Could Being Over 50 Get You Fired?!

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If you’re over 50, chances are the decision to retire won’t be yours.

A new data analysis by ProPublica and the Urban Institute found that more than half (56%) of U.S. workers over 50 have been fired, forced to retire early, or pushed out of their jobs before they were ready to retire.

What’s more, one third of these pushed-out workers go on to be fired from two or more jobs before leaving the workforce. And, only 1 in 10 of them ever reaches their previous salary level again.

If you’re under the impression age discrimination is on the decline, think again. Over the last two decades, age discrimination has only been getting worse, not better.

In 1998, the percentage of older workers who had been pushed out of their jobs was less than a third, compared with 56% in 2016. And, the percentage of older adults who suffered major financial losses from being pushed out of a job tripled, from 10% to nearly 30% over the same time period.

Coasting into retirement is no longer an option if you’re over 50. Not only is it a career mistake but also a retirement planning mistake.

Something you need to watch out for are the sneaky ways employers will try to push you out the door.

Donna Ballman, a Florida employment lawyer and author of the book, Stand Up For Yourself Without Getting Fired: Resolve Workplace Crises Before You Quit, Get Axed or Sue the Bastards, wrote down 11 stealth ways companies try to eliminate older workers.

Here the most common ploys, according Ballman:

  1. Job Elimination

One of the most common excuses used to get rid of older employees is “job elimination.” However, that may just be an excuse for what is really age discrimination.

If the company is not really eliminating the job, just changing the title and putting someone younger in your former position, you may have an age discrimination claim.

  1. Layoff

The company is supposed to attach to a layoff notice a list of other employees included and excluded from the layoff, along with their ages. Employers can be sneaky about the way they put together these reports.

Some will show only select departments or specific job titles, which don’t give the whole picture. More often, they’ll include a few under-40 employees to make the bloodletting look less like age discrimination.

If you are selected for layoff and younger, less-qualified employees at your level are not, you might have an age discrimination claim. If you’re part of a one-person or small “layoff” and you can show that younger people are not being included, you may also be able to prove age discrimination.

  1. Suddenly Stupid

If, after years of great performance reviews, you’re getting reprimanded for things everyone does, or being nitpicked for things the company didn’t care about before, it’s possible the company is gearing up for what’s called the “suddenly stupid defense.”

They’re building a case to get rid of you for poor performance – trying to show a “legitimate reason” other than age for firing you.

If you’re being targeted for write-ups when younger employees do the same things and aren’t written up, you may have a claim.

  1. Threatening Your Pension

Some companies will go as far to threaten an employee’s pension if they don’t quit. That’s a scary threat, but it may be a hollow one. First of all, few people have what would be considered a “pension” (a lump sum paid out every month). Most people have 401(k)s or similar savings plans that your employer can’t touch.

Your employer may claim you can lose your right to your vested pension if you’re fired “for cause,” but it’s not that easy. You have appeal rights if they deny your benefits, and you can sue if you aren’t satisfied with the administrator’s decision.

If you’re being threatened, it’s time to run speedy-quick to an employment lawyer in your state who handles claims under the Employee Retirement Income Security Act or ERISA – the law governing employee pension plans and other employee benefits.

  1. Early Retirement

One way employers get rid of older employees is offering a package that includes incentives to take early retirement. Some of these packages are too good to pass up, so if you are offered one, consider it carefully. If you turn it down, remember you can still be fired at will.

However, if the company only fires the older folks, you might have an age discrimination claim. If the early retirement is involuntary, such as when the only alternative offered is being fired, then it probably violates age discrimination laws.

  1. Mandatory Retirement Age

If your employer still has a mandatory retirement age, it’s probably breaking the law. There are exceptions for firefighters and law enforcement.

There is also a very limited exemption for employees who are at least 65 years old, who were bona fide executives or high-level policy-makers for their last two years, and who received an immediate nonforfeitable retirement benefit of at least $44,000.

  1. Cutting Job Duties

One way to force older employees out is to cut job duties, limiting your authority and humiliating you with low-level tasks. You may have age an age discrimination claim if this happens.

