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Social Security Simplification & Wealth Building

Learn the importance of knowing all about social security prior to you actually deciding to get your benefits…


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Caution: 50-minute read, but well worth it in the opinion of for those who desire to take control of their understanding of Social Security


In the current economy the threat of Social Security and Medicare tampering happens on a regular basis.  But what exactly is Social Security and Medicare–and how can you make the Social Security and Medicare that you have contributed to work for your best advantage during your retirement years?


Deciding on the best approach to take to receive your Social Security benefits can be a confounding and confusing process for many, and this discussion is designed to clear up competing arguments on when and what is the best approach to receive retirement benefits and more specifically your Social Security benefits so that the average person can understand and possibly provide guidance so that they are better informed.


And just as your investments and how you approach them are determined by your unique goals that you have, your risk-tolerance level, your income and your personal situation–so too does your analysis of your Social Security that you will receive, to a lesser or greater degree, depend on those same factors.


In this timely discussion, will attempt to simplify the topic of Social Security so that you can make better use of Social Security during your retirement years–and possibly be of more benefit to your heirs after you transition.


Social Security & Your Finances


Learn how to determine the best time to receive the social security and other benefits that you are entitled to…


As you age and edge closer to retirement, Social Security and your other retirement income becomes a real concern.


In this discussion, will discuss the ins and outs of Social Security so that you can better time “the time” (pun intended) that you will elect to receive your benefits, and furthermore show you other things that you can do as you approach retirement that can enhance your Social Security and other benefits that you may be entitled to.


You can apply for Social Security disability income at any time if you are suffering from a disability that allows you to receive benefits.


Full Retirement Age, or FRA, is the age when you are entitled to 100 percent of your Social Security benefits, which are determined by your lifetime earnings.  It is gradually increasing, from 66 and 6 months for those born in 1957 to 66 and 8 months for those born in 1958 and, ultimately, 67 for people born in 1960 or later.  Be sure to “distinguish” that FRA when you are entitled to 100% of your Social Security benefit, is not the same as your Maximum Benefit Amount which could be 25% or more higher than the amount you receive at your FRA.


Those FRA dates apply to the retirement benefits you earned from working and to spousal benefits, which your husband or wife can collect on your work record.  They differ slightly for survivor benefits, which you can claim if your spouse dies.


Full retirement age for survivors is 66 and 4 months for people born in 1958 and gradually increases to age 67 for people born in 1960 or later.


  • Claiming benefits “before” full retirement age will lower your monthly payments that you receieve from the SSA; the earlier you file — you can start at age 62 — the greater the reduction in benefits.  Spousal and survivor benefits are also reduced if you claim them before reaching full retirement age.


  • You can increase your retirement benefits by waiting past your FRA to retire.  Each month you put off filing up to age 70 earns you delayed retirement credits that boost your eventual benefit.


How early should I decide to get my benefits?


Your window to elect to receive Social Security benefits begin at age 62 and end at age 70 (note: you can elect to receive Social Security after age 70, however there is no financial benefit of doing so).


That’s a difficult question and will depend on your goals, risk-tolerance level, income, tax position, personal situation and other factors that may be unique to your current and anticipated financial position.  You can claim Social Security as early as age 62, but it may be to your benefit to put off filing for benefits as long as possible (pun intended).


By delaying you can maximize your monthly payments.  But you may want to do further analysis.


Here are some key factors that you may want to consider:


  • Q: How’s your and your family’s health history?  A: If you have a reasonable expectation of living decades past retirement, postponing benefits to get a bigger payment could prove important to your long-term financial stability.  But if you turn 62 and you are in poor or debilitating health, or you have a genetic predisposition to certain illnesses, or otherwise have a pessimistic view of your future, you may decide it makes more sense for you and your family to get what you can, while you can.


  • Q: How long do you expect to be gainfully employed? A: Many older workers are being nudged into early retirement as companies downsize, and they wind up spending their last working years in the gig economy or other odd jobs.  If you are one who did not plan appropriately for you golden years and you find yourself struggling to pay your monthly expenses, filing for Social Security at age 62 or before your FRA and taking lower benefits may be what you need to make ends meet.  Just be sure to take into consideration inflation, rising property taxes, rising insurance rates and other factors that may be unique to you and the environment in which you live, into serious consideration.


Still, there are strong arguments for waiting as long as you can, and you want to use caution and do careful analysis of the choices available:


  • Filing earlier locks you into a lower benefit on a “permanent” basis.  You are not entitled to 100 percent of the benefit calculated from your earnings history unless you apply at full retirement age (66 and 6 months for people born in 1957, 66 and 8 months for people born in 1958 and rising two months annually to age 67 over the next few years).



  • From full retirement age until age 70, you can earn delayed retirement credits that can boost your eventual benefit by two-thirds of 1 percent for each month of delay — and increase survivor benefits for your spouse, if you die first.


Survivor, Spousal & Dependent Support


  • after you transition your spouse and/or dependents could receive–survivor benefits


  • after 10 years of marriage and you divorce–your “former spouse” could be entitled to benefits–divorced spouse benefits


  • dependents may be entitled to receive social security benefits based off of your work record–dependent benefits


Other family members may be entitled to benefits that you have earned through the Social Security program during your working years.


Social Security “survivor’s benefits” are paid to widows, widowers, and dependents of eligible workers and this benefit is particularly important for “young families with children” and the benefit amount would be based on your earnings, if you were to transition after accumulating a work history.


If you are divorced, your ex-spouse can receive benefits based on your record (even if you have remarried) if certain conditions are met.


