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No Matter What Your Age, Your Social Security Statement Matters

Fifteen years ago, the Social Security Administration (SSA) launched the Social Security Statement, a tool to help Americans understand the features and benefits that Social Security offers. Since then, millions of Americans have reviewed their personalized statements to see a detailed record of their earnings, as well as estimates of retirement, survivor, and disability benefits based on those earnings. Here’s how to get a copy of your statement, and why it deserves more than just a quick glance, even if you’re years away from retirement.

Social-Security-is-important-to-women-at-every-stage-in-life

Source: http://www.socialsecurity.gov/socialmedia/photoblog/posts/2013/march.html

How do you get your statement?

In September 2014, the SSA began mailing Social Security Statements to most workers every five years. Workers attaining ages 25, 30, 35, 40, 45, 50, 55, and 60 who are not receiving Social Security benefits and are not registered for an online account will receive a statement in the mail about three months before their next birthday. Workers older than age 60 will receive a statement every year.

But why wait? A more convenient way to view your Social Security Statement is online. First, visit socialsecurity.gov to sign up for a personal my Social Security account (you must be 18 or older to sign up online). Once you have an account, you can view your Social Security Statement anytime you want, as often as you want.

Check your estimated benefits

Your Social Security Statement gives you information about retirement, disability, and survivor benefits. It tells you whether you’ve earned enough credits to qualify for these benefits and, if you qualify, how much you can expect to receive. As each Social Security Statement notes, the amounts listed are only estimates based on your average earnings in the past and a projection of future earnings. Actual benefits you receive may be different if your earnings increase or decrease in the future. Amounts may also be affected by cost-of-living increases (estimates are in today’s dollars) and other income you receive. Estimated benefits are also based on current law, which could change in the future.

Retirement benefits
Although Social Security was never intended to be the sole source of retirement income, retirement benefits are still very important to many retirees. Your statement shows estimates of how much you can expect to receive if you begin receiving benefits at three different ages: your full retirement age (66 to 67, depending on your birth year), age 62 (your benefit will be lower), or age 70 (your benefit will be higher). When to start claiming Social Security is a big decision that will affect your overall retirement income, so if you’re approaching retirement, this information can be especially useful. But even if you’re years away from retirement, it’s important to know how much you might receive, so that you can take this information into account as you set retirement savings goals.

Disability benefits
Disability is unpredictable and can happen suddenly to anyone at any age. Disability benefits from Social Security can be an important source of financial support in the event that you’re unable to work and earn a living. Check your Social Security Statement to find out what you might receive each month if you become disabled.

Survivor benefits
Survivor protection is a valuable Social Security benefit you may not even realize you have. Upon your death, your survivors such as your spouse, ex-spouse, and children may be eligible to receive benefits based on your earnings record. Review your Social Security Statement to find out whether your survivors can count on this valuable source of income.

Review your earnings record

In addition to benefit information, your Social Security Statement contains a year-by-year record of your earnings. This record is updated whenever your employer reports your earnings (or if you’re self-employed, when you report your own earnings). Earnings are generally reported annually, so keep in mind that your earnings from last year may not yet be on your statement.

It’s a good idea to make sure that your earnings have been reported correctly, because mistakes do happen. You can do this by comparing your earnings record against past tax returns or W-2s you’ve received. This is an important step to take because your Social Security benefits are based on your average lifetime earnings. If your earnings have been reported incorrectly, you may not receive the benefits to which you’re entitled.

What if you find errors? The SSA advises you to call right away if any earnings are reported incorrectly. The SSA phone number is 1-800-772-1213 (TTY 1-800-325-0778).

infographic - social security effects from pay gap

Source: http://www.facethefactsusa.org/facts/male-retirees-get-bigger-social-security-checks

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The Rule of 100 — How It Really Works

Many people are familiar with the Rule of 100 as a guide for determining general guidelines for a proper balance of your financial assets.

The Rule of 100 works like this: you take your age and subtract it from 100, so 100 minus your age gives you some number. Let’s say you’re 48 years old. If you take 100 minus 48, what do you get? You get 52.

So, how do you use that in your financial strategies? Well, the 52 as a general rule will represent the maximum percentage of your financial assets that you would want to allocate to financial vehicles exposed to any form of market risk. This would typically include stocks, bonds, mutual funds. These products provide the potential for both unlimited upside and unlimited downside.