So don’t just quit in disgust.

  1. Isolation

Cutting you out of meetings, excluding you from lunches, and sticking you in a cubicle far from the action is another way employers try to get you to quit.

If only younger employees are being included in activities from which you are excluded, this is evidence of age discrimination.

  1. Denying Promotions or Opportunities for Advancement

It’s illegal for an employer to deny you a promotion just because they think you’ll retire soon. Cutting job duties and isolating you are sneaky ways for them to claim you don’t have the experience or qualifications to get a promotion or to advance in the company.

If your opportunities are limited after you hit one of those age milestones, start documenting what is happening and see whether they are also targeting younger employees for similar treatment.

  1. Cutting Hours

Another way to put senior employees under duress is to cut hours to the bone. Starving you to death is a way to force you to quit.

Here, too, look around and see if older employees are being targeted.

  1. Harassment

Cutting hours and job duties, isolating you and assigning menial tasks are all forms of harassment. Other examples of age-based harassment are: calling you the “old man,” or “old lady”; constantly asking when you’re going to retire; saying you’re senile; or making other comments related to age.

Donna recommends following the company’s policy for reporting harassment. And putting everything down in writing. “Title this document, ‘Formal Complaint of Age-Based Harassment and Discrimination,’ says Ballman. “Describe how you’re being singled out for treatment different than younger coworkers.”

She says, note any ageist comments that have been made to you; any other older employees being targeted; and whether there are any witnesses or evidence. Give the company a chance to investigate. If they don’t remedy the situation or if the harassment continues, it might be time to contact an employment lawyer.

Age discrimination is a serious threat to your retirement nest egg. If you suspect you’re being targeted because of your age, start documenting everything so you can build your case.

To a richer life,

Nilus Mattive

Nilus Mattive

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6 HUGE Social Security Mistakes

This post 6 HUGE Social Security Mistakes appeared first on Daily Reckoning.

One of the biggest Social Security mistakes I see people make is claim their benefits too early.

According to the Center for Retirement Research at Boston College, 60% of seniors are applying for social security benefits before full retirement age.

If you turned 62 last year, your full retirement age will be 66 years and six months. Full retirement age will continue to increase in two-month increments each year until it reaches 67.

Even though you’re eligible to start claiming benefits at 62, it’s ill-advised. Monthly payments are reduced by 25-30% if you claim at 62, depending on your birth year.

In theory, claiming Social Security benefits should be straightforward — after working several decades, fill out an application and get a monthly benefit check for the rest of your life.

But, you and I know it’s not that easy. There are strategies to consider if you want to maximize your benefits, and there are several mistakes that could cost you thousands of dollars over the course of your retirement if you’re not careful.

Here are just a few mistakes I see people make that could easily be avoided.

Mistake #1 – Claiming Benefits Too Early

I already explained why this is not advised for most retirees. But if you already chose to claim benefits early and now are second-guessing your decision, there are some recourse steps you can take.

Specifically, you are allowed to withdraw your Social Security application and re-claim benefits at a later date, but two conditions apply.

First, you must withdraw your application within the first 12 months of receiving benefits. And second, you have to pay back every cent of benefits you’ve already received. Which can be a lot of money if you weren’t planning on withdrawing.

This is why you should be certain. There are some perfectly good reasons for claiming benefits before your full retirement age, but it’s important to weigh all your options before you make moves.

Mistake #2 – Not Understanding the “Earnings Test”

If you’re still working and haven’t yet reached full retirement age, your benefits can be withheld based on your earnings.

Here are the two “earnings test” rules for 2019:

  1. If you will reach full retirement age after 2019, $1 of your benefits will be withheld for every $2 you earn in excess of $17,640.
  2. If you will reach full retirement age during 2019, $1 of your benefits will be withheld for every $3 you earn in excess of $45,920. This is prorated monthly, and only the months before your birthday month are counted.

To be clear, benefits withheld under the earnings test aren’t necessarily lost. They can be returned in the form of increased benefits once you reach full retirement age.