Generally, you must be married for one year before you can get spouse’s benefits.  However, if you are the parent of your spouse’s child, the one-year rule does not apply.


The same is true if you were entitled (or potentially entitled) to certain benefits under Social Security or the Railroad Retirement Act in the month before the month you got married.  A divorced spouse must have been married 10 years to get spouse’s benefits.


You can apply for benefits by going online and completing the application for benefits.


Regardless of when you claim Social Security benefits, the sign-up age for Medicare is still 65. You can’t enroll earlier, except under very narrow circumstances, and you may incur hefty fees for signing up later.  There is a “time-period window” (roughly a 6-month period near the time of your 65th birthday) that must be met in order to sign up and receive Medicare!


How does a Reduction in Benefits work?


It depends on the year you were born and how long until you reach full retirement age, abbreviated as FRA.  That’s the age at which you would collect 100 percent of the monthly benefit payment that the Social Security agency calculates from your lifetime earnings history.


Retirement benefits are designed so that you get the full benefit if you wait until full retirement age, which is 66 and 6 months for those born in 1957, 66 and 8 months for those born in 1958 and gradually rising to 67 for those born in 1960 and afterward.  If you file early, Social Security reduces the monthly payment by 5/9 of 1 percent for each month before full retirement age, up to 36 months, and 5/12 of 1 percent for each additional month.


Suppose you were born in 1962 and will turn 62, the earliest age to claim retirement benefits, in 2023.


Filing at 62, 60 months early, permanently reduces your monthly benefit by 30 percent and if you would have been entitled to $2,000 a month at full retirement age, you will get $1,400 if you start benefits when you turn 62.


Here’s what the reduction would be in subsequent years.


  • Age 63: 25 percent


  • Age 64: 20 percent


  • Age 65: 13.3 percent


  • Age 66: 6.7 percent


In essence, by starting early you would forfeit roughly 5% to 7% or more in guaranteed returns a year, depending on the year you decided to start receiving your benefits.


  • The figures above represent the reduction if you start benefits as soon as possible upon reaching the designated age.  The benefit decrease is calculated based on months, not years, and each month that you wait beyond your 62nd birthday lessens the reduction.



  • All care in the accuracy in the data above was pursued, however the above data cannot be guaranteed as changes occur over time and the data obtained cannot be guaranteed.


What is the Maximum Benefit that I could receive?



You receive the highest benefit payable on your own record if you start collecting Social Security at age 70.


Once you reach your full retirement age, or FRA, you can claim 100 percent of the benefit calculated from your lifetime earnings.  Again, the full retirement age is 66 and 6 months for people born in 1957, 66 and 8 months for those born in 1958 and for those born in 1959, 66 and 10 months.


It will incrementally increase to 67 over the next few years, however if you were to hold off a few years, you could earn delayed retirement credits that increase your eventual benefit — by two-thirds of 1 percent for each month you wait.


For example, if you were born in 1958, your reach full retirement age between September 2024 and August 2025.  If you put off filing for Social Security until you turn 70, you’ll get 40 months of delayed requirement credits, good for a bump of nearly 27 percent over your full retirement benefit.


If the benefit you’re entitled to at FRA is $1,800 a month, at 70 your benefit would bump up to about $2,280 a month.


Here’s how that $1,800 full benefit could grow for you if you decided to wait:


  Year of birth     Full retirement age    Benefit at 70   


1954 66 $2,376 (132% of full retirement benefit)
1955 66 and 2 months $2,352 (130.67%)
1956 66 and 4 months $2,328 (129.33%)
1957 66 and 6 months $2,304 (128%)
1958 66 and 8 months $2,280 (126.67%)
1959 66 and 10 months $2,256 (125.33%)
1960 or later 67 $2,232 (124%)

At age 66 and 8 months you would receive a benefit of $1,800 a month, however if you waited to age 70, you could pocket $2,280 monthly–a difference of $480 a month, which could go a long way if you were in financial position and health condition to hold off a few years.


Keep Points


  • You can claim benefits later than 70, but there’s no financial reason to do so as delayed retirement credits stop, and your payment tops out once you attain age 70.


  • From age 67 to age 70 you can earn “delayed retirement credits” which can increase the benefit amount that you would receive.


What is the maximum amount that I can receive if I contribute a substantial amount to the system?


The most an individual who files a claim for Social Security retirement benefits in 2024 can receive per month is:


  • $2,710 for someone who files at 62


  • $3,822 for someone who files at full retirement age (66 and 6 months for people born in 1957, 66 and 8 months for people born in 1958).


  • $4,873 for someone who files at age 70 (Maximum Monthly Benefit Possible for anyone in 2024)


To add more clarity, the average Social Security retirement benefit in October 2023 was $1,796 a month, while the average disability benefit for 2023 was $1,489 a month.


You would be eligible for the maximum benefit if your earnings equaled or exceeded Social Security’s maximum taxable income — the amount of your earnings on which you pay Social Security taxes — for at least 35 years of your working life.


The maximum taxable income in 2024 is $168,600 and the figure is adjusted annually based on changes in national wage levels (wage adjustments), and thus the maximum benefit changes each year.


Also be aware that the maximum benefit is not the same as the maximum family benefit.  The most a family can collectively receive from Social Security (including retirement, spousal, children’s, disability or survivor benefits) on one family member’s earnings record differs from the maximum benefit amount for an individual mentioned above.  That amount is generally, about 150 to 180 percent of your full retirement benefit.


Can I stop and later restart receiving my Social Security benefits?


