11/4/2015 AZ Republic by Dr. Harold Wong
Hidden in the proposed U.S. Budget Bill are some provisions that can reduce the “file and suspend” and “restricted application” strategies. These strategies, estimated to be used by only 100,000 Social Security recipients, allowed married couples to get up to an extra $50-60,000 of total Social Security retirement benefits. Source: “What Congress Just Did to Social Security”, by Luke Delorme, 10-30-15 www.ValueWalk.com.
These advanced claiming strategies had the higher-income spouse, upon reaching full retirement age (typically age 66 for older Baby Boomers) to file for Social Security (SS) benefits but not take them immediately. This allowed him to get 32 percent more by waiting until age 70 instead of age 66. However, his spouse would, upon turning her full retirement age, would claim half of his benefit when he turns 66.
By restricting her claim to half of his SS benefit, her own SS (based on her earnings record) could continue to increase until age 70 when she might switch to her own SS benefits. The couple considered it to be “free money”, when she got half of his SS benefits (the spousal provision) for the 4 years, because it did not prevent both of them from maximizing their own SS benefits at age 70. Once this proposed U.S. Budget Bill becomes law, one must use better retirement planning to replace this $50-60,000 of “free money”. One has to either increase other sources of steady retirement income and/or reduce taxes.
Increase Retirement Income: Once the stock market crash of 2008 occurred, Ben Bernanke, Chairman of the Federal Reserve from 2006-2014, said his goal was to reduce short-term interest rates as close to zero as possible. Instead of receiving $5,000 interest, 9 years ago, from $100,000 deposited in a 1-year CD with Wells Fargo, now you get $50 annual interest, or 99 percent less. So, what alternatives have people tried in the last 8 years?
People invested in Master Limited Partnerships, which are primarily in the energy sector, and often act as “toll roads” because they own the pipelines. Cash flow has ranged from 4 to 8 percent when oil prices were over $100 per barrel. Now that oil prices dropped in half this year, the cash flow has dropped and the stock market valuation of these companies has dramatically dropped, by as much as half or more.
People can still get a decent cash flow from Real Estate Investment Trusts (REITs) but Wall Street often overpays for the properties. For example, when at least 3 Wall Street funds came into Phoenix, starting in 2009, they purchased thousands of single-family homes, often paying at least 25-35 percent more than what local Mom and Pop investors were willing to bid at the foreclosure auctions.
An often unknown alternative is the field of private pension funds. Example: last year a 62-year-old female deposited $250,000 in a private pension fund. When she turns 70, she will get $25,000 per year, guaranteed every year for life. This year, a 76-year-old male deposited $200,000. In 4 years he will receive $17,500 per year, guaranteed every year for life. It’s hard to beat an 8.75 to 10 percent annual cash flow.
Save Taxes and Multiply Future Income: If you use the Roth IRA conversion strategy, your cash flow can be tax-free for up to three generations. Or, one can use the Multi-Generational IRA strategy to multiply income 2-10 times for your kids or grandkids.
Free Seminars: “Secrets of Roth & Multi-Generational IRA’s!” will be given 6:30-8:30 pm, Thurs. 11/12/15, preceded by a light supper. On Sat. 11/14/15, 10 am-12 noon, “How to Maximize Your Social Security & Other Retirement Income!” will be given, followed by a light lunch from 12-1 pm. Both seminars will be held at Keller Williams University, 2077 E. Warner Road, Tempe, AZ 85284. Please RSVP at (800) 955-1408.