People who think they can be fully employed and collect their Social Security benefits are often caught off guard when the Social Security office tells them they made too much money and have to repay some of the benefits.

Once you reach full retirement age, you can earn as much as you’d like with no reduction in benefits.

Mistake #3 – Assuming Social Security Is All the Retirement Income You Need

23% of married couples age 65 and older and 43% of unmarried seniors rely on Social Security for 90% or more of their income. Not only is this unsustainable, it’s not how Social Security was designed. The original intent was that Social Security would account for about half of your retirement income.

In reality, the average American can expect Social Security to replace about 40% of their income. The rest needs to come from other sources, like pensions and retirement savings.

Typically you’ll need 70% to 80% of your pre-retirement income to maintain your quality of life after retiring.

Mistake #4 – Not Checking Your Social Security Earnings Record

Do you check your Social Security statement each year? If not, now is a good time to create an account at www.ssa.gov and check it out.

Your Social Security statement has lots of valuable information, including your estimated retirement benefits, disability benefit eligibility, Medicare eligibility and benefits for your potential survivors.

But maybe the most important reason to check your statement every year is to ensure it’s correct. Recently, the SSA said there was about $71 billion in Social Security-taxed wages that couldn’t be matched to any earnings records, and only half of this was eventually resolved.

Because your future benefits are based on your earnings record, it’s important to make sure you keep tabs on this number.

Mistake #5 – Remarrying without Understanding the Consequences

If you’re collecting an ex-spousal Social Security benefit and you remarry, that benefit goes away. And if you remarry someone who is 10 or 20 years younger than you, you might not qualify for spousal Social Security benefits for awhile.

So make sure you understand how remarrying will impact your benefits. Also consider, if your ex-spouse passes away, you will step up to their full benefit amount — not the most pleasant thing to think about but important to consider.

Mistake #6 – Assuming Social Security is Tax Free

A surprising number of people I’ve talked to don’t realize they may have to pay income tax on their Social Security benefits. It depends on how much retirement income you have. But you don’t have to be considered “high income” to be taxed.

If your combined income is greater than $25,000 for single filers or $32,000 for married couples filing jointly, as much as 50% of your benefits could be taxable. If your combined income is greater than $34,000 (single) or $44,000 (joint), as much as 85% of your benefits could be subject to federal income tax.

It really depends on how significant a source Social Security will be for your retirement income. If you have a pension and significant 401(k) income, likely a portion of your Social Security benefits will be taxed.

If Social Security is your prime source of retirement income, you’re unlikely to be taxed. Consider this when estimating how much income you’ll need in retirement.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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3 Critical Factors for Your Investing This Year

This post 3 Critical Factors for Your Investing This Year appeared first on Daily Reckoning.

Although the S&P 500 is still up almost 10% year to date, it’s dropped roughly 5.7% in the last month.

So as we approach 2019’s halfway mark, you might be feeling like things are turning a bit and it might not be another “sit back and relax” kind of year… one where things just keep going up on autopilot.

Well, here’s how I look at it…

What Can You Control?

As investors, we should always remember that we CAN’T control the markets, the Fed, geopolitics, or other big-picture forces affecting our portfolios.

At the same time, we CAN control what expectations we have as well as the strategies we use to get where we want to be.

It really boils down to balancing a few important factors:

#1. TIME HORIZON

#2. RATE OF RETURN

#3. RISK UNDERTAKEN

Each of these elements needs to be combined in a way that makes sense for YOU.

For example, if you don’t mind waiting a long time for your wealth to really grow, you can easily get lower, steadier rates of return without taking on lots of risk.

Investing in quality dividend stocks – which I’ve been consistently recommending for two decades now – is a perfect example of this type of balance.

When the Dow jumps 30% in a year, your portfolio still surges in value.

When the market dips or goes sideways, your dividend payments keep flowing into the portfolio or buying you additional shares.

And ultimately, over a decade or two, your nest egg will likely end up having increased something like 10% a year on average.