Yes, within limitations.  If you are in your first year of collecting retirement benefits, you could apply to Social Security for a “withdrawal of benefits” if you started early, say age 62.


If you later you got an unexpected windfall such as an inheritance, lottery winnings, or a pay raise or higher-paying job, you could theoretically be in a position to wait until you are older and you can collect a larger benefit if you do so within 12 months of the date you first claimed your benefits.


You start the process by filling out Social Security form SSA-521. and sending the completed form to your local Social Security office, preferably by certified mail.


If you opt for a stop (withdrawal), Social Security will treat it as if you never applied for benefits in the first place, and you will have to repay every dollar you’ve received including the following:


  • Your monthly retirement payments.


  • Any family benefits collected by your spouse or children, who must consent in writing to the withdrawal.



If you’ve been getting retirement benefits for more than a year, the “window for withdrawal” has closed for you!


However, once you reach full retirement age (66 and 6 months for those born in 1957, 66 and 8 months for those born in 1958 and rising two months per year to 67 for those born in 1960 and later), there’s a second option:


You can request a suspension of benefits!


During a suspension, you accrue delayed retirement credits that were mentioned earlier, which will increase your monthly retirement benefit when you start collecting again.


You can ask Social Security to reinstate your benefits at any time prior to turning age 70, and if you don’t ask for reinstatement by age 70, the agency will do it for you!


Be aware that:


  • If you change your mind about a withdrawal of benefits, you have 60 days from the date Social Security approves your withdrawal to cancel the request.


  • The SSA-521 includes a question asking if you want to keep “Medicare” benefits.  You can if you want to, however if you don’t, there are numerous implications both for any health care benefits you’ve already received and for re-enrollment in Medicare at a later date.  You can review these implications in the Social Security publication “If You Change Your Mind.”


  • You don’t have to hand in your notice when you start getting retirement benefits, as there is “no requirement” that you stop working.


  • But continuing to draw income from work might reduce the amount of your benefit if you claim Social Security before you reach full retirement age (FRA), the age when you qualify to collect 100 percent of the maximum benefit allowed from your earnings history.


To reiterate, Full Retirement Age is 66 years and 6 months for people born in 1957 and will rise two months for each subsequent birth year, until it settles at 67 for those born in 1960 and later.  Prior to FRA, Social Security doesn’t consider you fully “retired” if you make more than a certain amount from work, and it will deduct a portion of your benefits if your earnings exceed that limit.


The earnings caps are adjusted annually for cost-of-living adjustments (COLA), and they differ depending on how close you are to full retirement age.


If you are receiving benefits and working in 2024 but not due to attain FRA until a later year, the earnings limit is $22,320.  You lose $1 in benefits for every $2 earned over the cap.  So, if you have a part-time job that pays $30,000 a year — $7,680 over the limit — Social Security will deduct $3,840 in benefits or roughly $125 a month, from your social security check.


Suppose you will reach full retirement age in 2024.  In that case, the earnings limit is $59,520, with $1 in benefits withheld for every $3 earned over the limit that applies until the date you hit FRA!  Once you attain age 70 and onward, there is no benefit reduction, no matter how much you earn–once you hit age 70, the sky is the limit as far as your earnings are concerned as it relates to your Social Security benefits.


In fact, Social Security increases your monthly benefit at that point so that over time you recoup benefits you lost to the prior withholding.


If you receive wages, earnings-limit calculations are based on your gross pay; if you’re self-employed, Social Security counts your “net income” only.  The Social Security pamphlet “How Work Affects Your Benefits” and its Retirement Earnings Test Calculator can provide you with more details.


Key points


  • The earnings cap applies only to income from work.  The cap does not count investments, pensions, annuities or capital gains.


  • If your Social Security payments are reduced because you earned income above the limit, spouses and children receiving benefits on your work record will have their payments reduced as well.


  • The earnings cap and rules also apply to the work income of people receiving spousal, children’s and survivor benefits.



  • It may be wise to consult your tax advisor prior to electing to receive your benefits, if possible, as all tax situations are unique and experienced tax professionals can see through blind spots and areas of taxation that are nuanced and you may not be aware of.


Will my benefits increase if I continue to work?


It very well could.  It will all depend on how much you’re making now and how much you’ve made working in years past.


Social Security uses your “lifetime average” for monthly income, as calculated from your 35 highest-earning years and adjusted to reflect historical wage trends, as the basis for your benefit calculation.


Even if you’ve already claimed your benefits, Social Security annually recalculates this average, factoring in any new income from work.


If your current earnings fall into your top 35 earning years, your monthly average will rise, and so could your benefit!


What is the recalculation time period?


The Social Security Administration recalculates your retirement benefit each year after getting your income information from tax documents.  If you have a job, employers submit your W-2s to Social Security; if you are self-employed, the earnings data comes from your personal tax return that you would file during the tax season.


Social Security will take any work income from that tax year and figure it into your benefit calculation.


That calculation is based on the average monthly income from the 35 best-paid years of your working life (as indexed for historical United States wage trends, a process similar to adjusting for inflation).  If your recent earnings make the top 35, it will increase the monthly average and your benefit payment will increase!


You can call Social Security at 800-772-1213 to ask about how your anticipated earnings might change your benefit.


What is the payment schedule?


Apart from any earnings-based calculations, Social Security makes an annual cost-of-living adjustment (COLA) to your benefit based on inflation, if any.  The COLA for 2024 will be 3.2 percent, boosting the average retirement benefit by $59 a month starting in January.  COLA review and adjustments are done annually by the Social Security Administration.


