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Published: Friday, January 12, 2018 @ 6:00 AM
How confident are you that you’ll have the money necessary to retire when the time comes? If you’re depending solely on Social Security to get the job done, you may be in for a rude awakening.
Focus your mind on this number for a moment:
That’s what the average monthly Social Security benefit amounted to last year, according to the latest numbers from the Social Security Administration (SSA).
Now, we’re not saying you can’t live on $1,369 every month — some people are exceedingly frugal, right?
But if you want your golden years to consist of something more than dumpster diving and eating buffet leftovers, you’ll probably want to start trying to fatten up that monthly check right now.
In the past, it was very common to retire and take Social Security at 62. But every year you wait after 62, you have an imputed return of 8% per year on your lifetime benefit. So if you wait from 62 to 70, the amount that Social Security pays climbs dramatically. (Benefits no longer increase after 70.)
For 2018, people born in 1956 must wait until they are 66 years and 4 months old to receive 100% of their benefit — i.e. to reach full retirement age.
That pushes the full retirement age later by two months than last year. Those who were born in 1955 only had to wait until they were 66 years and two months to claim full benefits in 2017.
See this benefit table from the Social Security website to learn more.
You may be years away from collecting Social Security, but it behooves you to know what’s going on with the system.
For 2018, the SSA announced a 2% increase in monthly payments. That means a $25 monthly increase for the average beneficiary this year.
Likewise, you may be interested to know that in 2017, the maximum that any worker taking benefits at full retirement age could receive was $2,687 a month.
But for this year 2018, that cap is being raised so the max monthly benefit can be as high as $2,788 a month.
When you know this kind of stuff, you demystify the whole Social Security thing. That way you’re less likely to shut down completely when the time comes that you have to claim benefits.
That statement with your expected benefits arrives in your mailbox every five years when you’re 25, 30, 35, 40, 45, 50, 55, and 60 and over. Go through the numbers and make sure they look correct. Refer to your prior statement to make sure there are no unexpected changes.
You may not believe it, but a homeless woman managed to prove that Social Security owed her $100,000 after more than a decade! She did it by keeping accurate records from the days when she was working.
This is the easiest way to keep tabs on your benefit. Sign up here for free.
What you get from Social Security has everything to do with your 35 highest earning years. So you might consider negotiating a raise or taking on a second job, in order to boost your income.
If you’re looking for more ways to make extra money, check out Clark’s Work from Home Guide, which has legitimate ways you can earn some extra money. None of the sites listed on the guide will make you rich, but they will help you supplement your existing income.
If you choose to retire before 66, you can always opt to work part-time to supplement your income. Thankfully, you’ll now be allowed to earn up to $17,040 in 2018 without it compromising your Social Security benefits. That’s up from $16,920 in 2017.
If you do go over the earnings limit, Social Security will withhold $1 in benefits for every $2 you earn over the $17,040 limit. But once you turn 66, the earnings limit disappears and you’ll get credit for benefits that were withheld in the past.
AARP’s interactive calculator allows you to pop in your specifics and it will give you a decision tree to help you figure out the optimal time to take Social Security. Check it out to help yourself or a parent.
If you are looking for a more comprehensive approach to give you specifics on when it would be best to start drawing on your benefit, check out Maximize My Social Security. There are different levels of analysis that you can choose, but $40 gives you access to sophisticated software that helps determine the best time to start receiving your checks. They also offer a money-back guarantee if you aren’t satisfied.
Even if he or she has never worked under Social Security, your spouse may be able to get benefits if he or she is at least 62 years of age and you are receiving or eligible for retirement or disability benefits. He or she can also qualify for Medicare at age 65.
More info about spousal benefits is available at SSA.gov.
Nobody wants to go into retirement with back-breaking debt. If you’re still paying high interest rates, like on a credit card, get a lower interest card if you can qualify and transfer the balance.
Look at that box on your monthly statement and see what you’d have to pay to be debt free in three years. Then resolve to pay that each and every month. You need to budget money to pay down your debt just as you would budget for rent or a mortgage or a car payment.
On the other side of the issue, there’s been the case raised about the rich getting unfair amounts of Social Security themselves. The Washington Post’s Allen Sloan ran the numbers and found that in reality the typical wealthy person who gets Social Security benefits has paid in much more than he or she will get back in benefits.
