I have ended my 4th year of retirement in a good way. The decision to begin Social Security at age 62 was made and it will work very well for me. An added bonus is that is will also work very well for my husband.
From my last blog about Financial Planning, I was undecided about starting Social Security and thought I should try living on my base retirement and profits from my investments until I'm age 66 which is the full benefit age. I had no significant savings as I have been making large purchases instead. Here are the reasons that this appears to be the best decision at this time:
1. The Temporary Payment portion of my state pension ends when I reach age 62 with the assumption that Social Security will take it's place. This payment was about 1/3 of my total pension. Social Security is a couple hundred dollars more per month than that Temporary Payment.
2. The marital strategy of "file and suspend" would not benefit me but would be much less in dollars and runs the risk of less payment should I become a widow before my husband reaches age 70. This "file and suspend" strategy will be discontinued by March 2016 as it was found to be a legal loophole by politicians that was recently negotiated to close. I think it worked best for those couples that had one spouse with very little work history that paid into the system. I have 40 years paying good wages into the system and now it is payback time! Remember the TV horse show from the 1960's, "My Friend Flicka?" Well, now it's My Friend FICA! Thanks to all you wage-earners out there!
3. Instead of "file and suspend" we were told by a Social Security Representative that it would be to our benefit for me to file at my earliest time (my 62nd birthday) and then have my husband file on me while he continues to work until age 70, the maximum payment age. This does not affect my amount in any way but gives my husband half of what he would be making at age 66. We had thought it would be half of my age 62 amount but it turned out to be half of HIS amount at age 66. The law had changed in recent years that allows a person to make a larger amount of wage and still collect Social Security. Of course, there will be taxes paid on this higher income for my husband. Best of all, his Social Security continues to grow to maximum and I can collect off his increased benefits should I become a widow. Win-win situation!
4. The money my husband unexpectedly will now be making off my age 62 Social Security filing has been earmarked for home improvement which will take any pressure off his wages (he's still saving for his retirement) and I likely will increase my savings for added security.
5. My investment base amount has dropped in 2015. I had expected a minimum of 6% growth each year and got in the first two years. The past two years have been less than 6% and 2016 will be the first year I will not take any distribution. The distribution was used to largely fund my Health Savings Account (HSA) each year. That amount is the maximum out-of-pocket dollar amount I have to pay for my medical issues. I will try to pay that amount in 2016 from my savings; if not, I will have to reduce the base amount of my investments. I don't want to do that as I've stopped adding to it when I retired.
For the most part, I have been living within my means and enjoying my retirement with little restrictions. My needs and expectations are less than when I was working and I'm traveling about as much as I want. I still have a dream to go to Europe and may be getting closer to a real time as now I have decided I do not want to travel alone and may wait for my husband to retire since there appears to be no one else available in my life that wants to or is able to travel with me. Maybe a few years of savings will make it all real and my husband and I will have the trip of our lifetime!
It still takes some planned effort to make sure I'm secure enough and manage any financial stress potentials. I have recently been relieved from a 2% income tax loan that I finally paid off from 2011 as I had a very large backdrop payment when I retired from the state. Half of that paid off bills and bought a new car for cash and the other half is my investment base. I still kept a balance on a 9% credit card that did not get paid down every month these past two years. I have recently put that amount in a 0% Credit Union credit account that I will pay off in 18 months. Again, that increase savings potential from the new Social Security situation along with continuing with the normal payment I am use to paying for that 2011 income tax loan will take care of that as long as I keep the discipline and not add any more credit debt.
Because of the uncertainty of when my last Temporary Payment will be made and when the Social Security payment begins, I have been living lean so as to not spend money I don't have until I get it. Christmas was leaner than usual. I did spend more than expected on homemade gifts which for the most part was the final genealogy product I've been working on extensively this past year. I made nine copies for family members and that cost. It is also the final product.
So I'm starting out the new year with some uncertainty waiting to see my new reality. Expected increases from Social Security and commitment to save more money so I can do more is the main plan. My husband will take care of the household repairs and remodeling and my financial help will not be expected now. My health expenses are big and won't change until I'm 65 when Medicare takes some of the load. Best I can do is to manage my health issues as to keep my good quality of life and make sure the money is in the HSA when I need it. Financing my activities is manageable as I have found a level of activity that is comfortable and do not want to increase. As you can see by my other articles in this blog, I'm active enough! I do plan to travel to see family out of state a couple times a year and 2016 will include a trip to the west coast for the first time. There is much to look forward too and I can reasonably expect success.
The Beginning of My 5th Year of Retirement is optimistic! My health issues have progressed but there are new medicines recently prescribed that are working good! My prosperity is good as long as I keep within boundaries I have set with a realistic budget. I am getting much better at it since I have retired than when I was working! My happiness comes from being at peace with myself and improved relationships with my family and friends.
I have real expectations now that I own my own time and don't allow anyone to stress me out or waste my precious retirement time. I am in a position to let everyone know how much they mean to me and that I value their time. I am able to love unconditionally. I let people know I can be there for them and am flexible to their time if they're still working. But I can find many interests on my own when they are too busy to include me in their lives. True happiness comes from within and not dependent on other people. I am still challenged to find a balance between caring about people that may not care about me and being true to myself. I do have more "true" friends now than when I was working. Life's experiences have taught me that many relationships are conditional and self-serving. Retirement has shown me that there are many people that truly value me and like having me around just because I am me. Intuition has given me the power to see the difference!
There's no one-size-fits-all retirement solution, and no one should tell you otherwise. You sound very confident in your decision, so I'm inclined to say it was a good one. You're practicing sound money management with your frugality, and that bodes well for your ability to make the most of your Social Security payouts even without having reached the maximum bracket.
ReplyDeleteHenry Hansen @ Ethica Private Wealth Specialists