Social Security pays benefits in the month following the month for which they are due.  For example, the January benefit that you are entitled to would be paid in February.


For most beneficiaries, the payment date depends on your birth date since changes that were made in 1997 went into place.  If you are receiving payments on the record of a retired, disabled or deceased worker (for example, spousal or survivor benefits), that person’s birthday sets the schedule for the payments that you would receive.


Here’s how it works in a nutshell:


  • If the birthday is on the 1st through the 10th, you are paid on the second Wednesday of each month.


  • If the birthday is on the 11th through the 20th, you are paid on the third Wednesday of the month.


  • If the birthday is on the 21st through the 31st, you are paid on the fourth Wednesday of the month.


The Social Security Administration adopted this staggered schedule in June 1997.  Prior to that, all benefit payments went out on the third day of the month, but that became untenable as the number of beneficiaries grew to a level that made it impractical to pay out on a single day.


Most people who started receiving benefits before May 1, 1997, are still paid on the third of the month.


The third is also the monthly pay date for these groups of Social Security beneficiaries:



  • Those enrolled in Medicare Savings Programs, which provide state financial help for paying Medicare premiums continue to receive their payments on the 3rd day of the month.


  • Those who collect both Social Security and Supplemental Security Income (SSI) benefits.  If you were in this group, you would get your SSI on the first of the month and your Social Security on the third day of the month.


Social Security has an online calendar showing all the payment dates for 2024 and is updated annually.


Key points


  • Social Security no longer pays benefits by check. You can receive benefits by direct deposit or via a Direct Express debit card.


  • Those who receive Social Security Benefits receive payment based on the birth date of the retired, disabled or deceased person, or a set date determined by the Social Security administration which is generally the 3rd day of the month.


  • If a scheduled payment date falls on a weekend or federal holiday, payments are made on the first preceding day that isn’t a Saturday, Sunday or holiday.


Medicare payments

Medicare consists of:


Part A   Hospital

Part B   Outpatient

Part C   Medicare Advantage

Part D   Prescription Drugs


An easy way to remember what each part of Medicare covers (which can be difficult for some) is to use the following system:


When you think of part A think of coverage that allows you to go to “A” Hospital

When you think of part B think that you will “Be” getting health coverage or outpatient coverage

When you think of part C think that you are buying “Coverage” for Medicare Advantage

When you think of part D think that you are going to get prescription “Drug” coverage


Medigap Insurance coverage fills in the gaps where you would possibly have out of pocket expenses and deductibles, and it can be purchase by you if you select Medicare–and decide not to buy into Medicare Advantage coverage.


Another way of looking at it is part A is Hospital Coverage and possibly free, Medicare is part B, Medicare Advantage is part C,  and part D is coverage for Prescription Drugs, whether you have Medicare or MA!


Now that you have a system that you can use to distinguish all parts of Medicare and MA, let’s discuss Medicare in greater detail.


If you elect traditional Medicare, you will pay for parts B, D and Medigap, and you could be surprised by the premiums.  You have just learned and fully understand that part B covers outpatient care and has a monthly deductible ($174.70 in 2023), and there is also a deductible for every hospital visit on part A ($1,632 in 2023).


Part A: generally, you will qualify for hospital coverage if you have worked in the United States and have paid Medicare taxes (provides hospital coverage up to 60 days and a high deductible could be involved).


Part B: outpatient care is similar in scope to health insurance and in 2024 had a payment of $174.70 per month and the coverage will subject you to the benefits test if your modified adjusted gross income is over $103,000 single or $206,000 married filing joint.


Part D prescription drug coverage premiums averaged $50.50 in 2023, however drug and other coverage varies.  Often purchased through a private insurer.


Medigap coverage kicks in when there is a “gap in coverage” when you use part B and D, for example you could use the coverage to pay the part A and D deductibles mentioned above!


With Medicare, physicians and hospitals would have to submit claims to parts A, B, D and Medigap, where applicable individually, whereas with Medicare Advantage the claim would normally go to just one provider.


Medicare recipients could also possibly get financial assistance from Medicaid or other assistance programs if they qualified.


Medicare Advantage (part C) —the “competitor to Medicare” offers coverage for parts A, B and D, and coverage and costs varies by provider.  The coverage provided is similar to that of an HMO or PPO and provider costs and coverages that vary from provider to provider, so it is best to shop around.


In either plan, Medicare Advantage (MA) or Medicare “pre-existing conditions” will be covered!


Star Ratings by AARP could also be helpful when considering plans!


If you are signed up for both Social Security and Medicare Part B — the portion of Medicare that provides standard health insurance or outpatient care — the Social Security Administration will “automatically deduct” the premium from your monthly benefit.


The standard Part B premium for 2024 is $174.70 a month, an increase of $9.80 from the 2023 rate. Medicare Part A, which covers hospitalization, is free for anyone who is eligible for Social Security, “even if” they have not claimed Social Security benefits yet.


If you are getting Medicare Part C (additional health coverage through a private insurer, also known as Medicare Advantage) or Part D (prescription drugs), “you have the option” to have the premium deducted from your Social Security benefit or to pay the plan provider directly yourself.


Part D is also subject to a means test, similar to part B!


If you want the deduction from your Social Security income, you will have to contact your part C or D provider to arrange it!


