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January 31st, 2020 by

Being named as the executor of a friend’s or family member’s estate is generally an honor. It means that person has been chosen to handle the financial affairs of the deceased individual and is trusted to help carry out his or her wishes.

Settling an estate, however, can be a difficult and time-consuming job that could take several months to more than a year to complete. Each state has specific laws detailing an executor’s responsibilities and timetables for the performance of certain duties.

If you are asked to serve as an executor, you may want to do some research regarding the legal requirements, the complexity of the particular estate, and the potential time commitment. You should also consider seeking the counsel of experienced legal and tax professionals.

Executor of the estate

Documents and Details

The executor of an estate (referred to as a personal representative in some states) is named in the deceased’s legal will. If there is no will, there technically can be no executor, but the probate court will appoint an administrator or personal representative to carry out the same duties. The person chosen will depend on state law.

A thoughtfully crafted estate plan with up-to-date documents tends to make the job easier for whomever fills this important position. If the deceased created a letter of instruction, it should include much of the information needed to close out an estate, such as a list of documents and their locations, contacts for legal and financial professionals, a list of bills and creditors, login information for important online sites, and final wishes for burial or cremation and funeral or memorial services.

An executor is responsible for communicating with financial institutions, beneficiaries, government agencies, employers, and service providers. You may be asked for a copy of the will or court-certified documentation that proves you are authorized to conduct business on behalf of the estate. Here are some of the specific duties that often fall on the executor.

Arrange for funeral and burial costs to be paid from the estate. 

Collect multiple copies of the death certificate from the funeral home or coroner. They may be needed to fulfill various official obligations, such as presenting the will to the court for probate, claiming life insurance proceeds, reporting the death to government agencies, and transferring ownership of financial accounts or property to the beneficiaries.

Notify agencies such as Social Security and the Veterans Administration as soon as possible. 

Federal benefits received after the date of death must be returned. However, because Social Security benefits are paid a month behind, a payment made in the month of death (for the previous month) would not have to be returned. You should also file a final income tax return with the IRS, as well as estate and gift tax returns (if applicable).

Protect assets while the estate is being closed out. 

This might involve tasks such as securing a vacant property; paying the mortgage, utility, and maintenance costs; changing the name of the insured on home and auto policies to the estate; and tracking investments.

Inventory, appraise and liquidate valuable property. 

You may need to sort through a lifetime’s worth of personal belongings and list a home for sale.

Pay any debts or taxes. 

Medical bills, credit-card debt, and taxes due should be paid out of the estate. The executor and/or heirs are not personally responsible for the debts of the deceased that exceed the value of the estate.

Distribute remaining assets according to the estate documents. 

Trust assets can typically be disbursed right away and without court approval. With a will, you typically must wait until the end of the probate process.

The executor has a fiduciary duty — an obligation to be honest, impartial, and financially responsible. This means you could be held liable if estate funds are mismanaged and the beneficiaries suffer losses.

If for any reason you are not willing or able to perform the executor’s duties, you have a right to refuse the position. If no alternate is named in the will, an administrator will be appointed by the courts.

Let me guide you through your retirement planning decisions. Contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. 

Contact me TEL: 1-833-313-7233.

Retirement Specialist Freeman Owen, Jr.
January 16th, 2020 by

If you receive a distribution from a qualified retirement plan such as a 401(k), you need to consider whether to pay taxes now or to roll over the account to another tax-deferred plan. A correctly implemented rollover avoids current taxes and allows the funds to continue accumulating tax-deferred.

MOST TAX-EFFICIENT WAY TO TAKE A DISTRIBUTION FROM A RETIREMENT PLAN

PAYING CURRENT TAXES WITH A LUMP-SUM DISTRIBUTION

If you decide to take a lump-sum distribution, income taxes are due on the total amount of the distribution (except for any after-tax contributions you’ve made) and are due in the year in which you cash out. Employers are required to withhold 20% automatically from the check and apply it toward federal income taxes, so you will receive only 80% of your total vested value in the plan. (Special rules apply to Roth accounts.)

The advantage of a lump-sum distribution is that you can spend or invest the balance as you wish. The problem with this approach is parting with all those tax dollars. Income taxes on the total distribution are taxed at your marginal income tax rate. If the distribution is large, it could easily move you into a higher tax bracket. Distributions taken prior to age 59½ are subject to a 10% federal income tax penalty. (Special rules may apply if you were born before 1936.)