Buying and Holding Assets

The same can be said for buying and holding other assets for the long-term – whether it’s real estate or precious metals.

In contrast, someone who wants better, faster returns is naturally going to have to take on a little more risk to get it… but even in this market, doing so is not impossible.

One way is targeting various shorter-term moves in various stocks and exchange-traded funds (ETFs).

In fact, you can even use ETFs to target moves in plenty of areas beyond stocks and related investments.

For example, there are widely-known ETFs targeting gold, silver, oil, and other commodities.

There are also ETFs and exchange-traded notes (ETNs) that are designed to rise when stock sectors, indexes, or various commodities fall in value… even some that produce two or three times the moves!

Again, you should expect some losers when you follow a more active approach… but the overall result can still give you a more rapid compounding effect even in choppy markets.

And if shorter-term gains of 5% or 12% still aren’t enough? Then you can simply slide the risk scale a bit further out and use greater amounts of leverage!

Using Leverage Isn’t Always a Bad Idea

Contrary to popular belief, using leverage isn’t always a bad thing nor does it even have to involve borrowed money.

For example, some of the funds I just mentioned use a limited amount of leverage to amplify moves in their underlying benchmarks.

Similarly, buying options to speculate on various up and down moves can do the same thing with even more dramaticeffects… while still never exposing you to unlimited risk like short selling, futures trading, or other leveraged approaches do.

And as I’ve proven over and over again, selling options can also help investors get extra investment income while actually LOWERING their portfolio’s overall risk in many cases!

As the market is dropping, selling put options on companies you wouldn’t mind owning is a terrific way to collect upfront payments while possibly getting you into the type of solid long-term investments I mentioned a moment ago.

Likewise, if you sell some covered calls against stocks you already own, you simply stand to collect extra income on top of any regular dividends you’re already earning.

And as long as you write contracts that have higher strike prices than your entry prices, the worst thing that happens is you book some additional capital gains. 

Bottom Line

Even if the major markets keep falling from here… or bouncing up and down without really going anywhere for the rest of the year… there’s no reason to get frustrated or sit on the sidelines.

You have plenty of ways to continue building your wealth whether you want to stay very conservative… get very aggressive… or split the difference with a more active approach like option selling.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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What to Do if You Are Forced into Early Retirement

This post What to Do if You Are Forced into Early Retirement appeared first on Daily Reckoning.

Will you still be working by age 70?

It’s a fair question.

According to a recent survey by the Employee Benefit Research Institute, nearly one-third of workers predicted they’d be working until age 70 or older, and only 10% expected to retire before 60.

The reality is only 7% of the retirees surveyed worked until at least 70, and more than one third quit work before age 60.

And this wasn’t a fluke scenario either. Corporate downsizing, health problems and other unexpected events have led to more than 50% of U.S. workers, over the age of 50, having to retire earlier than expected.

We tend to think we’re going to work up to, or longer than, traditional retirement age, but it’s not usually the case. In fact, more often than not, older U.S. workers are pushed out of their jobs before their planned retirement date.

Since this is the reality we live in today, I think everyone should have an emergency retirement plan. If you find yourself out of a job unexpectedly, here are some steps you can take to deal with the prospect of early retirement:

Don’t Panic

Being let go or having to take an early retirement package is not always easy to stomach. Your pride might get in the way of your best judgement so don’t make any quick decisions with your money.

Instead, give yourself a few days to collect your thoughts on what just happened.

Review Your Finances

After you’ve taken some time to reflect, start reviewing your finances. Most likely you were planning to continue adding money into your company’s 401(k) or other retirement accounts. Those contributions are likely going to end, so the question becomes: Do you have enough saved to retire?

You can use the 4 percent rule to estimate how much you can safely take out of your retirement accounts. But also be sure to include Social Security and any pension benefits you might have coming your way.

If the numbers look good, then you can safely retire without worry. But if not, you may need to consider part-time work or drastically changing your lifestyle.

