28 August 2014 0 Comments

Social Security Planning Tips

shutterstock_112541258The Bridge

When you are about to retire there are several choices that face you.  If you are about to retire at age 62 you may not want to take Social Security retirement benefits at that time due to the early retirement reduction in benefits. You might also not want to leave the workforce until the full retirement age (FRA) of age 66, but then delay the beginning of Social Security benefits until age 70 to maximize the delayed retirement credits.  In either case you will need to provide bridge income as you await for the Social Security benefit to kick in.  Some might suggest using an immediate annuity (IA) for this purpose, but I believe merely drawing down from other investments to be more efficient since the load on short term IA’s can be excessive.

Filling the Gap

Social Security retirement benefits are not going to be enough to provide a livable income.  Income from other sources will be required.  Immediate Annuities that guarantee an income for life can be an effective tool.   Not only is it the only investment that will absolutely guarantee income for life, the taxation is spread over the anticipated life of the annuitant.  This is doubly important with Social Security planning since just about any taxable income will not only generate its own tax, but will also create taxation on Social Security benefits.  A way to avoid any taxation is a life insurance policy loaded with maximum cash and minimum death benefit.   This unusual tax advantage has been covered in previous blogs under the subject of Indexed Universal Life.

Survivor’s Benefits

Income provided to the spouse of a covered worker will not be sufficient to provide a livable income for that souse.  That’s where life insurance comes into play.  Life insurance is the only answer if the covered worker is still working and other assets are not sufficient to maintain the minimal living standard desired.  If the worker has retired and there are sufficient funds to provide for the surviving spouse, then life insurance may not be necessary.  Just don’t let that piece of your planning go too long so that insurance options are limited due to cost or insurability.  Start deciding on your need for permanent insurance before your term policies come to their end.

In my next several entries I will leave the topic of insurance and give you some of my thoughts on the subject of Leadership…hope they will be meaningful to you.

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