Social Security, Uncategorized

Navigating Social Security: When to Claim for Maximum Benefit

Tomasina Hill

April 16, 2024

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Blog Introduction:

Deciding when to take Social Security benefits is a major retirement planning decision that impacts not only your finances but also the long-term well-being of you and potentially your spouse. Whether you’re considering taking benefits early, at Full Retirement Age (FRA), or delaying until age 70, understanding the financial implications is crucial. Join us as we dive deep into the numbers, exploring the effects of different claiming ages on your retirement income.

Understanding Full Retirement Age (FRA):

The concept of Full Retirement Age (FRA) has evolved over the years. Originally set at 65, legislation in the 1980s gradually increased the age to 67 for those born in 1960 or later. Understanding your FRA is essential as it determines the baseline for your benefits calculation.

The Financial Impact of Claiming Ages:

Claiming Early: Taking Social Security benefits before your FRA can result in significantly reduced monthly payments. For instance, claiming as early as 62 might mean your benefits could be reduced to as low as 71.7% of the FRA amount, depending on your birth year.

Waiting Until 70: Delaying your claim increases your benefits by a certain percentage each year past your FRA, up to age 70. This could mean receiving up to 126.7% of your FRA benefit amount, effectively boosting your monthly income when you might need it most.

Analyzing Break-even Points:

Using financial planning software like Right Capital, we examine scenarios to identify the break-even points—how long you would need to live to benefit more from delaying Social Security versus taking it early. This analysis helps personalize the decision based on your financial situation and life expectancy.

Why This Decision Matters:

Choosing when to start receiving Social Security affects the rest of your retirement life. It impacts how much you receive each month and, by extension, how you and your spouse cope financially in later years, especially if other retirement funds begin to dwindle.

Conclusion:

There’s no one-size-fits-all answer to when you should start taking Social Security. It’s a decision that should be made with a comprehensive understanding of the numbers, personalized to your financial and life situation. Consider consulting with financial experts who can provide tailored advice based on detailed financial planning and projections.

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Contact us today with any questions, concerns, or just to stay connected.

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Social Security, Uncategorized

Navigating Social Security: When to Claim for Maximum Benefit

Tomasina Hill

April 16, 2024

Share

Sign Up For Our Newsletter To Receive Weekly Updates.

Blog Introduction:

Deciding when to take Social Security benefits is a major retirement planning decision that impacts not only your finances but also the long-term well-being of you and potentially your spouse. Whether you’re considering taking benefits early, at Full Retirement Age (FRA), or delaying until age 70, understanding the financial implications is crucial. Join us as we dive deep into the numbers, exploring the effects of different claiming ages on your retirement income.

Understanding Full Retirement Age (FRA):

The concept of Full Retirement Age (FRA) has evolved over the years. Originally set at 65, legislation in the 1980s gradually increased the age to 67 for those born in 1960 or later. Understanding your FRA is essential as it determines the baseline for your benefits calculation.

The Financial Impact of Claiming Ages:

Claiming Early: Taking Social Security benefits before your FRA can result in significantly reduced monthly payments. For instance, claiming as early as 62 might mean your benefits could be reduced to as low as 71.7% of the FRA amount, depending on your birth year.

Waiting Until 70: Delaying your claim increases your benefits by a certain percentage each year past your FRA, up to age 70. This could mean receiving up to 126.7% of your FRA benefit amount, effectively boosting your monthly income when you might need it most.

Analyzing Break-even Points:

Using financial planning software like Right Capital, we examine scenarios to identify the break-even points—how long you would need to live to benefit more from delaying Social Security versus taking it early. This analysis helps personalize the decision based on your financial situation and life expectancy.

Why This Decision Matters:

Choosing when to start receiving Social Security affects the rest of your retirement life. It impacts how much you receive each month and, by extension, how you and your spouse cope financially in later years, especially if other retirement funds begin to dwindle.

Conclusion:

There’s no one-size-fits-all answer to when you should start taking Social Security. It’s a decision that should be made with a comprehensive understanding of the numbers, personalized to your financial and life situation. Consider consulting with financial experts who can provide tailored advice based on detailed financial planning and projections.

Understanding the Upcoming 2026 Income Tax Increase: What You Need to Know

A Brief History of the Tax Cuts and Jobs Act (TCJA)

In today’s Cardinal lesson, we’re discussing the significant changes coming to income tax rates in 2026. This isn’t a proposal but a law already set in motion. The Tax Cuts and Jobs Act (TCJA), passed in 2017 and effective from January 1, 2018, brought about substantial reductions in income taxes. However, these reductions were only funded for eight years, meaning they will expire at the end of 2025.

What Changes to Expect in 2026

As of January 1, 2026, the tax rates will revert to their 2017 levels, adjusted for inflation. Key changes include:

The 12% bracket will increase to 15%.
The 22% bracket will rise to 25%.
The top rate of 37% will revert to 39.6%.

Not Just a Proposal

It’s crucial to understand that this change is already the law. Many people mistakenly believe that the tax rate increases are still under discussion. However, unless Congress enacts new legislation, these higher rates will take effect as scheduled.

Implications for Your Financial Planning

Impact on IRAs and 401(k)s

With the current lower tax rates, now is the time to consider strategies like Roth conversions. By converting funds from a traditional IRA to a Roth IRA now, you can potentially save a significant amount in taxes over the long term.

Why Planning Ahead is Crucial

For individuals with substantial retirement savings, understanding these changes is vital for effective tax planning. The window to take advantage of the current lower tax rates is closing, and planning ahead can make a significant difference.

Case Studies and Planning Opportunities

Hans Scheil and Tom Griffith discuss specific case studies and planning strategies in our latest video. These examples illustrate how different scenarios can be managed effectively:

Case Study 1: A married couple with an adjusted gross income of $150,000 in 2024 can convert part of their IRA to a Roth IRA, taking advantage of the lower current tax rates.
Case Study 2: High-net-worth individuals with large IRAs can save substantial amounts in taxes by planning conversions over the next two years.

Estate Tax Considerations

The TCJA also doubled the estate tax exemption, which will revert in 2026. This change can significantly impact high-net-worth individuals, making estate planning more crucial than ever.

Action Steps to Take Now

Review Your Current Tax Situation: Analyze how the upcoming changes will affect your finances.
Consider Roth Conversions: Take advantage of the lower tax rates before they expire.
Plan for Estate Taxes: Assess your estate plans in light of the changing exemptions.

Conclusion

The changes coming in 2026 are significant, but with proper planning and informed decision-making, you can navigate these changes effectively. Watch our video for more detailed insights and personalized advice.

Get In Touch

Contact us today with any questions, concerns, or just to stay connected.

Have questions? Contact us today.

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