DEFERRING TAXES WITH A ROLLOVER

If you don’t qualify for the above options or don’t want to pay current taxes on your lump-sum distribution, you can roll the money into a traditional IRA.

If you choose a rollover from a tax-deferred plan to a Roth IRA, you must pay income taxes on the total amount converted in that tax year. However, future withdrawals of earnings from a Roth IRA are free of federal income tax after age 59½ as long as the five-tax year holding requirement has been met. Even if you are not 59½, your distribution may be tax-free if you are disabled or a first-time home purchaser ($10,000 lifetime maximum), as long as you satisfy the five-year holding period.

If you elect to use an IRA rollover, you can avoid potential tax and penalty problems by electing a direct trustee-to-trustee transfer; in other words, the money never passes through your hands. IRA rollovers must be completed within 60 days of the distribution to avoid current taxes and penalties.

An IRA rollover allows your retirement nest egg to continue compounding tax-deferred. Remember that you must generally begin taking annual required minimum distributions (RMDs) from tax-deferred retirement plans after you turn 70½ (the first distribution must be taken no later than April 1 of the year after the year in which you reach age 70½). Failure to take an RMD subjects the funds that should have been withdrawn to a 50% federal income tax penalty.

Of course, there is also the possibility that you may be able to keep the funds in your former employer’s plan or move it to your new employer’s plan if allowed by the plans. (Make sure you understand the pros and cons of rolling funds from an employer plan to an IRA before you take any action.)

Before you decide which method to take for distributions from a qualified retirement plan, it would be prudent to consult with a professional tax advisor.

Let me guide you through your retirement planning decisions. Contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. 

Contact me TEL: 1-833-313-7233.

Retirement Specialist Freeman Owen, Jr.
January 7th, 2020 by

Many Americans realize the importance of saving for retirement, but knowing exactly how much they need to save is another issue altogether. With all the information available about retirement, it is sometimes difficult to decipher what is appropriate for your specific situation.

One rule of thumb is that retirees will need approximately 80% of their pre-retirement salaries to maintain their lifestyles in retirement. However, depending on your own situation and the type of retirement you hope to have, that number may be higher or lower.

how much do I need to save for retirement?

Here are some factors to consider when determining a retirement savings goal.

1. RETIREMENT AGE

The first factor to consider is the age at which you expect to retire. In reality, many people anticipate that they will retire later than they actually do; unexpected issues, such as health problems or workplace changes (downsizing, etc.), tend to stand in their way. Of course, the earlier you retire, the more money you will need to last throughout retirement. It’s important to prepare for unanticipated occurrences that could force you into early retirement.

2. LIFE EXPECTANCY

Although you can’t know what the duration of your life will be, there are a few factors that may give you a hint.

You should take into account your family history — how long your relatives have lived and diseases that are common in your family — as well as your own past and present health issues. Also, consider that life spans are increasing with recent medical developments. More people will be living to age 100, or perhaps even longer. When calculating how much you need to save, you should factor in the number of years you expect to spend in retirement.

3. FUTURE HEALTH-CARE NEEDS

Another factor to consider is the cost of health care. Health-care costs have been rising much faster than general inflation, and fewer employers are offering health benefits to retirees. Long-term care is another consideration. These costs could severely dip into your savings and even result in your filing for bankruptcy if the need for care is prolonged.

4. LIFESTYLE

Another important consideration is your desired retirement lifestyle. Do you want to travel? Are you planning to be involved in philanthropic endeavors? Will you have an expensive country club membership? Are there any hobbies you would like to pursue? The answers to these questions can help you decide what additional costs your ideal retirement will require.

Many baby boomers expect that they will work part-time in retirement. However, if this is your intention and you find that working longer becomes impossible, you will still need the appropriate funds to support your retirement lifestyle.

5. INFLATION

If you think you have accounted for every possibility when constructing a savings goal but forget this vital component, your savings could be far from sufficient. Inflation has the potential to lower the value of your savings from year to year, significantly reducing your purchasing power over time. It is important for your savings to keep pace with or exceed inflation.

6. SOCIAL SECURITY

Many retirees believe that they can rely on their future Social Security benefits. However, this may not be true for you. The Social Security system is under increasing strain as more baby boomers are retiring and fewer workers are available to pay their benefits. And the reality is that Social Security currently provides about 40% of the total income of Americans aged 65 and older with at least $47,731 in annual household income.1 That leaves about 60% to be covered in other ways.

