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Retirement Planning: Dig a Little Deeper

By Portage County Business Council

By LouAnn Schulfer, AWMA®, AIF®
Accredited Wealth Management AdvisorSM
Accredited Investment Fiduciary®

We work with a substantial amount of people throughout the course of a year who are actively planning for retirement.  Questions we commonly hear include: Where is the best place to put my retirement savings (401k, IRA)?  Which pension option is the right for me/us?  When and how should I claim social security?  When can I begin receiving retirement income?  What are the penalties if I do it wrong?  These are all great questions and they deserve considerable exploration.  Sometimes, people have an idea of how they think they will structure their retirement income plan and accounts, but often times, after digging deeper into areas they may not have thought of, we discover a compelling reason to decide differently.  Here are a few examples.

Taking social security income early.  I’ve had many clients tell me that they know they won’t live to a ripe old age.  Family history, lifestyle, bad habits catching up with them, are all reasons to believe “take it while I can get it” when it comes to filing for social security.  Dig a little deeper though.  Are you married?  If so, consider your spouse.  If you have sufficient income to cover your expenses, you may consider delaying taking social security because the monthly benefit that you’ll receive for the rest of your life will continue to grow.  If your spouse plans to claim on your benefit, either while living or as a widow or widower, delaying your social security will also increase  your husband or wife’s benefit.  And if he/she lives a long time, that has the potential to significantly impact their lifestyle.

Taking social security income late.  It’s true that your social security benefit will continue to grow by about 8% per year for each year that you delay receiving income.  It’s a compelling reason to consider delaying taking social security, especially if you expect to live a long life.  That leaves you with two options to cover your spending needs (and wants) while waiting:  continue working or spend your own personal retirement savings.  The decision of whether to work is obviously a choice that’s personal to you.  I’ve crunched the numbers for many couples with a year by year analysis on the impact that delaying social security will have on their own personal retirement accounts and to some, the results have been surprising.  While they may get more out of social security by delaying and living past life expectancy, they will have spent more of their own money early in retirement, significantly depreciating the ending value of their accounts.  Upon death of the first spouse, the survivor assumes the greater of the two social security benefits and the lesser of the two stops.  Conversely, when you die your spouse will receive 100% of what is left in your personal retirement accounts.  And, when the second of a couple dies, there is no beneficial inheritance of social security, whereas their beneficiaries will receive what is left in retirement accounts.

Pension options.  For married couples, their initial thought is almost always to take the pension option that guarantees pension income over both of their lifetimes.  In other words, the pension will continue to pay until the second spouse dies.  There may be a price to pay for this option though, in that the pension participant (the worker) will receive a (usually substantially) monthly amount less than had he/she elected for the single life option, which would cover over the participant’s (the worker’s) entire lifetime.  The risk is, if the spouse dies first, the pension participant has accepted a lesser amount and received no benefit from it, because the pension income did not last beyond their lifetime.  What we’ve done, is calculated the difference between the single life option and the joint life option.  Then, if the pension participant is insurable, look to fund a life insurance policy with either the difference in the monthly amount (single vs. joint), or potentially pay the monthly premium from the difference and still have some money left over.  (this does sometimes happen!)  This is a way to maximize your pension benefit while leaving an inheritance indirectly from the pension (because you used some of your monthly pension income to pay the life insurance premium), regardless of whether you die before or after your spouse.

These are just a few fun examples.  Dig a little deeper when examining your retirement income options and you may be pleasantly surprised at the lifetime impact that your new decision has made.

LouAnn Schulfer is co-owner of Schulfer & Associates, LLC Wealth Management and can be reached at (715) 343-9600 or
Securities and advisory services offered through LPL Financial, a Registered Investment Advisor.  Member FINRA/SIPC.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for an individual.