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Is it better to take your Social Security benefits now, or spend your retirement savings first?

I want to thank everyone for the overwhelming response to my new book, The Little Black Book of Social Security Secrets.  We’ve received an unprecedented number of phone calls and emails from readers who have read it, and who now realize that the choices that they make about Social Security can have an enormous impact on their retirement years.  Many of you want to know if you’re making the right decision about when to collect Social Security, and have written with the specifics of your situation.  Unfortunately, I just cannot answer all of your questions personally.  But what I will try to do on this blog is address some of the major issues that seem to be of the most concern to my readers.  For same-sex readers who are legally married and who have filed for Social Security benefits, the burning question seems to be, “Are they ever going to process my claim?”

What is the status of the backlog of claims that have already been filed by same-sex couples?

Social Security recently released Emergency Message EM-16013 REV, which provides their employees with long-overdue guidance on how to process the existing claims of same-sex individuals who were trapped by conflicts created when they married in one state, but lived in another.  This guidance effectively makes same-sex couples subject to the same deemed filing rule that is applied to opposite-sex couples.  And, while the Emergency Message is a good start, I’m not convinced that we will see a resolution to the backlog any time soon.  Many readers who are not even subject to the subtle interpretations of the Social Security rules that came as a result of The United States vs Windsor have told us about the backlog in processing their claims – so this is not necessarily a problem unique to same-sex couples.  We’re hearing horror stories from many traditional married couples whose applications have been in limbo for over a year!

I will devote a future blog post to some ideas that might help you move your existing claim along a little more quickly.  But for now, let’s look at some of the other questions raised by readers who are evaluating their options, but who have not yet filed.

When is the best time to apply for Social Security?  Should I take my benefits now, or spend my retirement savings and apply later?

Several readers have written and said that they are in a situation similar to this one:

My employer has just told us that the company has filed for bankruptcy and will be closing its doors later this year.  I don’t know if I will be able to get another job at my age and, even if I do, I’m  not sure I will be able to make as much money  as I am making now.  My spouse doesn’t work outside of the house.  I was thinking about signing up for my Social Security benefits once the company closes, but then I read your book.  I do have some savings in retirement plans (both traditional and Roth), and an investment account.   When is the best time for me to apply for Social Security if I can’t find another job?  Should I spend my savings now and apply for Social Security later, or should I save my money and apply now?

The loss of a job, especially at this point in your life, can be traumatic.  Before we review the options that you have, let’s go through a quick refresher on two of the points covered in The Little Black Book of Social Security Secrets.

When Should You Take Social Security?

How does the age at which you actually collect Social Security affect the amount you receive? Legally married same-sex couples are now eligible to receive the same Social Security benefits as traditional married couples.  If you are now 62, your Full Retirement Age (FRA) is 66.  If you wait until your FRA to collect your benefits, you will receive your Primary Insurance Amount (PIA).  If you collect at 62, your monthly check will be permanently reduced, by 25 percent of your PIA.  If you wait until you are 70 to collect, your check amount will be permanently increased by Delayed Retirement Credits (DRCs) of 8 percent per year (up to a maximum of 32 percent), plus Cost of Living Adjustments (COLAs).

When Should Your Spouse Take Social Security?

This next part is critical to understanding why you may have more options than you realize.  If you file for your own benefit (or, if you already filed for and then suspended your own benefit), your spouse will be permitted to file for spousal benefits based on your record as soon as he or she is eligible.   When your spouse files, though, is as important as when you file.  If your spouse waits until her FRA (for readers born between 1943 and 1954, this is 66), she’ll receive the highest spousal benefit possible – which is 50 percent of your own PIA.  She is allowed to file as soon as she turns 62 but, if she does, she will only receive 35 percent of your PIA.  In this example, we’re going to assume that your spouse is not entitled to a benefit based on her own earnings record.  I have some examples for two-income households coming up in a later post.

The answer to the above question posed by my readers, therefore, will depend on how old both of you are.  If you filed for and suspended your own benefit by the deadline of April 29, 2016, that will make it possible for your spouse, assuming that she is at least 66, to file for a spousal benefit that will be 50 percent of your own PIA.  (She can file at 62, but her benefit will be reduced.)  The spousal benefit will give your family some income from Social Security every month, while at the same time allowing your own benefit to grow by those DRCs and COLAs.  Maybe you can’t get another job that pays as well as the one you have right now, but you might be able to get one that you enjoy a lot more – like working on a golf course – because your spouse now has a source of income that can make up the difference.