The portion that represents your age, 48 is the percentage of your assets that you may want to allocate to those financial vehicles generally considered more secure.

And this is the area that sometimes trips people up with regard to the Rule of 100. The concept of balancing your assets between risk and more secure financial products is pretty simple, but sometimes people are unsure which products are considered to be more secure. As a result, they may end up with a poor balance between riskier and more secure products, even though they believe they have adhered to the Rule of 100.

So, here are the financial vehicles that can be considered to offer a level of protection from market losses – CDs, many government-issued securities, fixed annuities and fixed index annuities. What each of these have in common is that you are not subject losses due to market fluctuations.

So, when using the Rule of 100, these are the vehicles you may, with the help of your financial professional, want to consider, to help balance the assets you have allocated to risk.

 

This is provided for informational purposes only and should not be used as the basis for any financial decisions.

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Last-Minute Tax Tips

It’s that time of year again–tax filing season. And while many taxpayers like to get a head start on filing their returns, there are those of us who always find ourselves scrambling at the last minute to get our tax returns filed on time. Fortunately, even for us procrastinators, there is still time to take advantage of some last-minute tax tips.

time for taxes

If you need more time, get an extension

Failing to file your federal tax return on time could result in a failure-to-file penalty. If you don’t think you’ll be able to file your tax return on time, you can file for and obtain an automatic six-month extension by using IRS Form 4868. You must file for an extension by the original due date for your return. Individuals whose due date is April 15 would then have until October 15 to file their returns.

In most cases, this six-month extension is an extension to file your tax return and not an extension to pay any federal income tax that is due. You should estimate and pay any federal income tax that is due by the original due date of the return without regard to the extension, since any taxes that are not paid by the regular due date will be subject to interest and possibly penalties.

infographic - have you filed your taxes yet

http://www.nbcnews.com/nightly-news/infographic-have-you-filed-your-taxes-yet-n77881

Try to lower your tax bill

While most tax-saving strategies require action prior to the end of the tax year, it’s still not too late to try to lower your tax bill by making deductible contributions to a traditional IRA and/or pre-tax contributions to an existing qualified Health Savings Account (HSA). If you’re eligible, you can make contributions to these tax-saving vehicles at any time before your tax return becomes due, not including extensions (for most individuals, by April 15 of the year following the year for which contributions are being made).

For tax year 2014, you may be eligible to contribute up to $5,500 to a traditional IRA as long as you’re under age 70½ and have earned income. In addition, if you’re age 50 or older, you may be able to make an extra “catch-up” contribution of $1,000. You can make deductible contributions to a traditional IRA if neither you nor your spouse is covered by an employer retirement plan; however, if one of you is covered by an employer plan, eligibility to deduct contributions phases out at higher modified adjusted gross income limits. For existing qualified HSAs, you can contribute up to $3,300 for individual coverage or $6,550 for family coverage.

woman with a budgeting jar

Use your tax refund wisely

It’s easy to get excited at tax time when you find out you’ll be getting a refund from the IRS–especially if it’s a large sum of money. But instead of purchasing that 60-inch LCD television you’ve had your eye on, you may want to use your tax refund in a more practical way. Consider the following options:

  • Deposit your refund into a tax-savings vehicle (if you’re eligible), such as a retirement or education savings plan–the IRS even allows direct deposit of refunds into certain types of accounts, such as IRAs and Coverdell education savings accounts.
  • Use your refund to pay down any existing debt you may have, especially if it is in the form of credit-card balances that carry high interest rates.
  • Put your refund toward increasing your cash reserve–it’s a good idea to always have at least three to six months worth of living expenses available in case of an emergency.

Finally, a tax refund is essentially an interest-free loan from you to the IRS. If you find that you always end up receiving a large income tax refund, it may be time to adjust your withholding.

don't become a victim

Beware of possible tax scams

Though tax scams can occur throughout the year, they are especially prevalent during tax season. Some of the more common scams include:

  • Identity thieves who use your identity to fraudulently file a tax return and claim a refund.
  • Callers who claim they’re from the IRS insisting that you owe money to the IRS or that you’re entitled to a large refund.
  • Unsolicited e-mails or fake websites, often referred to as “phishing,” that pose as legitimate IRS sites to convince you to disclose personal or financial information.
  • Scam artists who pose as tax preparers and promise unreasonably large or inflated refunds in order to commit refund fraud or identity theft.