Using himself as a test case, his research shows the “rich” get back between 50 and 75 cents on every dollar they paid in.
As the decades go by, taxes are likely to only get higher. That’s why saving after-tax money today in a tax-free vehicle like a Roth IRA is a great idea.
Published: Wednesday, December 13, 2017 @ 10:32 AM
— It's that time of year again when parents and college or college-bound students fill out the FAFSA (Free Application for Federal Student Aid).
The idea of wading through a form – especially one that requires financial information – is definitely not an appealing idea, but the FAFSA could be a tremendous help in getting your student money to attend college.
The following points are what you need to know, as well as common mistakes to avoid when filling out the FAFSA.
Fill it out – you have nothing to lose.
You may think that you don't need to fill out the FAFSA, especially if you believe you might not qualify for need-based aid. But there's no income cut-off point with federal student aid, according to the U.S. Department of Education. In addition, the FAFSA can help you qualify for all kinds of grants, loans and scholarships, including those offered by your state, school or private organizations.
By investing a few minutes of time, you could reap thousands of dollars in potential rewards.
Submit it ASAP.
The sooner you submit your FAFSA, the better, according to consumer adviser Clark Howard. Although the federal deadline isn't until June 30, 2018, you should check with the financial aid administrator at colleges you're interested in to make sure their deadlines aren't earlier.
Submitting earlier will help you plan how you'll pay for college. You'll also have a better chance of getting as much aid or scholarship money as possible since some colleges distribute their available money on a first-come, first-serve basis, Howard says.
Gather the information you'll need.
The FAFSA asks questions about the student as well as his or her parents if the student is a dependent.
You'll need the following information on hand as you fill out the FAFSA:
Watch out for common mistakes.
The National Association of Student Financial Aid Administrators points out some common mistakes that can delay your form's submission or cause you to not get the aid and scholarships you might qualify for. They include the following:
Keep an eye out for requests for more information.
Your FAFSA may be selected for verification, which means you'll have to provide some additional or supporting information, U.S. News & World Report explains. This process doesn't necessarily mean you've done anything wrong. You may have a discrepancy or mistake on your form, but some FAFSAs are just randomly selected for verification (lucky you!).
Published: Wednesday, November 22, 2017 @ 12:01 PM
— With the recent massive security breach of Equifax — one of the three credit bureaus with which many may have thought their private information was safer than most — now many people are dealing with more insecurities, wondering where they can entrust their private information, if anywhere.
Here are some options:
Better and cheaper than credit monitoring, an option for optimal security is freezing your credit through each of the three credit bureaus (Experian, Equifax and TransUnion), according to WSB money expert Clark Howard at Clark.com.
The fee is $3 to $10 per person per bureau, depending on your state, to allow you to seal your credit reports — except now it's free with Equifax from here on out due to the recent data breach.
You will be provided with a personal identification number (PIN) that only you know and can be used to temporarily unfreeze (or "thaw") your credit when legitimate applications for credit and services need to be processed such as when you are buying a car.
This added layer of security means thieves can't establish new credit in your name even if they are able to obtain your personal information.
LifeLock vs. CreditKarma.com
While LifeLock advertises it can help consumers secure their information to guard against identity theft, LifeLock charges monthly services that start at $10 a month.
This kind of credit monitoring is not the same or as effective as a credit freeze, said Craig Johnson for Clark.com.
Instead, he recommends CreditKarma.com for free credit monitoring.
If you haven't already frozen your credit, now would be the time since Equifax recently got hacked and the information of possibly 145.5 million people was attained by these hackers.
Information accessed primarily includes names, social security numbers, birth dates, addresses and, in some instances, driver's license numbers.
To try to compensate, Equifax is offering free identity theft protection and credit file monitoring (but only through Jan. 31, 2018) with its TrustedID Premier.
Another point of confusion is the unsolicited free Dark Web Email Scan offered by Experian to your email, leading to a monthly fee for further scanning.
Experian IdentityWorks also offers a free 30-day trial membership for identity theft protection and resolution, involving a monthly automatic deduction of $9.99 for the plus plan or $19.99 for the premium plan.