Consider Part-time Work Or Consulting

The likelihood of you matching the job you just lost is low, so don’t feel bad about taking a lower paying job or one with less status. Every dollar you earn is one less you’ll have to pull from savings and investments.

Plus, some part-time jobs even offer benefits. Costco and Starbucks, for instance, give part-time staff health insurance and 401(k) plans with company match.

You can also explore the idea of consulting or trying something outside your field of work. Look at early retirement as an opportunity to try something new.

Lower Your Expenses

While you’re on the hunt for new employment, it’s best to tighten up your budget. Searching for work as you get older becomes more difficult and the process can take longer than when you’re young.

Have a look at your monthly expenses and determine which ones are eating up the majority of your household income. For most, housing and transportation will be the biggest culprits.

If you’re single or your spouse is unemployed, you may need to consider some drastic cuts, like selling your house and relocating somewhere more affordable, or selling one of your vehicles to lower expenses like insurance, gas, and maintenance.

File for Unemployment Benefits

If you get laid off, you’re likely eligible for unemployment. You’ve paid into the system all your working life, there’s no shame in taking the benefits now that you actually need them.

You will have to prove that you’re actively looking for re-employment so make sure you follow the necessary steps. And, if you have no income, you might also be eligible for other benefits like food stamps, job training or employment counseling.

Lastly, if you were forced to retire early because of illness, you may also be eligible for disability benefits.

Find New Health Insurance

If you lost your job tomorrow, you can stay on your former employer’s health insurance plan up to 18 months, but you’ll likely have to pay the full cost.

Rather than pay more than you have to, consider applying for new health insurance right away. Since your income will be lower now, you can qualify for subsidies or for Medicaid. These options will most likely be cheaper than the COBRA offered by your employer.

Be Smart About Social Security

If you’re eligible for Social Security benefits, you can start to take them as early as age 62. But, if you do, your monthly benefits will be permanently reduced.

You could lose as much as 30 percent, according to the Social Security Administration, if you collect at 62 rather than waiting until your “normal” retirement age.

What’s more, you can earn “delayed retirement credits” if you postpone your benefits past normal retirement age. Do some research to make sure you’re collecting as much as you possibly can.

Pursue Hobbies

It can be hard adjusting to a life that’s not built around work. So channel your energy into new projects and hobbies that are equally fulfilling.

If you’ve always wanted to spend more time woodworking or gardening, now is the time to do it. And who knows, you might even develop a hobby that will pay you back. A lot of retirees have found ways to make some extra cash buying and selling old antiques, tools, and other usable or collectible items online.

Having to retire early is not always a bad thing. You might get a significant buyout package or you might realize you were ready to retire all along.

Just be prepared for anything and you’ll lessen the shock if the day comes.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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Big Banks or Congress, Who Do You Trust More?

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I know it seems like I’m picking on Senator Elizabeth Warren lately, but that’s not my intention.

Rest assured, I dislike the vast majority of politicians just as much.

It just so happens that, in a runup to the 2020 election, it seems like Warren is trying to make big headline splashes by taking on populist whipping boys like the student loan crisis and, more generally, big banks.

Meanwhile, I want to inject reason back into the equation every time I see something that might produce a good feeling among a certain part of the population, but doesn’t pass muster when examined more closely.

That’s a long-winded way of saying: I want to call Warren when she spouts off B.S.

Or comes up with a plan that simply doesn’t make sense.

And I will do the same as other politicians – on both sides of the aisle – going forward.

Take Warren’s latest spat with Chase Bank on Twitter.

The Backstory

Through its Twitter account, Chase Bank wanted to inspire people to be more mindful of their personal spending.

So it posted a hypothetical conversation between a bank account and its owner.

The gist was that there are plenty of ways to save more money – including bringing your lunches to work, cutting out expensive coffee trips, and walking rather than taking a car service. 

Here’s the full post…

Now, there are a lot of things we can hate about Chase and its big banking rep. A lot of things.

But was that post really one of them?

I won’t keep you in suspense: No.

Yet Warren took aim anyway

Chase’s suggestions are hardly novel.