The IRS will never call you about taxes owed without sending you a bill in the mail. If you think you may owe taxes, contact the IRS directly at www.irs.gov. In addition, the IRS will never initiate contact with you by e-mail to request personal or financial information. If you believe that you’ve been the victim of a tax scam, or would like to report a tax scammer, contact the Treasury Inspector General for Tax Administration at www.treasury.gov/tigta.

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Happy Valentine’s Day

With the holiday, it’s the perfect time to spread some love to the people that matter most, our PLJ community.

No matter your plans, we hope today is filled with lots of fun and laughter.

More importantly, we hope you’re celebrating the most important person in your life… yourself!

Love yourself first and everything else falls into line.
-Lucille Ball

Valentine's-Day

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10 Financial Terms Everyone Should Know

Understanding financial matters can be difficult if you don’t understand the jargon. Becoming familiar with these 10 financial terms may help make things clearer.

girl studying

1. Time value of money

The time value of money is the concept that money on hand today is worth more than the same amount of money in the future, because the money you have today could be invested to earn interest and increase in value.

Why is it important? Understanding that money today is worth more than the same amount in the future can help you evaluate investments that offer different potential rates of return.

2. Inflation

Inflation reflects any overall upward movement in the price of consumer goods and services and is usually associated with the loss of purchasing power over time.

Why is it important? Because inflation generally pushes the cost of goods and services higher, any estimate of how much you’ll need in the future–for example, how much you’ll need to save for retirement–should take into account the potential impact of inflation.

inflation sample

3. Volatility

Volatility is a measure of the rate at which the price of a security moves up and down. If the price of a security historically changes rapidly over a short period of time, its volatility is high. Conversely, if the price rarely changes, its volatility is low.

Why is it important? Understanding volatility can help you evaluate whether a particular investment is suited to your investing style and risk tolerance.

4. Asset allocation

Asset allocation means spreading investments over a variety of asset categories, such as equities, cash, bonds, etc.

Why is it important? How you allocate your assets depends on a number of factors, including your risk tolerance and your desired return. Diversifying your investments among a variety of asset classes can help you manage volatility and investment risk. Asset allocation and diversification do not guarantee a profit or protect against investment loss.

woman with a budgeting jar

5. Net worth

Net worth is what your total holdings are worth after subtracting all of your financial obligations.

Why is it important? Your net worth may fund most of your retirement years. So the faster and higher your net worth grows, the more it may help you in retirement. For retirees, a typical goal is to preserve net worth to last through the retirement years.

6. Five C’s of credit

These are character, capacity, capital, collateral, and conditions. They’re the primary elements lenders evaluate to determine whether to make you a loan.

Why is it important? With a better understanding of how your banker is going to view and assess your creditworthiness, you will be better prepared to qualify for the loan you want and obtain a better interest rate.

statistic - credit score survey

Source: http://blog.lendingclub.com/survey-says-americans-not-making-the-most-of-hard-learned-credit-lessons/

7. Sustainable withdrawal rate

Sustainable withdrawal rate is the maximum percentage that you can withdraw from an investment portfolio each year to provide income that will last, with reasonable certainty, as long as you need it.

Why is it important? Your retirement lifestyle will depend not only on your assets and investment choices, but also on how quickly you draw down your retirement portfolio.

8. Tax deferral

Tax deferral refers to the opportunity to defer current taxes until sometime in the future.

Why is it important? Contributions and any earnings produced in tax-deferred vehicles like 401(k)s and IRAs are not taxed until withdrawn. This allows those earnings to compound, further adding to potential investment growth.

9. Risk/return trade-off

This concept holds that you must be willing to accept greater risk in order to achieve a higher potential return.

Why is it important? When considering your investments, the goal is to get the greatest return for the level of risk you’re willing to take, or to minimize the risk involved in trying for a given return. All investing involves risk, including the loss of principal, and there can be no assurance that any investing strategy will be successful.

federal reserve organization

http://en.wikipedia.org/wiki/Federal_Reserve_System

10. The Fed

The Federal Reserve, or “the Fed” as it’s commonly called for short, is the central bank of the United States.

Why is it important? The Fed has three main objectives: maximum employment, stable prices, and moderate long-term interest rates. The Fed sets U.S. monetary policy to further these objectives, and over the years its duties have expanded to include maintaining the stability of the entire U.S. financial system.

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