It's free to cancel within the 30-day trial period, but the consequences are not revealed up front for those who decide to cancel their membership once the monthly fees begin.
Published: Friday, November 17, 2017 @ 4:17 PM
— Your house is a large expense with many associated costs like a mortgage payment, insurance, maintenance and more.
It provides a roof over your head, of course, but since it usually costs you money each month, why not put it to work for you and earn some cash in the process?
The following are four ways your house can make you money:
List your home with Airbnb or VRBO.
If you're planning to be out of town for a few days or don't mind bunking with a friend, you may be able to make some money by renting out your home through sites like Airbnb and VRBO.
Before jumping in, you'll need to take time to learn about the market, your expenses and any taxes you may need to pay. And before you list your property, you'll need to understand how to make it stand out with a good listing, including compelling photos and competitive pricing. Airbnb has a series of toolkits to help with this.
Rent it out to the area's growing TV and film industry.
When TV, film and commercial producers want to depict a home on screen, many times they'll rent the real thing, according to Money. It can be inconvenient for owners, however, since their homes may be taken over by a large crew and be completely rearranged.
On the other hand, homeowners often have fun with the experience while making some extra money. And while you're watching TV or a movie, you may be able to spot your home.
Host a foreign exchange student or faculty member.
Temporarily hosting a foreign exchange student or faculty member who's studying or teaching in this country can help you make some extra cash for anywhere from six weeks to six months at a time. You'll also be exposed to a different culture and language, and the experience could help you form a bond that lasts even when your guest returns home.
The Penny Hoarder suggests contacting student housing offices at local community colleges and universities, asking to be placed on their list of host families. After this, you'll have to apply, be interviewed, and allow your home to be toured. You'll also need to pass background and reference checks.
Rent out your driveway or storage space.
If you have extra space in your driveway, you may be able to make some money by letting others park there, according to Men's Health. This is especially true if you live near a commuter rail line or sports stadium, but you'll need to check to make sure you're not violating any local ordinances. Check out websites like JustPark to get started.
Published: Tuesday, November 14, 2017 @ 3:15 PM
— Health insurance has a large impact on your finances, so it pays to get the most out of your plan.
Understanding its ins and outs can be confusing, but it's worth your time to check on benefits you could be losing out on or mistakes that could cost you money.
Choose your plan carefully.
When it's time to renew your health care coverage, consumer adviser Clark Howard recommends not just blindly signing up for your current plan, even if you've been happy with it.
Your plan – as well as other options you may be able to sign up for – may have changed. Take a close look at the co-pays, deductibles, in-network providers and other specifics to make sure you're making the best possible choice.
Take advantage of preventative care benefits.
Almost every plan, according to healthcare.gov, offers preventative care benefits that are free. You won't have to pay a co-pay or meet your deductible to get these services at no charge.
Services for adults include age-appropriate vaccinations and colorectal cancer screenings for patients over 50.
Work within your formulary.
Health care plans typically have a formulary, which is a list of medications that they're willing to pay part of or the entire cost of. It may include a list of preferred medications, for which it will pay the highest percentage of the cost.
It pays to be familiar with your formulary before you get an unpleasant surprise at the pharmacy, according to NerdWallet. Print out a copy of the document from your health insurance company's website, or call up an online copy at your doctor's office. Your doctor can work with you to make sure you get an effective medication that you can afford.
Utilize HSAs and FSAs.
If your health insurance plans allow you to put aside tax-free dollars in a Health Savings Account (HSA) or Flexible Spending Account (FSA), you should learn how they can help you. Consumer advisor Clark Howard's website, Clark.com, has a chart that explains the pros and cons of each.
An HSA is usually associated with high-deductible plans, and like an FSA, it helps you save money to pay for health care expenses. These can include everything from prescription eyeglasses to medication.
Watch out for surprise out-of-network charges.
Your insurance plan has a list of network providers, and when you can, you should stay in-network. That's easy enough if you're visiting a single doctor, but if you need to have surgery, things can get more complicated.
For pre-planned surgery, Consumer Reports recommends talking with your doctor's billing department to get a list of everyone who will provide your care, including radiologists and anesthesiologists. Call your health care company to see if they're in-network, and if not, ask your doctor if in-network providers can be used.