AND THE TOTAL IS…

After considering all these factors, you should have a much better idea of how much you need to save for retirement.

For example, let’s assume you will retire when you are 65 and spend a total of 20 years in retirement, living to age 85. Your annual income is currently $80,000, and you think that 75% of your pre-retirement income ($60,000) will be enough to cover the costs of your ideal retirement, including some travel you intend to do and potential health-care expenses. After factoring in the $18,000* annual Social Security benefit you expect to receive, a $10,000 annual pension from your employer, a 3% potential inflation, and a 5% real rate of return, you end up with a total retirement savings amount needed of about $720,000. (For your own situation, you can use a retirement savings calculator from your retirement plan provider or from a financial site on the Internet.) This hypothetical example is used for illustrative purposes only and does not represent the performance of any specific investment.

The estimated total for this hypothetical example may seem daunting. But after determining your retirement savings goal and factoring in how much you have saved already, you may be able to determine how much you need to save each year to reach your destination. The important thing is to come up with a goal and then develop a strategy to pursue it. You don’t want to spend your retirement years wishing you had planned ahead when you had the time. The sooner you start saving and investing to reach your goal, the closer you will be to realizing your retirement dreams.

* Social Security Fact Sheet, 2020, estimated average annual Social Security benefit payable in January 2020.

Source: 1) Social Security Administration, 2019

You need a little foresight and knowledge to make the most of your retirement plan. So, contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. 

Contact me TEL: 1-833-313-7233.

Retirement Specialist Freeman Owen, Jr.
May 23rd, 2018 by

birthdays

Birthdays may seem less important as you grow older. They may not offer the impact of watershed moments such as getting a driver’s license at 16 and voting at 18. But beginning at age 50, there are several key birthdays that can affect your tax situation, health-care eligibility, and retirement benefits.

50 — Taxable distributions from IRAs and qualified employer retirement plans before age 59½ are generally subject to a 10% early distribution penalty (20% for certain SIMPLE plan distributions) on top of any federal income taxes due. But if you are a qualified public safety employee you can take penalty-free withdrawals from your qualified retirement plan after leaving your job if your employment ends during or after the year you reach age 50.

55 — If you’re not a qualified public safety employee, you can take penalty-free withdrawals from your qualified retirement plan after leaving your job if your employment ends during or after the year you reach age 55.

59½ — And all withdrawals from qualified retirement plans and IRAs are penalty-free after you reach age 59½, whether or not you’re still employed. Ordinary income taxes generally apply to these distributions. (Withdrawals taken prior to age 59½ may be subject to a 10% federal income tax penalty.) This is one of those key birthdays!

62 — You are eligible to start collecting Social Security benefits. However, your benefit will be decrease by up to 30%. To receive full benefits, you must wait until “full retirement age,” which ranges from 66 to 67 depending on the year you were born.

65 — You are eligible to enroll in Medicare. Medicare Part A hospital insurance benefits are automatic for those eligible for Social Security. Part B medical insurance ­ben­efits are voluntary and have a monthly premium. To obtain coverage at the ­earliest possible date, you should generally enroll about two to three months before turning 65.1

70½ — You must start taking minimum distributions from most tax-deferred retirement plans. Otherwise, there’s a 50% penalty on the amount that should have been withdrawn. Annual required minimum distributions are calculated according to life expectancies determined by the federal government. This birthday is forcing you to start taking minimum distributions, whether you need them or not. You don’t necessarily need to spend it if you don’t need it. I have solutions for you!

Source: 1) Medicare & You 2017, U.S. Department of Health and Human Services

Planning for retirement is like planning a birthday party.

You need a little foresight and knowledge to make the most of your retirement plan. So, contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. Contact me 1-833-313-7233.

Freeman2017-blog2

 

April 30th, 2018 by

Stashing money away for retirement is complicated, so it’s not surprising that fundamental retirement guidelines have become popular over the years. Here are four that you might have come across in reading, researching, or just talking with friends. Like most guidelines, they offer helpful starting points but need to be examined critically and adjusted for your specific situation.

1. Save 10% of your pay for retirement.

This is a good beginning, but new retirement guidelines suggest putting away 15% of your salary. If you started late, you may need to save more. At the very least, save enough to receive any matching funds offered by your employer. Consider this: If you save just 6% of your salary and your employer offers a full 6% match, you are already putting away 12%!

new retirement

2. The percentage of stock in your portfolio should equal 100 minus your age.

This reflects fundamental retirement guidelines that younger people can take on more risk, while older people approaching retirement should protect their principal by converting some volatile growth-oriented stocks into more stable fixed-income securities.