Keep points 



  • People with low incomes and limited financial assets may qualify for Medicare Savings Programs that can help with Part B premiums.  These are federally funded but run by the states.  In 2023, income limits to qualify for the programs in most states ranged from $1,235 to $1,660 a month for individuals and $1,663 to $2,239 a month for married couples (the thresholds are higher in Alaska and Hawaii).  The 2024 limits will be posted on the Medicare website once they are announced.


  • If you are receiving benefits” from SSA, the Social Security Administration will “automatically sign you up at age 65” for parts A hospitalization and B outpatient care of Medicare.


  • Medicare is operated by the federal Centers for Medicare & Medicaid Services, but Social Security handles enrollment.  Social Security will send you sign-up instructions at the beginning of your initial enrollment period, three months before the month of your 65th birthday, however mistakes and delays can occur, therefore you want to act within the 6-month window of your 65th birthday if you have a need for Medicare as you are now aware of the enrollment process.


  • Medicare Part A covers basic hospital visits and services and some home health care, hospice and skilled-nursing services.  If you are receiving or are eligible to receive Social Security retirement benefits, you do not pay “premiums” for Part A.


  • Medicare Part B is similar to standard health insurance and carries a premium.  The base rate in 2024 is $174.70 a month.  Higher-income individuals pay more depending on the amount of their modified adjusted gross income.


  • You can “opt out” of Part B — for example, if you already have what Medicare calls “primary coverage” through an employer, spouse or veterans’ benefits and you want to keep the primary care that you already have.


  • Check with your current insurance provider to make sure your coverage meets the standard. Opting out will not affect your Social Security status, but you might pay a penalty in the form of permanently higher premiums if you decide to enroll in Part B later.


  • If you want to enroll in Medicare Part C (also known as Medicare Advantage, an “alternative to Part B” that is provided by private insurers, you must sign up on your own. The same goes for Medicare Part D, prescription drug coverage.  You can find more information in Social Security’s “Medicare” publication and AARP’s Medicare Made Easy guide, or you can call Medicare at 800-633-4227.


Key points


  • If you are living abroad or are outside the United States when you become eligible for Medicare, contact the nearest U.S. embassy or consulate to request an enrollment form.


You can only enroll in Medicare at age 62 if you meet one of these criteria:



  • You are on SSDI because you suffer from amyotrophic lateral sclerosis, also known as ALS or Lou Gehrig’s disease (The two-year requirement is waived in this case).


  • You suffer from end-stage renal disease.


Otherwise, your initial enrollment period for Medicare begins three months before the month of your 65th birthday.  For example, if you turn 65 on July 14th, 2024, the enrollment window opens on April 1st and closes on November 1st, 2024.


If you “are receiving” Social Security benefits, the Social Security Administration, which handles Medicare enrollment, will send you an information package and your Medicare card at the start of the sign-up period.  You’ll be automatically enrolled in Medicare Part A (hospitalization) and Part B (standard health insurance) in the month you turn 65.


In the meantime, consider looking into other options for health insurance to bridge the gap until you are Medicare-eligible if you lack insurance and have not reached the age to receive Medicare.  Depending on your financial and marital situation, these might include Medicaid, private insurance through the Affordable Care Act marketplace or coverage through your spouse’s workplace plan or your own employer’s work plan.


Key point



How to enroll


You can enroll online, by phone at 800-772-1213, or by visiting your local Social Security office.  Local offices fully reopened in 2022 after being closed to walk-in traffic for more than two years due to the COVID-19 pandemic, but Social Security recommends calling in advance and scheduling an appointment to avoid long waits.


You should proactively be aware of the enrollment deadlines, as Social Security will not sign you up automatically at 65 for “traditional Medicare” — Part A (hospitalization) and Part B (health insurance) — as it typically does for people already collecting Social Security benefits!


In this situation, you’ll have to enroll yourself, either online or by contacting Social Security.


Always remember that Medicare and Social Security are “two separate programs” however the Social Security Administration runs enrollment for traditional Medicare!


You can enroll in Medicare parts A, B and D (prescription-drug coverage) as early as three months before the month you turn 65 or as late as three months after your birthday month which is called your initial enrollment period.  For example, if your 65th birthday is May 15th, 2024, the initial enrollment window is open from February 1st until August 31st, 2024.


Here’s why you need to be on top of your deadline:


If you don’t sign up during those seven months, you may be subject to a permanent surcharge once you do enroll.  You’ll find more information on sign-up periods in Medicare publications about enrolling in Part B and Part D.


Part A is free if you qualify for Social Security, even if you have not claimed benefits yet, however Part B carries a premium and in 2024, the standard Part B premium is $174.70 a month; it goes up for beneficiaries with MAGI (income) above $103,000 for those who file an individual tax return, and MAGI of $206,000 for a married couple filing jointly.


If you are not yet receiving Social Security benefits, you will have to pay Medicare directly for Part B coverage.  Once you are collecting Social Security, the premiums will be deducted from your monthly benefit payment.


If you “decide to purchase” a Part D prescription-drug plan, it’s best to do so during your initial enrollment period; and as mentioned previously, you may pay a higher premium, permanently if you fail to sign up in a timely manner.


Your Part D provider cannot deny coverage even if you are in poor health or have a preexisting condition.  You can choose between paying Medicare directly or having Part D costs deducted from your Social Security payment.


Key points


  • The Medicare eligibility age of 65 no longer coincides with Social Security’s full retirement age (FRA) — the age when you qualify for 100 percent of the Social Security benefit calculated from your lifetime earnings.  FRA was long set at 65 but it is gradually going up: It’s 66 years and 6 months for people born in 1957, 66 and 8 months for those born in 1958, 66 and 10 months for those born in 1959 and will settle at 67 for those born in 1960 or later.