Remember that, in order for your spouse to be able to claim spousal benefits based on your record without you having to collect your benefit, you had to have filed for and suspended your own benefit by April 29, 2016.  If you did, your spouse can collect spousal benefits while your own benefit continues to grow by DRCs and COLAs.  If you didn’t file and suspend by April 29, 2016, your spouse cannot collect spousal benefits unless you are also collecting your own benefit.

So what happens when you do get that pink slip?  As tempting as it might be to just throw in the towel and collect whatever Social Security you can, I’d recommend that you continue working in some capacity if you are able to do so.  Even a part-time job will provide you with some money and, if your spouse is able to claim spousal benefits based on your record, you just might have enough income to meet your expenses while still allowing your own benefit to grow to the maximum possible.

Should I Spend My 401(k) Money First?

Many of my readers have some money in retirement plans (both traditional and Roth), and also some money in non-retirement accounts.  They’ve asked me which account they should spend first, and whether it is better to take Social Security early so that they can delay spending their retirement accounts for as long as possible.  So let’s look at the alternatives.

For most people, it is better to spend your non-retirement accounts before your retirement accounts.  The graph that follows is from my book, Retire Secure!  It shows that, the longer you can leave your money in a tax-deferred (or tax-free) account, the longer it will last.

Should I spend my 401(k) money

 

Once your investment account is liquidated, the question becomes complicated. You should spend your traditional and Roth IRAs strategically, depending on your own personal tax situation. What the heck does that mean? I wish there was a one-size-fits-all answer, but there isn’t. However, Chapter 4 of my book, Retire Secure!, does contain an extensive analysis of this topic, and includes specific examples that may provide you with some additional insight. If you’d like to learn more about why it’s so important to spend the right money first, you can get a copy of the book from this website.

If you don’t want to read the book, here are some general points to consider. You’ll be required to take withdrawals from your traditional IRA when you turn 70 ½, and those withdrawals will be taxable. Income generated from non-qualified investment accounts is taxable. If you have enough taxable income from other sources, a portion of your Social Security will also be taxable. Most retirees don’t plan for unavoidable changes in their tax situations, and their failure to do so can be very expensive. What we strive to do in our practice is find the spending and tax management strategies that make your money last as long as possible. Ultimately, the solution is different for each client.

Readers, thank you for the questions and please keep them coming! I love hearing from you! And check back soon to read about some more real-life challenges that people like you are dealing with!

 

 

Live Gay, Retire Rich is Now Available on Amazon!

Live Gay Retire Rich by James Lange

I’m excited to inform you that my latest edition of Live Gay, Retire Rich, endorsed by the top IRA, Social Security, and legal experts in the country, is now available on Amazon. http://amzn.to/1LAIbAY

Live Gay, Retire Rich! is the Second Edition of Retire Secure! for Same-Sex Couples, now updated to include the positive holding of the Supreme Court Case Obergefell v. Hodges and its implications.

For example:

There were two gay couples with identical financial resources.  They each had the same amount of money, identical investments, identical taxes, and identical earnings history for Social Security purposes.   The first couple didn’t do any planning. The second couple followed the advice offered in Live Gay, Retire Rich! Using reasonable assumptions, the first couple runs out of money in 28 years while the second couple has $1.4 million and their portfolio continues to grow.

What was the difference? The first couple didn’t follow our advice; the second couple did. The first couple never got married, started receiving Social Security benefits at 62, didn’t make any Roth IRA conversions, and didn’t use key IRA and retirement plan estate planning strategies recommended in Live Gay, Retire Rich!  The second couple did get married, used our recommended apply and suspend technique for Social Security, did a series of Roth IRA conversions, and used the key IRA and retirement plan estate planning strategies we recommend.

I strongly urge you to pick up my new book on Amazon. http://amzn.to/1LAIbAY.
Regards,

LANGE1_Blue

James Lange
CPA/Attorney

P.S. Our assumptions include a Social Security technique, apply and suspend, that may not be available for much longer. Get your copy today and find out if this strategy could work for you, before it’s too late!