Although the strategy is sound, the math may no longer be appropriate considering long life spans and low yields on fixed-income financial instruments. For example, if you followed this rule at age 40, 60% (100 less 40) of your portfolio would consist of stock, and at age 60, the percentage of stock would be 40%. Depending on your situation and risk tolerance, you may require a higher percentage of stock at either of these ages to meet your retirement goals.

3. You need 80% of your pre-retirement income during retirement.

New retirement guidelines suggest that you need 80% of your pre-retirement income during retirement. But, in fact, there is no magic number, and you may be better off focusing on your actual expenses today. Then, think about whether they’ll stay the same, increase, decrease, or even disappear by the time you retire.

While some expenses might disappear, like a mortgage or costs for transportation to and from work, new expenses may arise, such as travel, help with home maintenance, and medical costs. A typical 65-year-old couple who retires in 2017 might spend $275,000 on medical care in retirement, even with Medicare.1 Calculate how much you may need to pay for your expenses in retirement and add a cushion for “the unexpected”.

4. A “safe” withdrawal rate is 4%.

The “4% rule” suggests that you make annual withdrawals from your retirement nest egg equal to 4% of the total when you retire, with annual adjustments for inflation. This model was developed in the 1990s for a 30-year retirement with a portfolio that included 50% large-cap stocks.2Although this may be part of many retirement guidelines, some experts suggest a lower rate. Factors to consider include the amount of income you anticipate needing, your life expectancy, the rate of return you expect from your financial products, inflation, taxes, and whether you’re single or married.

Sources:
1) CNBC, October 5, 2017
2) The Balance, August 18, 2017

It’s your retirement. Plan it perfectly for you!

Retirement guidelines are helpful, but they are not exactly the same for everyone. Let me show you how to get the most from your retirement planning. Contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. Contact me 1-833-313-7233.

Freeman2017-blog2

 

April 22nd, 2018 by

future stability

In a recent survey of 3,000 Americans ranging in age from 20 to 70, almost two-thirds of the respondents said they feared running out of money during a long retirement more than they feared death.1 Fear may not be a helpful response, but this concern is not surprising considering changes in the American retirement landscape.

People are living longer during a time when traditional pensions are disappearing and medical expenses continue to climb. Social Security may provide a dependable, supplemental income throughout retirement, but benefit levels are not high enough to fund a long retirement for most people. In January 2018, the average monthly benefit was just $1,404, and the maximum benefit at full retirement age was $2,788.2

Even people with a substantial nest egg face a challenge in making their dollars last throughout a long retirement. Withdrawing too much too quickly can put you at risk of running out of money while being overly cautious and withdrawing too little might lead to a less satisfying retirement lifestyle than you might otherwise enjoy.

Planning for a long retirement

One way to help solidify your long retirement income is by purchasing a longevity annuity. It is a deferred fixed annuity that delays lifelong income payments until a future date. Often it is when the contract owner reaches age 80 or 85. Because the annuity income is deferred, the payouts are typically higher in relation to the premiums than they would be if the annuity income had been paid immediately. Purchasing the annuity at a younger age with a longer deferral period would generally give you a better premium-to-income ratio.

A longevity annuity may give you more confidence that you will have income for a long life. It also makes it easier to manage the near-term income from your dollars and financial instruments. For example, if you retire at age 65 and feel comfortable that the combined income from your annuity and Social Security will meet your income needs after you reach age 85, you could focus on funding your earlier retirement years from other monies and vehicles for a 20-year period, rather than guessing how long your nest egg dollars might have to last.

Source:
1) Money, October 19, 2017
2) Social Security Administration, 2017

Find out how to never outlive your resources.

Let me show you how to get the most from your planning! I want you to enjoy a long retirement without fear of running out of money. Contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. Contact me 1-833-313-7233.

Freeman2017-blog2

 

April 10th, 2018 by

Many early retirees reported reasons for retiring early that were beyond their control, such as health problems or disability, company downsizing or closure, changes in the skills required for their jobs, or having to care for a spouse or family member. However, some said they retired early by choice because they could afford to or because they wanted to do something different.1

If you’re nearing the end of your working years, you probably have a retirement timetable in mind. It may be as specific as a particular date or as general as a range of years. Regardless of your timetable, circumstances could change, and retirement might come sooner than you think.

