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Social Security & you


Posted: April 4, 2008 7:42 p.m.
Updated: June 5, 2008 5:02 a.m.

Today, Social Security covers about 163 million workers with 49 million people receiving benefits. Many people think that Social Security contributions are held in interest-bearing accounts to be used for their
future income (this is the way it should be if it was run properly). In reality, contributions are used to fund benefits for today's retirees.

Before you consider taking benefits, think of your long-term retirement plans.

If you are considering taking Social Security benefits before reaching full retirement age, your benefits will be permanently reduced. By delaying receipt of benefits, you can maximize retirement income and, in some cases, the retirement and survivor benefits available to a spouse. Following are some reasons to consider about waiting until normal retirement age.

The benefit of waiting
Full retirement age is defined by Social Security as the age retirees are eligible to receive 100 percent of their benefit (though not the maximum).

It varies based on the year you are born. For example, if a retiree was born in 1940, their full retirement age is 66. Each year a retiree postpones taking their benefit, after reaching full retirement age, the amount is increased by up to 8 percent, until age 70. This is above any cost-of-living adjustments. Also, delaying Social Security income will not affect eligibility for Medicare. When a person turns age 65, you become eligible for Medicare, even if Social Security benefits have not been received.

Couples and waiting
Proper planning may make it possible for couples to step up Social Security benefits. Assuming a wife begins receiving her Social Security benefits at age 66, she would be eligible to receive the greatest of:

* A benefit amount based on her own earnings (worker benefit).
* A benefit amount equal to 50 percent of her spouse's Social Security benefit.
* A survivor benefit equal to 100 percent of her spouse's actual benefit (if husband is deceased).

Taking benefits early will permanently reduce the percentage of the spouse's Social Security benefit that the wife can receive. Social Security also provides survivor's insurance for workers and their families. It is one of the most valuable benefits you have under Social Security if you have a young family.

If you can't wait
Delaying Social Security doesn't have to mean a delay in receiving income.

If you are considering a strategy to delay benefits, review your investment portfolio with your financial advisor so you can understand the liquidity, taxation and risk levels of each of your investments.

It's important to look at a variety of sources when building a retirement income strategy. By using multiple investments, you can better manage income generation, investment risk and tax consequences for your overall portfolio.

With careful planning, you can create an income stream that is comfortable in meeting your goals. You may want to consider a variable annuity that has very good income strategies, guarantee options for one or two lifetimes, avoid probate and various beneficiary options.

Jim Lentini, CLU, ChFC, IAR, is president of Lentini Insurance & Investments Inc. His column represents his own views, and not necessarily those of The Signal.


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