____________________________________________________________________________

Praise for Live Gay, Retire Rich!:

This is an exciting time to be part of the LGBTQ community in America and it also is an important moment to take advantage of the financial opportunities that are now available to us. Jim Lange’s book Live Gay, Retire Rich! is an easy-to-understand and valuable tool that will help us navigate the financial waters and successfully plan for our future.
Billie Jean King, Founder, Billie Jean King Leadership Initiative

Jim has generously pledged the proceeds from this book to Freedom to Marry and naturally, I appreciate that. But what I really appreciate is his bringing his expertise to bear on helping the couples for whom we have already won the freedom to marry.
Evan Wolfson (from the foreword), Founder and President, Freedom to Marry, A national campaign dedicated to marriage equality for same-sex couples

Jim provides a comprehensive road map to all the new retirement and estate planning strategies that were not previously available to same-sex couples. But they are now, and couples who wish to take advantage of them to enhance their options, increase their wealth, cut their taxes and live with financial security should dive into this gem.
Ed Slott, CPA, America s IRA Expert

Jim Lange has written a wonderful book for all committed couples same-sex or opposite sex who are considering marriage. Once you reach retirement age, marriage becomes the best way of preserving income and wealth for the partner who survives.
Jane Bryant Quinn, Columnist, AARP and Editorial Director, Daily Voice Author, Making the Most of Your Money NOW

Additional testimonials from Burton Malkiel, Kaye Thomas, Jan Cullinane, Mel Lindauer, Brian Tracy, and Sidney Kess and more information about Live Gay, Retire Rich available at www.outestateplanning.com. ____________________________________________________________________________

About Jim Lange

James Lange, CPA/Attorney has been helping same-sex couples since 2002.  He is a nationally recognized Roth IRA and retirement plan distribution expert and understands the best techniques for married couples to get the most out of Social Security.  The combination of his financial expertise as well as an understanding of the changing legal status of same-sex marriage makes Jim the logical person to write Live Gay, Retire Rich which can now be purchased at http://amzn.to/1LAIbAY

He’s also the best-selling author of the first and second edition of Retire Secure! with dozens of testimonials from the nation’s top IRA, investment, and estate planning experts and The Roth Revolution: Pay Taxes Once and Never Again.

Jim’s recommendations have appeared 35 times in The Wall Street Journal, 23 times in the Pittsburgh Post-Gazette, The New York Times, Newsweek, Money magazine, Smart Money and Reader’s Digest. His articles have appeared in The Journal of Retirement Planning, Financial Planning, The Tax Adviser (AICPA), and other top publications.  His article, Optimizing Social Security Benefits for Unmarried Couples, was just published in Trusts & Estates magazine.

 

The Essence of Retire Secure For Same-Sex Couples – Part 1

In this 9 part blog post series I will discuss along with graphs the essence of my book Retire Secure! For Same-Sex Couples: Live Gay, Retire Rich.

Retire Secure! for Same Sex Couples: Live Gay, Retire Rich quantitatively compares various courses of action. For those who don’t want to read through the explanation and detail, just looking at the 9 graphs could provide critical information with a minimum of reading effort. Please be aware that the recommendations beneath each figure will be advantageous in most situations, but not for everyone.

Taking Advantage of Retirement Plans Rather than Saving Outside Retirement Plans
It’s better to save in IRAs and retirement plans versus saving in after-tax accounts (regular investments outside IRAs or retirement plans).


This graph shows the total net assets* for two identically situated people, except one contributes to his retirement plan at work and the other saves outside the retirement plan. They each have the same earnings, invest the same out of pocket amount at the same rate, have the same tax bracket, spend the same, etc. The difference is dramatic. The lesson: Don’t pay taxes now, pay taxes later—during the accumulation stage while you are working.

Please see page 30 in my book Retire Secure! For Same-Sex Couples: Live Gay, Retire Rich for further details.

* We measure $100 in an IRA as $75 net assets because there is a $25 income tax associated with the $100 IRA. This applies to this and the following graph.


Stay tuned next week where I’ll touch on the Benefits of Spending After-Tax Savings before IRAs and other Retirement Assets.  If you are interested in seeing if you qualify for a free consultation please fill out the form on this page http://outestateplanning.com/what-we-do/ or give us a call at 412-521-2732.

– James Lange

Celebrate New Legal Rulings with a Free Same-Sex eBook!

LGBT Ally James Lange, an author and CPA/Attorney, Celebrates New Legal Rulings by Offering a Free E-Book for Same-Sex Couples Across the Nation.  

Retire Secure! for Same-Sex Couples: Live Gay, Retire Rich is endorsed by the top IRA, Social Security, and legal experts in the country and available as a FREE download for a limited time at www.samesex-equalrights.com

PITTSBURGH, October 13, 2014 – Last week was a historic week of victories for same-sex couples across the nation as 8 more states, West Virginia, Alaska, Utah, Virginia, Oklahoma, Wisconsin, North Carolina, and Indiana won the right to marry. The courts struck down the bans to marry in these states, expanding the rights for same-sex couples to marry in over half of the country. Within hours, county clerks in those states were issuing marriage licenses to couples who had been waiting for a decision to come down. Additionally, 4 more states in the 10th circuit and 4th circuit are on the verge of marriage equality as well. Colorado, Kansas, South Carolina, and Wyoming have cases pending verdicts and are expected to overturn their marriage bans in the near future. To celebrate these rulings attorney and CPA, James Lange is offering Retire Secure! for Same-Sex Couples: Live Gay, Retire Rich for free for a limited time on his web site, www.samesex-equalrights.com.