Considering some key issues now might ease your transition and give you more choices in how you retire.

IMAGE

1. Calculate The Necessary Income for Your Retirement Lifestyle.

Would you be able to maintain your desired standard of living if you had to retire early? It might be helpful to calculate your projected income based on two different retirement dates: the date you prefer and an earlier date.

Keep in mind that your Social Security benefits would be reduced if you claim them before reaching your “full retirement age” (currently 66 to 67, depending on year of birth). And the sooner you retire, the less time your investments have to pursue potential growth, so accelerating your savings now could make a big difference. Even if you retire on schedule, having a larger savings balance may give you more flexibility in your retirement lifestyle.

2. Reduce Your Debt

Lowering or eliminating outstanding credit-card balances as soon as possible could be a great step toward getting on track for retirement. Paying off auto loans would free up more income when you’re retired.

Owning your home free and clear would also be a big help in creating an ideal retirement lifestyle. However, about 37% of homeowners age 65 and older are still paying off a mortgage.2 If you foresee your mortgage being an issue in your retirement years, you may want to examine options to pay it off early, reduce payments, or otherwise modify the terms.

3. Consider Your Health

Fifty-five percent of retirees who left the workforce earlier than planned cited health problems or disability as a reason for early retirement; 17% cited caring for a spouse or other family member.3

  • Is your retirement timetable realistic based on your current health status and the health of your spouse?
  • Would you be prepared if your health changes?
  • Have you factored the cost of health care into your retirement strategy?

A married couple who retired at age 65 in 2016, with median expenses for prescription drugs, would need an estimated $265,000 to have a 90% chance of paying their health-care costs throughout retirement.4 Costs for your dream retirement lifestyle may be higher.

Sources:
1, 3-4) Employee Benefit Research Institute, 2016–2017
2) U.S. Census Bureau, 2017 (2015 data)

Plan your dream retirement!

Preparing now could help ease you into a more comfortable retirement lifestyle. Let me show you how to get the most from it. Contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. Contact me  1-833-313-7233.

Freeman2017-blog2

 

March 28th, 2018 by

There are a number of good reasons why you may want to work part-time during retirement. Obviously, you would be earning money and relying less on your retirement savings. You may also have access to better health-care benefits. Finally, many retirees work for personal fulfillment. They enjoy staying mentally and physically active. Plus, they enjoy the social benefits of working in retirement. Some retirees just want to try their hand at something new & they aren’t ready to retire.

Others who are thinking about retirement aren’t’ ready to give up their day jobs just yet. In 2013, a phased retirement plan was introduced in some workplaces to help potential retirees ease into retirement more easily. It’s when a company allows an aging employee to “officially retire”, but keeps the employee on the payroll with the ability to scale back their number of work hours or become more selective on which projects they take on.

Earning a paycheck may enable you to postpone claiming Social Security until a later date. For each year you delay taking your Social Security benefits (from full retirement age to age 70), the annual benefit grows automatically by 8%.

Here are two more ways working in retirement could affect your Social Security benefits.

1. The Retirement Earnings Test

If you are working in retirement and receiving Social Security benefits prior to reaching full retirement age (FRA), $1 in benefits will be deducted for every $2 you earn above the annual limit ($17,040 in 2018). During the calendar year in which you reach FRA, $1 will be deducted for every $3 you earn above a higher annual limit ($45,360 in 2018), but only until the month you reach full retirement age. Fortunately, you won’t lose these benefits forever. Once you reach FRA, your lifetime benefit will increase to account for the loss amount.

2. Taxes on Benefits

If you have substantial income (such as wages or other taxable income), a portion of your Social Security benefits may be taxable. You may owe federal income tax on up to 50% of your benefits if your combined income exceeds a “base amount” of $25,000 ($32,000 for joint filers). And if your combined income exceeds a higher base amount of $34,000 ($44,000 for joint filers), you may owe tax on up to 85% of your Social Security benefits.

One size DOES NOT fit all.

Your retirement options should be in under your control. Let me show you how to get the most from your retirement planning. Contact me for a FREE retirement strategy consultation at my office in Upper Marlboro, MD. Contact me 1-833-313-7233.

Freeman2017-blog2

 

July 10th, 2016 by

 

70 new retirement age
Why are so many people over the age of 70 deciding to stay in the work force?

