How Big Will Your 2018 Social Security Check Be?

The weather is getting cooler as 2017 is drawing near. We can all feel it. If you’re like many older Americans on a fixed income, you like to do a little planning ahead. If you’re wondering how large your Social Security check will be during 2018, your wait will be over soon.

This month you can go on the web and access your Social Security account to view how this year’s cost-of-living (COLA) adjustment will affect your monthly check in 2018. You can also pull up a future benefits estimate and double check if the amounts recorded are accurate.

A few weeks ago, the Administration announced excellent news for recipients. The 2018 COLA will be an increase of 2 percent. This represents the highest hike since 2012. In practical terms, this means an average of $25 more of monthly retirement benefits for each recipient.

Advocacy groups for those who are retirement age have noted that for approximately 70 percent of recipients, the 2018 COLA increase could be offset by the cost of their Medicare premiums. However, they also say that not all but some retirees have a “hold harmless” provision that will prevent this.

Many people think that checking Social Security benefits on the web just applies to those 65 and older. This is not the case. The Administration suggests that it’s a good idea for anyone to check their account on a regular basis. Even men and women who have not yet started to receive benefits can view their account and do some planning ahead of time. Each American’s online statement provides payment estimates based on the age he or she can begin drawing benefits.

It’s really important that you check your earning history each year to verify its accuracy so that when you are eligible to receive benefits, your monthly benefit amount will be as high as possible. This way, if there is an inaccuracy in your earning history, you can adjust it now by submitting supporting documents to verify your employer(s) and your wages, like your tax return and W-2 form.

It should also be noted that anyone who has established an online account will receive an email around the time of his/her birthday as a reminder to check their account. To assist the elderly, the Administration also mails a printed version of annual earnings estimate to anyone who is 60 years or older if they have not established an online account. This is to especially helpful for those who don’t have a computer or Internet access, or simply prefer to handle their financial transactions by mail.

To look at your statement, go to: SocialSecurity.gov/reviewyourstatement. You’ll be asked to verify your identity by entering your username and password. For the first time this year, as an added security precaution, you’ll also be required to enter a security code sent to you by email or text. You can also set up a new account if needed.

Social Security is just a piece of the retirement puzzle.  Let us sit down with you and take a look at your current retirement plan to be sure you are properly prepared for the road ahead.

Avoid Tapping Retirement Savings This Holiday Season

If you are like many people, you may easily spend hundreds of dollars or more on holiday gifts and related holiday purchases each year. Some sources indicate that consumers may spend more money over the holiday season this year than they have in previous years. The cost of gifts is only one seasonable expense. For example, you may have plans to host a party, to travel or to decorate the house elaborately. When you are preparing to spend a large sum of money within a short period of time, financial planning is necessary. Some people may be thinking about taking money out of a retirement account to cover seasonal expenses, but this is not advisable for many reasons.

The Tax Penalties
When you take money out of your retirement account before the withdrawal date, you face the expensive prospective of having to pay an early withdrawal penalty. More than that, if you are taking money out of an account that used pre-taxed funds, you will also need to pay taxes on the amount of money that you withdraw. In some cases, this extra income that you are taxed on will bump you into a higher tax bracket. This can magnify the impact on your tax liability for the year. As you can see, it can be very expensive to pay for your expenses during the holidays through this type of funding.

The Impact on Your Financial Future
The impact on your finances is more far-reaching than simply having to pay a higher income tax bill. When you take money out of an account that was earmarked for the later years in life, you are decreasing the amount of money that you will have access to at that point. More than that, you miss out on the benefits of compounded interest, dividend reinvestment and other methods for growing your money exponentially over time. The impact on your financial security can be stunning. Because of these factors and because of the tax penalties that you may face, the true cost associated with an early withdrawal may be much more substantial than what you may think.

A Better Solution for Shopping During the Holidays
Because of how expensive it can be to take money out of a retirement account to pay for holiday gifts, décor, travel plans and more, planning for a better solution is important. One idea is to begin setting aside money or even shopping for gifts several months ahead of time. By doing so, you are spreading out this expense over the course of several months rather than several weeks. Layaway is available at some stores as well. You can also consider using credit cards or even different types of loans to pay for the expenses. Loans and credit cards do have fees associated with them, but you may discover that these are more affordable options to consider than dipping into your 401k or IRA. Remember that you can always downsize your holiday experience or buy more affordable gifts if you lack the funds necessary to pay for everything without reaching for your IRA or 401k.

Paying for gifts, travel and more this season can be a burden to your budget, and you need to approach this season with a solid financial plan. Rather than dip into a chunk of money that you have earmarked for your senior years, develop a better plan that may be more affordable for you over the long run. Before you start shopping and decorating your home, create a budget so that you know exactly how much money you will need. Then, create a feasible plan to pay for these expenses with ease.

Cheers to a smart holiday shopping season!

Military Unveils New Retirement System

The United States Armed forces will unveil its new retirement planning system January 1, 2018. The new Blended Retirement System, or BRS for short, has so far drawn mixed reviews from those that understand it and puzzled looks by the many that do not. The changes to the system are discussed below and will hopefully bring greater understanding where needed.

BRS Overview

The concept behind the BRS is the blending of two income sources for retiring personnel. The current system contains an annuity provision that provides money for retiring military personnel with over 20 years of service. The BRS will add to the mix the Thrifty Savings Plan, a 401K program managed by the government that will allow members to invest their own money in stocks or securities while enjoying a contribution from their employer.

The Formula

The annuity formula currently in use will be utilized by the BRS. With this formula, an average of a service member’s highest 36 months of pay is determined and then multiplied by 2.5% of the members years of service. The BRS will reduce this from 2.5% to 2.0%.

The reduction in the annuity formula will be offset by the government’s contribution to a member’s TSP. Once reaching 60 days of service, a member is automatically enrolled in TSP. Once this happens 3% of the members base pay will go to the TSP each month along with a 1% contribution from the government. Once reaching 2 years of service the government will offer an exact match of contributions a member makes to the TSP up to 5%.

Benefit to Short Term Personnel

The addition of the TSP is of great benefit to members who are not planning to serve long enough to retire from service. Under the old system, members that served less than 20 years received nothing toward their retirement income. By contributing to TSP, members can receive the money deposited into their TSP account regardless of when they choose to discontinue their military service.

Members With Decisions To Make

BRS guidelines mandate that all members joining before 2006 are automatically grandfathered into the old system. Likewise, all service members to join after Jan 1, 2018, will be under the BRS. What this leaves is a group of service members with 1 to 12 years of service that must decide between the pros and cons of the two systems. These members will have 1 year to make a decision on this matter. Over 1 million United States service members are included in this group.

Payment Options When Retiring

When a member retires he will have options as to how his money is to be distributed to him. A member can choose to take a lump sum and receive all funds at once. Or, a member can opt for a reduced lump sum of 25% or 50% followed by a reduced monthly annuity until the member reaches the age of 67. Once reaching 67, the amount of the monthly annuity will be the full amount.