Retirement

New Budget Law Means Changes to Your Social Security and Medicare Benefits

Social security is economic security for retired, disabled people or families of retired, disabled or diseased workers. Many people today are engulfed with promotions and invitation of benefits and security system seminars on how to maximize their social security income. On November 2nd, 2015 the president signed into law the, Bipartisan Budget Act of 2015 which has put an end to loopholes used in the past while filing forbenefits and made significant changes to the benefits system. Now what has changed according to new budget act?

The biggest change for claiming Social Security benefits is that the “File and Suspend” strategy has been abolished. Previously, married couples could maximize their Social Security benefits by having one spouse file for retirement benefits, then suspending the benefits shortly after filing. Typically, the person who is suspending the benefits is the individual who has had a higher earnings record. This strategy allowed married couples to file spousal benefits and receive higher benefits based on the lower income of the spouse.

Under the Bipartisan Budget Act, when a person files for suspension of benefits, not only does the individual not receive any benefits during the suspension period but, his or her spouse also does not receive any spousal benefits. Any current retirement benefits claims will not be affected, however the Bipartisan Budget Act will apply towards new file and suspend benefit claims.

Another benefit strategy that has been eliminated is using the process of restricted applications. This strategy is mainly used to increase the overall longevity of one’s Social Security benefits. When an individual reaches full retirement age and is eligible for both the spousal benefits and his or her own benefits, they can file a restricted application to only receive the spousal benefits. By doing so, they delay receiving their own retirement benefits in order to earn the delayed retirement credits. These delayed credits increase Social Security benefits by 8% a year.

Under the rules of the Bipartisan Budget Act; when you file for Social Security benefits, you are simultaneously filing for both your spousal benefits and your individual benefits. For those people who turn 62 after 2015, they will have two options for claiming their Social Security benefits; either they can start claiming benefits anytime at or after turning 62 and receive a lower total amount of benefits. Or they can delay receiving benefits until they are older, as late as 70, in order to maximize their benefit amount, but not receive any benefits until that time.

An additional benefit of the Bipartisan Budget Act is that it sets the premium rates for people who receive Medicare Part B coverage and there will not be an increase for most people in 2016. People who have their Medicare premiums deducted out of their Social Security benefits will not see an increase in rates for 2016. This is roughly 70% of Americans who are covered with Medicare Part B. However, the other 30% of people will see their premium rates rise from $104.90 to approximately $119 per month. This is due to the fact that there was no cost-ofliving increase, the premium increase is considered a relief for those people who fall
under the 30% category; otherwise they would have had to incur the full load of the Medicare increase, which would have been higher than 50%.

 


Sources
USA Today -
http://www.usatoday.com/story/money/columnist/powell/2015/11/12/socialsecurity-
medicare-changes-budget-law-retirement/75164246/

Loveland, Ohio magazine
http://lovelandmagazine.com/2015/11/the-bipartisan-budget-act-of-2015/

FedSmith
http://www.fedsmith.com/2015/11/02/bipartisan-budget-act-of-2015-signedinto-
law/

NBC News
http://www.nbcnews.com/politics/congress/house-passes-sweeping-two-yearbipartisan-
budget-deal-n453226

How much money will you need to retire?

Do you know how much money you need in order to retire?

The answer may surprise you!

Generally speaking, you will need about 70 percent of your pre-retirement salary
to live comfortably
. The percentages vary, somewhat, depending upon your situation
and what you plan to do after retirement.

Does your current retirement plan include:
• Travel?
• Building your dream home?
• Paying for health insurance?

According to the Social Security Administration, 9 out of 10 individuals over age 65
receive Social Security benefits. These are monthly cash payments made to retirees
who paid Social Security taxes (e.g. FICA) and earned at least 40 credits (10 years of
work). Actual benefits depend on lifetime earnings - more earnings, more benefits - as
well as retirement age.

However, the average Social Security monthly benefit payment leaves an enormous gap
to be filled with other sources of revenue. In 2010, most retirees reported that Social
Security made up only 37% of their expendable resources. The rest came from savings
and investments, post-retirement earnings, and pensions.

How Much Will My Pension Contribute?

If you are lucky enough to have a defined-benefit (DB) pension, it will definitely help your
bottom line. A DB pension - not to be confused with a 401k or other investment plan - is
a contract for a fixed sum to be paid regularly to a retiree or if the worker becomes
disabled. Both the employer and employee contribute to the pension fund. These
pensions are common for public employees, such as police officers, teachers and
firefighters.

Many workers with federal pension plans do not pay Social Security taxes while
contributing to their pensions. If any part of the pension is from work where Social
Security taxes were not paid, it could affect the amount of the Social Security benefit.

Whether Social Security benefits and/or DB pension payments are included in your
retirement plan, it is important to recognize a large shortfall may exist between income
and need. This shortfall may be filled with either savings and investments or earnings. If
you are not working now and saving for later, you may find yourself working after
retirement to make ends meet.

It is never too late to start planning for your retirement, but you should start now. Beacon
Financial Group is a financial planning firm with more than 20 years of experience.
Contact Beacon Financial Group for a complimentary financial consultation to
help identify your post-retirement income gaps and plan for a more secure future.

There is absolutely no cost or obligation.



Sources:
Fast Facts & Figures about Social Security, 2012. Publication No. 13-11785. Released:
August 2012
For more information, contact Beacon Financial Group to speak to an experienced,
licensed advisor: (888) 769-4333 or info@beaconfinancialgroup.net.

How to Maximize Your Pension Benefits

How to maximize your pension benefits. Pension maximization is an effective strategy for married individuals who are current participants in a pension plan. It helps them receive their maximum retirement benefit and guarantees their surviving spouse an income after their death.  

To understand how pension maximization could impact your retirement, consider this example:

You choose to receive $4,000 per month in your retirement and ensure that your spouse receives the same. Choosing this option would give you $1,000 less per month for your entire retirement - $12,000 less per year or $120,000 lost for every 10 years in retirement. Because people continue to live longer, you could live 30 years in retirement, costing you $360,000 if you fail to plan your pension properly.  

Selecting the life only option ($5,000 per month - the maximum available) for your monthly pension income may ensure you receive the highest amount available. You may use the extra income to purchase a life insurance policy so your spouse will be protected and receive tax-free income from the proceeds upon your death. If your spouse predeceases you, you continue to receive the highest monthly benefit and have the option to reassign your beneficiaries or cancel your life insurance.  

In either situation, both spouses are protected and can maximize the income provided by the pension. With pension maximization, you receive the maximum income from your pension and also help make sure your family is taken care of.  

One of the most important decisions you will face when you leave your job is deciding which pension option to choose. By making the right choice, you can maximize your income and preserve your surviving family’s financial security in the event of an unexpected death. Remember, the pension choice you make is IRREVOCABLE. Contact a Beacon Financial representative today to explore your options.  

 

*Example used as illustration only, not indicative of any particular situation, actual results will vary. Guarantees are based on the claims-paying ability of the issuer.


This information is general in nature and should not be relied upon for financial decision. As with any financial matters, please consult with your financial professional before taking any action.