  • Always remember that even if you don’t elect for Social Security at the earliest time possible, you can still sign up for Medicare at 65 as long you are a U.S. citizen or lawful permanent resident.  You will have to pay Medicare directly for all coverage, including Part A (unless you or your spouse are among the small number of state and local government employees who paid Medicare taxes but not Social Security taxes; in this case, you may be able to get Part A for free).


Managing Medicare enrollment


For most people, Medicare eligibility starts at age 65 and “if you’re receiving Social Security retirement benefits” at that time, SSA will send you a Medicare enrollment package at the start of your initial enrollment period, which begins three months before the month you turn 65.   This point cannot be over-emphasized and is repeated here yet again due to the importance of you understanding this deadline.  If you are not on Social Security, you want to still know that you must sign up by age 65 if you desire the coverage!


For example, if your 65th birthday is July 15, 2024, this period begins April 1.


On your 65th birthday, you’ll automatically be enrolled in parts A and B.  You have the right to opt out of Part B, but you might incur a penalty, in the form of permanently higher premiums, if you sign up for it later.


If you have not yet filed for Social Security benefits, you will need to apply for Medicare yourself!


You can do so any time during the initial enrollment period, which lasts seven months (so, for that July 15 birthday, the sign-up window runs from April 1 through Oct. 31). If you do not enroll during that period, you could face late fees if you do so later.


You’ll find comprehensive enrollment information in SSA’s “Medicare” publication and links to application forms on the Social Security website.


Paying Medicare premiums


If you are drawing Social Security benefits, your Medicare Part B premiums are deducted from your monthly payments.  If you’re not getting benefits, you’ll receive bills from CMS (almost all Medicare beneficiaries pay no premiums for Part A because they worked, and paid Medicare taxes, long enough to qualify for the program).


The standard Part B premium paid by most Medicare enrollees is $174.70 a month in 2024. The rate rises with the beneficiary’s income, going up in steps for individuals with incomes greater than $103,000 in 2024 and married couples who file taxes jointly and have a combined income of more than $206,000 in 2024.


Social Security determines whether you will pay a higher premium based on income information it receives from the IRS!


If your income is high enough, Social Security will impose what is called an Income Related Monthly Adjustment Amount (IRMAA) or means test on Part B outpatient care and Part D prescription drugs.


Although this surcharge is unknown to many prior to signing up for Medicare, it can add up and can be hundreds of dollars on a monthly basis for some recipients.  If your income tier (MAGI) is from $103,000 to $129,000 in 2024, everyone in that tier would pay the same annual surcharge.  For MFJ the tiers start at MAGI of $206,000.


Therefore, if you are a high-income household and your spouse were to transition, you could fall into the single tax bracket (and the tier of $103,000 to $129,000) and a monthly surcharge could be added to your monthly payment, even though your household actually had a reduction in income.


The determination as to whether you will face this surcharge is based on your AGI (line 11 amount on form 1040 that does not go into the calculation of your MAGI or modified adjusted gross income) so charitable contributions or donations, mortgage deduction, taxes and medical deductions would not be of benefit with the exception of a QCD (Qualified Charitable Deduction) in which you can donate up to $100,000 annually and count it toward your RMD (distributions that must begin at age 73 according to the SECURE  Act 2.0.


Unlike cash, a QCD will keep the donation out of your gross income (it is an above the line deduction in tax jargon–goes on schedule 1 adjustments) and thus “lower your MAGI” so you could possibly avoid (the IRMAA adjustment) the surcharge.


Strategies that you can use to avoid or minimize the surcharge imposed by the Income Related Monthly Income Adjustment Amount:


*Consider a ROTH conversion

News flash–withdrawals from a ROTH IRA don’t count toward IRMAA


*Contribute more to your Retirement plans

You can lower your above the line income (IRS form 1040 line 11 and above) by contributing the maximum amount or at the very least an increased amount to your retirement plan or IRA account(s) and thus fall below the $103,000 threshold for singles, or $206,000 threshold, if you file as married filing jointly.


*Use tax-gain harvesting

By harvesting you sell your stock, mutual fund, etf etcetera, that is outside of your retirement account and buy it back immediately to “reset” your basis.  You would pay taxes on the gain in the year you harvested.   And by doing so the higher cost basis will reduce your taxes once you sign up for Medicare.


*Set up a Qualified Charitable Donation

As mentioned above, by setting up a QCD you can take an above the line deduction and reduce the amount of you MAGI, so your income won’t reach the threshold set by IRMAA (Income Related Monthly Adjustment Amount).


*Defer taking Social Security

You have up to age 70 until Social Security benefits make the most sense to take for many, and by delaying Social Security won’t count toward IRMAA.


*Compare your premiums between Medicare and Medicare Advantage

Medicare Advantage may give you the coverage that you need and might be cheaper than Medicare.  With Medicare you must pay separately for Parts A, B, D and Medigap and that along with the coverage that you desire could tilt the scales as to which one to choose.


*Appeal the surcharge

You can appeal if your income is significantly lower than it was 2 years ago.  SSA uses a 2-year lookback to determine current year surcharges.  If you were to start receiving Medicare in 2024, they would look at your 2022 MAGI to determine if IRMAA was applicable for 2024.  Other grounds to appeal include life changing events such as retirement, death of a spouse, divorce, loss of pension and other life changing events that the agency could possibly accept if it appeared reasonable in their eyes.


