full retirement age and continue to work, your benefits will be reduced by $1 for every $2 in earnings above the prevailing annual limit ($21,240 in 2023). If you work during the year in which you attain full retirement age, your benefits will be reduced by $1 for every $3 in earnings over a different annual limit ($56,520 in 2023) until the month you reach full retirement age. After you attain your full retirement age, earned income no longer reduces benefit payments.1
     
  3. How Can I Maximize My Benefit? The easiest way to maximize your monthly Social Security benefit is to simply wait until you turn age 70 before receiving payments.
1. SSA.gov, 2023
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security. Copyright FMG Suite.

Market Updates.

  • We’ve been encouraged by recent economic forecasts and numbers that indicate a softer overall inflationary impact.
  • The unemployment rate fell to 3.7%, and U.S. nonfarm payrolls rose to 199,000 in November, a slight increase from the payroll gain of 150,000 in October.
  • The November Consumer Price Index (CPI) increased by 0.1% over last month and is up 3.1% from a year ago. Wholesale prices remained unchanged in November, which is also an encouraging inflation indicator.
  • As we approach 2024, there is some optimism in the housing market — even though housing prices are still high and supply is difficult, the average 30-year fixed mortgage rate declined to 7.07%, the lowest rate since July. Over the past week, mortgage applications increased by 7.4% and refinance applications increased by 19%.
  • In the December meeting, the Federal Reserve opted not to raise interest rates, remaining within the 5.25%–5.5% target range. Projections released by the Fed indicate an expectation of four rate cuts in 2024, aiming for the goal of a 4.6% rate by the end of 2024.
  • The Fed also shared an encouraging core personal consumption expenditures price index (core PCE) forecast indicating a decline of 2.4% in 2024 and 2.2% by 2025 to reach their 2% target in 2026. Previous forecasts indicated a decrease of 2.6% in 2024 and 2.3% in 2025.
  • We are wishing you a very Happy Holiday season and a prosperous New Year!

Sources

 

Join us for the next Ask Triangle!

Securities and Advisory Services offered through Harbour Investments, Inc. Member SIPC & FINRA.

Market Updates.

  • While we have observed some unexpected fluctuations in the economy recently, they don’t appear to be extreme, and the economy remains resilient and strong.
  • The Bureau of Labor Statistics October report showed a cool down as U.S. nonfarm payrolls only increased by 150,000, less than expected, while the unemployment rate rose to 3.9%.
  • The October Consumer Price Index, which measures consumer price changes over time (excluding food and energy) was lower than anticipated with a two-year low of 4%.
  • This month, the U.S. 10-year Treasury yield fell by almost 9 basis points, and the 2-year Treasury yield has fallen nearly 10 basis points.
  • We saw an 0.8% decrease in import prices, along with a 0.5% decline for the Producer Price Index in October, the biggest drop since April 2020.
  • Although the Federal Reserve opted not to raise interest rates in October, and it is encouraging to see the pace of inflation begin to slow, the Fed is still committed to enforcing a restrictive monetary policy through rate increases to achieve a decreased 2% inflation rate.
  • Despite decreases in the jobs market, the potential slowing of inflation and interest rate hikes encourages us. No matter what, we won’t leave your financials up to chance or wait to see what the market does tomorrow. The Triangle Financial team always takes a long-game perspective, so you can rest assured we keep your future security in focus.

Sources

 

Join us for the next Ask Triangle!

Securities and Advisory Services offered through Harbour Investments, Inc. Member SIPC & FINRA.

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