Posts Tagged ‘retire’

When Can I Draw Social Security?

Millions of people rely on Social Security as a means of retirement income. Before you do anything, you need to answer this question: when can I draw Social Security? If you don’t know the answer you may end up making a bad decision that effects you during retirement.

Steps for Drawing on Social Security

Are you ready to draw on Social Security? The following steps will help you answer this question while also getting started.

1. Determine your eligibility. If you are 62 years or age or older, you are eligible for retirement benefits. However, you will receive more money if you wait until age 65 or older.

2. Apply for Social Security benefits on the Social Security website. Other options include visiting your local Social Security Office or calling on the phone.

The Social Security Administration (SSA) suggests applying for benefits three months before your birthday. This will help avoid any unnecessary delays.

In most cases, applying for Social Security is simple. The SSA already has most of the information needed including your Social Security number and income information.

3. Provide any information that is requested. As noted above, the SSA usually has all the information they need. That being said, proof of citizenship and/or a photo ID may be required.

What if I am applying for SSI disability? In this case, you will need to provide more detailed information. To start, you must be unable to perform your prior job responsibilities for a minimum period of 12 months. Additionally, you are required to provide medical documentation.

Although you can begin to draw Social Security at age 62, this will result in reduced benefits. To receive full Social Security benefits, hold out until you reach full retirement age.

Now that you know when you can draw Social Security, it should be easier for you to plan your retirement.

 

Fixed Indexed Annuity

Are you interested in buying a fixed indexed annuity? This retirement investment is often times referred to as an equity indexed annuity. No matter what you call it, you need to learn more about the benefits so that you can make an informed decision.

Why a Fixed Indexed Annuity May Be Right for You

There are many reasons why a fixed indexed annuity may be a good choice in retirement.

1. Guaranteed lifetime income. Let’s face it: many people are worried that they will run out of money in retirement. Sound familiar? With this investment, you are guaranteed an income stream for as long as you live. There are several different types of annuity payment options, so choose the one that best matches your lifestyle and financial situation.

2. Tax deferral. Did you know that your annuity accumulates value on a tax deferred basis? This is true until you begin to withdraw funds. With this benefit, your money can grow faster because you are earning interest on funds that would have otherwise been paid out in the form of tax.

3. Guaranteed principal. Mutual funds, securities, and most other investments lead to account balance fluctuations based on the market. With a fixed index annuity this is never a concern. You are guaranteed that your balance will never decrease, no matter what the market brings.

4. Stock market growth. The most unique feature of a fixed indexed annuity is the way that it is linked to the stock market without any risk for a loss. Rather than bearing the risk of the market, as you would with a mutual fund, for example, you are safe from any loss of principal – no matter how bad things get.

Are you interested in a safe way to invest your money, while receiving a guaranteed income? If so, a fixed indexed annuity may be the best option for you.

 

Annuity Definition

Before you opt for an annuity, you should know exactly what you are getting into. There are benefits and drawbacks of this retirement vehicle. While this is the perfect choice for some people, others find it to be a bad financial decision.

It is simple to understand the annuity definition: a fixed sum of money paid out on a regular schedule, usually monthly or annually.

Knowing the definition of an annuity is a great start, but this does not mean you should immediately go out and invest in this manner.

Annuity Benefits

The main benefit of an annuity is the lifetime income. No matter how long you live, you are guaranteed to receive income as outlined in your contract. Some people love this security and the feeling of knowing that a steady flow of income will always be coming their way.

Did you know that you can add inflation protection to most annuities? Although this is more expensive, it helps ensure that your money will keep up with cost of living increases.

Annuity Downfalls

Are you aware that not all annuities are created equal? This is a shock to many people – especially those who have already purchased an annuity. Generally speaking, there are two types of annuities: deferred and immediate. Within these two options, you can choose either a variable or fixed annuity.

All of these choices can lead to a stressful, worrisome purchase process. For this reason, it is essential to find an advisor who is willing to walk you through the process in an honest manner.

Annuities can be very expensive. In addition to big upfront charges, there are back end fees, such as those for withdrawing your money too soon. If this is not bad enough, you will have to pay administrative and record keeping fees every year.

Now that you know the annuity definition, as well as some of the more prominent pros and cons, you can decide if this is a good choice for you and your family.

 

Planning a 401k Withdrawal

Are you interested in taking a 401k withdrawal in the near future? Do you have questions about when and how this should be done? Anybody who invests in a 401k is making a good decision. However, the decision to invest is only the first of many.

There are many withdrawal options, but before we get into them keep this point in mind: it is recommended to keep money for retirement in your 401k until you retire. In other words, an early withdrawal is never a good idea – unless you are in a dire financial situation.

A Few Simple Tips

Before making any rash decisions, consider these tips:

1. Except in the rarest of cases, 401k withdrawals are taxed as ordinary income. It is important to plan for the tax implications of withdrawing funds from your account.

2. If you withdrawal any money before the age of 59 ½ you will be hit with a 10 percent early distribution penalty. This is in addition to the tax that owed on the money.

3. You have the right to delay distributions until April 1 of the year after you turn 70 ½. Doing this gives you the chance to maximum tax deferred growth and save even more money. Once you reach this age, you are required to annually withdrawal your Required Minimum Distribution.

If you don’t withdrawal your Required Minimum Distribution you are penalized 50 percent of the difference between the withdrawn amount and what should have been distributed.

No matter your age or how much money you have in your 401k account, it is essential to carefully plan any withdrawal. How much tax will you pay on the withdrawal? Will you be assessed an early distribution penalty? These are the types of questions you must answer.

By following the tips above, you should be able to successfully plan a 401k withdrawal.

 

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