*Use your imagination to find other ways to avoid the surcharge

The surcharge is not necessarily permanent and if you can find ways to reduce your income some in future years, you may be able to avoid this surcharge altogether.  You may want to take the surcharge early because you know you can avoid it later.  Likewise, you may want to find ways to avoid the surcharge early and pay it later.  The surcharge is a year-to- year charge and you want to use the creativity that you have to find ways to eliminate this charge–when possible.


Key points


  • People with disabilities may qualify for Medicare before age 65 in many instances.  If you are receiving Social Security Disability Insurance (SSDI), Social Security will enroll you automatically in Parts A and B after you have been drawing benefits for two years.


  • If you have Medicare Part D (prescription drug plan) or a Medicare Advantage plan, also known as Medicare Part C, you can elect to have the premiums deducted from your monthly Social Security payment.




Social Security, Railroad Retirement Benefits and Pension income and other retirement income are areas that you want to give proactive analysis to, as the decisions and choices that you make will be critical for a successful retirement where you can do what “you” desire during your retirement years and not be restrained due to inadequate income or poor planning.


Although pension income for many is a thing of the past, those who now or will soon receive it can use the proceeds in conjunction with their social security income and sound investment and retirement planning to live out their life with more joy and enthusiasm.


Railroad Retirement Benefits are similar in scope to the benefits that the Social Security Administration provides, however those benefits are designed to assist railroad workers and their family in retirement and in the unfortunate transition of the income earner.  It is a system that is generally more generous than that of the SSA (pun intended) toward recipients and beneficiaries.  If you receive, or anticipate receiving those benefits, you too want to plan appropriately and build your retirement nest egg in the best way possible, based on your ability to do so.


Now is the time that you contemplate your Social Security payment amount that you will receive and combine the monthly benefit with your other retirement benefits to determine if the number that you are now at or will soon be at, is sufficient or whether you will need to earn more income, work a few more years until ultimately retiring or taking your benefits at the earliest time possible due to financial and health concerns.


Your total monthly income must be determined upfront, that means you must combine your 401k or other pre-tax retirement income, pension income, IRA income and income that is outside of your retirement accounts to determine if you have the monthly cash flow that allows you to pay your monthly expenses, do what you desire and have funds that can last for your remaining life expectancy and beyond.


The basic questions of choosing whether Medicare or Medicare Advantage is your best choice, whether you should you start your SSB, RRB or other retirement distributions earlier, at a reduced amount, or start later at a higher level may all coincide at this time or at the time you plan to retire!


If you delay, your eventual Social Security and/or RRB payment that you could receive will keep rising, until you hit age 70.


If you elect to start your benefits today or before reaching your FRA, you can enjoy the benefits earlier, because you are concerned about whether life and the future will go your way!  If you decide to wait, you may find an additional amount monthly, and for you that could be great.  Your unique financial and health condition will play a large role in the approach toward your retirement funds that you choose.


The choice as to whether to choose Medicare or Medicare Advantage can be a difficult one and should be given careful analysis, possibly with the assistance of family members and other professionals.


But many other factors come into play when determining the best age for you to claim benefits, including your physical well-being, marital status, financial needs, tax position and job satisfaction, other sources of income and your life savings.


The election of when and how you will elect SSB, RRB or choosing between Medicare and Medicare Advantage must all be analyzed in a thoughtful manner from all angles.


When you combine your SSB, RRB, investment income inside and outside of retirement, retirement income whether from your 401k’s, IRA’s, 403b’s, Thrift and other retirement plans, you want to be in position where you can put yourself, your loved ones and causes that you value most that bring you the most joy at the center.  And if you planned appropriately and obtained the necessary knowledge in a timely manner all of your retirement goals can come into clear focus and be attained in real time.


By simplifying the process and the way that you approach investments and retirement, you can make what you desire to happen most during your retirement years become a reality.


Other Key Points:


You receive the highest “maximum benefit payable” on your own record if you start collecting Social Security at age 70.  Full retirement age is 66 years and 6 months for people born in 1957 and will rise two months for each subsequent birth year until it settles at 67 for those born in 1960 and later.


You receive the “highest benefit payable” on your own record at FRA if you start collecting SSB or RRB at age 67.  Full Retirement Age extends from age 65 for beneficiaries born before 1938, to age 67 for those born in 1960 and later.  You can receive your full railroad retirement benefit starting at age 60 if you have 30 years of qualifying service.  Normal full retirement age for railroad benefits is 65 or 67, depending on the year you were born.


Medicare and Medicare Advantage are often in a “state of flux” and you can expect changes (hopefully for your benefit) to occur in the future.


All the best to your SSB, RRB, Other Retirement Income & Medicare success, as it is our hope that this discussion has allowed you to valiantly perch from your retirement nest…                                                                                                                               



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Retirement Simplification & Wealth Building

Learn how you can manage your retirement in a more stress-free manner as you build your wealth…


Caution:  20-minute read, however it is “well worth your time” in The Wealth’s opinion


In the most recent post investment simplification was discussed and investment approaches were presented in a way that allows you to build wealth almost effortlessly.  Based on that post, if you determined that you had the needed discretionary income and you were to apply the principles learned in that discussion on a consistent basis, you would now be on a real path toward investment and possibly retirement success.


You must know what you need to do after you have accumulated a large nest egg and this discussion is designed to show you a number of ways that you can receive your retirement income and minimize your taxes so that you can stretch your income over your life expectancy so that you can do more and live more abundantly!