But there is absolutely no equivalency between a post trying to motivate people to think about their personal spending and Warren’s accusations.

For starters, it’s a false dilemma – even if Warren is correct, it doesn’t negate having a personal budget or considering where you’re spending money.

Ask Yourself This…

What was the personal savings rate before the financial crisis?

I’ll answer – it was typically around 5% from January 2000 through January 2010 but dipped as low as 2.2% in 2005.

In other words, it isn’t like your typical bank account was getting stuffed with cash before the financial collapse.

What about Warren’s other accusations?

Well, yes, Chase was involved in the subprime mortgage crisis and the near-collapse of our financial system.

So were several government agencies,  the Federal Reserve, and a number of policies that aggressively encouraged homeownership even for groups that couldn’t really afford it.

In fact, Fannie Mae and Freddie Mac – two government-sponsored enterprises – were the largest components of the total federal bailout… needing $191,484,000,000 in taxpayer money. That’s 7.6 times as much as Chase needed.

And what about the $25-billion bailout given to Chase itself?

It has already repaid the entire amount and the U.S. government earned a $1.7 billion profit on that investment to boot.

Make no mistake: I detest the bailouts that happened, especially the moral hazard that they created. But it isn’t like taxpayers lost out on the Chase bailout… or many other ones. If you want to see all the data, check out this running list.   

Living Wages

What about “employers don’t pay living wages”?

I’m not really sure how to address this one. It’s just an overly broad statement that sounds good but doesn’t mean anything.

What is a living wage? Depends on where and how you live, I guess. I imagine it also applies to some employers more than others, and further varies by individual jobs within any particular company.

There are certainly lots of Chase employees – not just Jamie Dimon – making a living wage. I can guarantee that.

And Warren’s last point pretty much says the same thing, except it adds in the idea of rising costs.

Again, it’s an oversimplification.

Costs have been rising for certain things – especially higher education. (Refer back to my last Warren piece to understand why that might be.)

And any inflation that we do have has largely been stoked by the Federal Reserve – i.e. Washington, D.C.

Bottom Line

Same refrain as my last article regarding Senator Warren – pretty much everything she’s complaining about originates in large part with the government itself.

That goes for the housing crisis that precipitated the economic collapse and destroyed so many jobs and retirement portfolios…. all the way to the massive spikes in college tuition, healthcare, and food that have happened in the decade since.

Meanwhile, here’s my version of that Twitter post…

@U.S.Treasury: Why is my balance so low?

Taxpayers: Maybe lawmakers shouldn’t have spent $665 billion more than they had last year

Taxpayers: Actually, lawmakers haven’t balanced an annual budget since 2001

Taxpayers: Social Security and Medicare are facing perpetual shortfalls, too

@U.S.Treasury: Guess we’ll never know

Taxpayers: Seriously?

#MoneyMotivation

Even if its “money motivation” Twitter post was a bit cliché, Chase isn’t wrong to tell Americans they need to watch how they manage their finances.

It would just be better to tell the same thing to Senator Warren and the rest of our over-promising, fiscally-irresponsible politicians.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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6 Social Security Mistakes to Avoid

This post 6 Social Security Mistakes to Avoid appeared first on Daily Reckoning.

One of the biggest Social Security mistakes I see people make is claim their benefits too early. 

According to the Centers for Retirement Research at Boston College, 60% of seniors are applying for social security benefits before full retirement age. 

If you turned 62 last year, your full retirement age will be 66 years and six months. Full retirement age will continue to increase in two-month increments each year until it reaches 67. 

Even though you’re eligible to start claim benefits at 62, it’s ill-advised. Monthly payments are reduced by 25-30% if you claim at 62, depending on your birth year. 

In theory, claiming Social Security benefits should be straightforward — after working several decades, fill out an application and get a monthly benefit check for the rest of your life. 

But, you and I know it’s not that easy. There are strategies to consider if you want to maximize your benefits, and there are several mistakes that could cost you thousands of dollars over the course of your retirement if you’re not careful. 