There’s no question that today’s Boomer enjoys better health & vitality than previous generations. Many choose to stay working because they enjoy their careers and it strengthens their financial position. But a more common scenario is that many Boomers have not saved enough money to retire comfortably. Traditional pensions are largely disappearing and many Americans haven’t saved enough, over the working year, in their retirement accounts. Nearly half of all retirees depend on Social Security benefits for more than half of their income (1). Considering that the average benefit for retired workers in 2016 is $1341, it is apparent that some people need to work as long as they can just to cover basic living expenses (2).

Do you think 70 is the new retirement age in America?

In addition, today’s longer life expectancies and higher health care costs create a need for even more savings. Two major advantages of staying employed is a) they can keep contributing to their work place retirement accounts and b) delay claiming social security benefits. Waiting until age 66 or 67, depending on the birth year, can have benefits. Claiming Social Security benefits after full retirement age can see their benefit increase 8% per year up to age 70.

Even so, many older Americans cannot keep working due to health reasons. There is no way to predict what your future may be. However, workers who save consistently during their working years are able to make retirement decisions more freely.

Advice From A Retirement Expert

My advice for every working American is to take maximum advantage of your work place’s retirement accounts like 401(k) or 403(b). Use whatever matching dollars you can get from your employer and start saving early in your career. Stash away as much as you can into nest egg dollars. It will be easier for you to decide what the new retirement age should be for YOU.

Source:
1) Social Security Administration 2016
2) Employee Benefit Research Institute 2015

Freeman Owen, Jr -Retirement Specialist

A comprehensive retirement plan is so important.
Let me help you get started!

Meet me for a FREE retirement strategy consultation at my office.
Call 833-313-7233 | MD, VA & DC. 

 

August 18th, 2015 by

Longevity odds

Knowing when to claim distributions from your retirement nest eggs will help you outlive the longevity odds. Because each person’s situation is different, there is no “one size fits all” when making these decisions. But, a retirement expert can help you weigh the options and guide you to the best decision for your retirement goals. Here’s how:

Boost Lifetime Benefits

Social Security benefits can be claimed by eligible workers at any age between 62 and 70. Retired workers can claim a reduced (70% to 75%) benefit at age 62, but eligibility for the full retirement benefit ranges from age 66 to 67 (depending on birth year). For each year Social Security is delayed after full retirement age, the annual benefit grows automatically by about 8%, up to age 70.1

Thus, someone who is currently eligible for an $1,800 monthly benefit at age 62 could receive $2,400 at full retirement (currently age 66) or as much as $3,168 by delaying benefits to age 70. In this example, the individual who files at age 70 instead of age 62 would receive more than $16,000 of additional income every year for the rest of his or her life. This is only an example: actual results will vary.

Plan for Longevity

In theory, benefit calculations are actuarially neutral, which means that recipients who live an “average” life span should receive the same lifetime Social Security income regardless of when they begin collecting benefits. However, you may want to consider the possibility that you and/or your spouse could live well beyond that “breakeven” point.

Delaying benefits is more likely to pay off for women and married couples. If the higher-earning spouse waits to file for the highest possible Social Security benefit, his or her spouse could eventually receive a higher survivor benefit after the death of the high earner.

Consider Future Taxes

If retirees delay filing for Social Security and receive income from IRA withdrawals and taxable financial instruments in their early retirement years, they might pay more taxes initially but less over the long term. Even though retirees who live mainly on Social Security income in the early retirement years might pay little or no income taxes on their benefits, after they reach age 70½ and must start taking RMDs, the income tax liability on IRA income and Social Security benefits combined could be more onerous.

Distributions from traditional IRAs are taxed as ordinary income. Withdrawals taken prior to age 59½ may be subject to a 10% federal income tax penalty, with certain exceptions.

Preserve Your Nest Egg Dollars

The funds that you will need during the early years of your retirement should generally be put into financial vehicles conservatively. Otherwise, your nest egg could be depleted if you are forced to sell during a down market.

The age at which you sign up for Social Security is an important personal decision. It should generally be based on many factors including your marital status, health, work situation, financial resources, tax burden, and retirement goals.

Source: 1) Social Security Administration, 2014

Freeman Owen, Jr - Host of "Safe Money Talk" on CBS Radio The Big Talker 1580AM

There is expert guidance available to your for your retirement planning goals.

Meet me for a FREE retirement strategy consultation at my office at 833-313-7233 | MD, VA & DC.