Pittsburgh LGBT Ally James Lange of Lange Financial Group, LLC has been working to help same-sex couples understand and take advantage of the tax and Social Security laws since 2002, but his campaign was re-energized when the Windsor case was decided in 2013. The laws and regulations for estate planning, tax planning, and Social Security planning have changed so significantly for same-sex couples over the last year that Jim has dedicated a large portion of his firm’s time and funds toward writing a book on gay retirement planning. Retire Secure! for Same Sex Couples: Live Gay, Retire Rich can be downloaded for FREE by going to www.samesex-equalrights.com before October 31st.

Along with the ability to get married, Lange suggests that there are many other points couples in states with marriage rights or on the verge of those rights should consider. “Married same-sex couples who live in states that recognize same-marriages will now be able to enjoy significant Social Security marital benefits and estate planning benefits, particularly if one member of the couples has a significant IRA or retirement plan,” says Lange, author of the book, Retire Secure! for Same-Sex Couples: Live Gay, Retire Rich. Mr. Lange offers four tips for same-sex couples:

  1. Go Into Marriage with Your Financial Eyes Wide Open. The couples who will benefit the most financially will likely be same-sex couples in their 60s or older where at least one person of the couple has a significant IRA or retirement plan. Some other couples will actually do worse financially. Finances are an important, though not exclusive, reason to get married or stay unmarried. If you are already married, speak to a tax advisor to take advantage of all the marital benefits.
  2. Consider How Marriage Affects Social Security Benefits. For many couples, one result of marriage is the opportunity to collect a much higher Social Security benefit. If you qualify and it is appropriate in your situation, apply for Social Security spousal benefits. There is a fantastic technique called “apply and suspend,” which is newly available to many same-sex couples in states that have recently changed their laws and to many residents of states that already afforded marriage rights. Most Social Security recipients, however, do not understand all of the possible spousal benefits of Social Security. There are significant advantages while both spouses are alive and after the first spouse dies.       Find out the enormous financial benefits for free by going to www.samesex-equalrights.com before October 31st.
  3. Marriage and IRA and Retirement Planning. Regardless of your state of residence, as long as you were married in a state that recognizes same-sex marriages, you and your spouse will enjoy significant tax benefits on inheriting an IRA or a retirement plan.
  4. Seek Professional Advice. As with all important financial decisions, Lange suggests that couples speak with a qualified retirement and estate advisor, preferably a CPA, as well as an attorney who works with same-sex couples. “Couples need to be sure they have all the knowledge they can to prepare for their financial lives as a married couple,” says Lange. For more information about how to get a FREE copy of Retire Secure! for Same-Sex Couples: Live Gay, Retire Rich or for information on how to schedule a meeting or media interview with James Lange visit www.samesex-equalrights.comor call 412-521-2732.

About Jim Lange

James Lange, CPA/Attorney has been helping same-sex couples since 2002. He is a nationally recognized Roth IRA and retirement plan distribution expert and understands the best techniques for married couples to get the most out of Social Security. The combination of his financial expertise as well as an understanding of the changing legal status of same-sex marriage makes Jim the logical person to write and now offer for free Retire Secure! for Same-Sex Couples: Live Gay, Retire Rich which can be downloaded at www.samesex-equalrights.com before October 31st.

He’s also the best-selling author of the first and second edition of Retire Secure! with dozens of testimonials from the nation’s top IRA, investment, and estate planning experts and The Roth Revolution: Pay Taxes Once and Never Again.

Jim’s recommendations have appeared 32 times in The Wall Street Journal, 23 times in the Pittsburgh Post Gazette, The New York Times, Newsweek, Money magazine, Smart Money and Reader’s Digest. His articles have appeared in The Journal of Retirement Planning, Financial Planning, The Tax Adviser (AICPA), and other top publications. His article, Optimizing Social Security Benefits for Unmarried Couples, was just published in Trusts & Estates magazine this August.

Media Contact: Amanda Cassady-Schweinsberg, 412-521-2732

SOURCE: James Lange, CPA/Attorney