Here are just a few mistakes I see people make that could easily be avoided. 

Mistake #1 – Claiming Benefits Too Early

I already explained why this is not advised for most retirees. But if you already chose to claim benefits early and now are second-guessing your decision, there are some recourse steps you can take.

Specifically, you are allowed to withdraw your Social Security application and re-claim benefits at a later date, but two conditions apply. 

First, you must withdraw your application within the first 12 months of receiving benefits. And second, you have to pay back every cent of benefits you’ve already received. Which can be a lot of money if you weren’t planning on withdrawing. 

This is why you should be certain. There are some perfectly good reasons for claiming benefits before your full retirement age, but it’s important to weigh all your options before you make moves.

Mistake #2 – Not Understanding the “Earnings Test”

If you’re still working and haven’t yet reached full retirement age, your benefits can be withheld based on your earnings. 

Here are the two “earnings test” rules for 2019:

  1. If you will reach full retirement age after 2019, $1 of your benefits will be withheld for every $2 you earn in excess of $17,640.
  1. If you will reach full retirement age during 2019, $1 of your benefits will be withheld for every $3 you earn in excess of $45,920. This is prorated monthly, and only the months before your birthday month are counted.

To be clear, benefits withheld under the earnings test aren’t necessarily lost. They can be returned in the form of increased benefits once you reach full retirement age. 

People who think they can be fully employed and collect their Social Security benefits are often caught off guard when the Social Security office tells them they made too much money and have to repay some of the benefits. 

Once you reach full retirement age, you can earn as much as you’d like with no reduction in benefits.

Mistake #3 – Assuming Social Security Is All the Retirement Income You Need

23% of married couples age 65 and older and 43% of unmarried seniors rely on Social Security for 90% or more of their income. Not only is this unsustainable, it’s not how Social Security was designed. The original intent was that Social Security would account for about half of your retirement income. 

In reality, the average American can expect Social Security to replace about 40% of their income. The rest needs to come from other sources, like pensions and retirement savings. 

Typically you’ll need 70% to 80% of your pre-retirement income to maintain your quality of life after retiring. 

Mistake #4 – Not Checking Your Social Security Earnings Record

Do you check your Social Security statement each year? If not, now is a good time to create an account at www.ssa.gov and check it out. 

Your Social Security statement has lots of valuable information, including your estimated retirement benefits, disability benefit eligibility, Medicare eligibility and benefits for your potential survivors. 

But maybe the most important reason to check your statement every year is to ensure it’s correct. Recently, the SSA said there was about $71 billion in Social Security-taxed wages that couldn’t be matched to any earnings records, and only half of this was eventually resolved. 

Because your future benefits are based on your earnings record, it’s important to make sure you keep tabs on this number.

Mistake #5 – Remarrying without Understanding the Consequences

If you’re collecting an ex-spousal Social Security benefit and you remarry, that benefit goes away. And if you remarry someone who is 10 or 20 years younger than you, you might not qualify for spousal Social Security benefits for awhile.

So make sure you understand how remarrying will impact your benefits. Also consider, if your ex-spouse passes away, you will step up to their full benefit amount — not the most pleasant thing to think about but important to consider. 

Mistake #6 – Assuming Social Security is Tax Free

A surprising number of people I’ve talked to don’t realize they may have to pay income tax on their Social Security benefits. It depends on how much retirement income you have. But you don’t have to be considered “high income” to be taxed. 

If your combined income is greater than $25,000 for single filers or $32,000 for married couples filing jointly, as much as 50% of your benefits could be taxable. If your combined income is greater than $34,000 (single) or $44,000 (joint), as much as 85% of your benefits could be subject to federal income tax.

It really depends on how significant a source Social Security will be for your retirement income. If you have a pension and significant 401(k) income, likely a portion of your Social Security benefits will be taxed. 

If Social Security is your prime source of retirement income, you’re unlikely to be taxed. Consider this when estimating how much income you’ll need in retirement.

To a richer life,

Nilus Mattive

— Nilus Mattive
Editor, The Rich Life Roadmap

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