Your retirement plan may need to last you decades and you want to know how you can stretch your nest egg at the earliest time possible so that you can live a more comfortable retirement.  Even if your retirement is decades away, you want to proactively familiarize yourself with the information in this timely discussion, so that you can achieve more throughout your lifetime.


Once you approach your retirement years you can choose to roll over your 401k, 403b, Thrift or other retirement plan, you can decide to leave your retirement funds in the 401k or other retirement account, or you also have other options, and they will all be discussed below:


Do the rollover yourself

Once you retire you can choose to roll over your funds from your retirement plan into an IRA, and you have 60 days to do so if you want to avoid the pain of being taxed on the entire amount.  Even if you roll over your funds within the 60-day window your employer (or former employer) or plan administrator will withhold 20% of the rollover amount for income taxes.


If you don’t have the 20% amount laying around in your emergency fund or other accounts, you will only be able to roll over 80%.


By coming up with the 20% you can “recoup” the 20% that was withheld at tax time when you file your tax return!


If you are unable to come up with the 20%, be sure that you realize that the 20% will be considered taxable income, and if you are under age 55 you will be penalized another 10%!


Say you receive $200,000 to rollover, $40,000 would be withheld and sent to the IRS and $160,000 would be rolled over into your IRA that you designated.  You would receive a 1099R at tax time showing $40,000 as taxable income.  By rolling over 100% it would not be considered taxable income and you could file your taxes and get the 20% withholding back.


Arrange for a trustee-to-trustee rollover

A trustee to trustee, also known as a direct rollover could be more beneficial than a rollover that you do yourself as it will be done by your retirement plan administrator, and is generally the best course of action as there would not be a 20% withholding.


Once the money is in the IRA, you are not “required” to take anything out until April 1st of the year after you turn 73.  If your contribution includes “after-tax” contributions, you can only roll over for the full amount if the IRA sponsor will account for the after-tax money separately.


If you have after-tax contributions, a “portion” of every IRA withdrawal will be tax free.  Or you can receive all of the “after-tax money” before the rollover and pocket it tax free!


Leave the money in the account

If you like your plan administration and the returns that you are getting, you can choose to leave the money in the account and cash out or roll it over later if you desire.  If the retirement plan is providing good returns and you are comfortable with the investments, why shake up the pot?


You would normally need at least $5,000 or more in the account to make this option worthwhile and distributions would be required by age 73, even if you did not need the money.  If your account was invested in a ROTH, you could leave the money in the account until you transitioned.


Roll over to a ROTH IRA

You can roll your assets from your company plans to a ROTH IRA, and because your contributions to your company plan was done on a “pre-tax” basis and have never been taxed, the rollover would now be taxable, however no 20% withholding would be required.  You do not have to take Required Minimum Distributions (RMDs) at age 73 with a ROTH.  The assets in your ROTH IRA could then grow tax-free indefinitely.


If you use this strategy, you want to be able to find the money “outside of your retirement account” to pay the taxes, otherwise you will limit the tax-free growth of the ROTH account.  Also, if you transition, the funds in the ROTH IRA could go to your beneficiaries and RMD’s and taxes would come into play.


Take out company stock

If you work for a fortune 500 company or a company that has publicly traded stock and your company put those stocks within your retirement plan, you could have yet another option that could help you save on your taxes.


You can use a tax concept called NET UNREALIZED APPRECIATION” (NUA) and pull the company stock out and put only the non-company stock balance in the IRA!


Rolling highly appreciated stock into an IRA, locks in a high tax rate for that appreciation.  You will owe taxes on the full value of the stock at ordinary income tax rates (up to 37%) “as you sell it” and take distributions from the IRA.


However, there is a better way to transfer the stock!


Lets say you have $2.2 million (the part not held in company stock) and roll it into an IRA, and you transfer the stock to a separate taxable account.


You will owe income taxes on the company stock, but the tax is based on its “cost-basis” — the value of the stock when your employer put them into your account.  In this case, let’s say it was $20,000 and is now valued at $200,000.


When you sell the stock from your taxable account, you will report a long-term capital gain, and if the sales price is $300,000, the gain ($300,000 minus $20,000) of $280,000 would be taxed at the more favorable capital gains rate of 0%, 15% or 20 percent–which would for most be lower than the “ordinary income tax rate” mentioned above that could be as high as 37%.


Assuming a retirement “long-term capital gains” tax rate of 15%, ($280,000 * .15) your taxes would be $42,000.


Had you rolled the entire $2.2 million into the IRA and “then” withdrawn the $300,000, you would owe income tax on the entire distribution in your highest tax bracket–and if it was the 37% tax bracket you would owe $111,000–a difference of $69,000, an amount that can go a long way during your retirement years.


Another way of looking at it is if you were able to use the above strategy you would pay $69,000 less in taxes or you would have an additional $69,000 that you could be utilizing for the continued growth of your retirement fund.


It is important that you realize that there are things in life that you don’t know–that you don’t know, and you want to know this important “lifelong fact of life” at this time or the earliest time possible in your life (no pun intended)!  This tidbit of knowledge that you have just learned as it relates to company stock can go a long way in protecting your nest egg during your retirement years, if it is a strategy that you can use with your retirement portfolio.


If you own the stock when you transition, not having it in an IRA creates a windfall for your heirs as the stock will receive “favorable stepped up basis” (stock will be stepped up to the stock price at your transition date and that means lower taxation for your heirs) treatment and once your beneficiaries sold the stock the tax would be at the capital gains rate and would be based on the price of your company stock at the time of your transition–not when your employer put them in your account.


Or another way of looking at it is if the stock is “outside the IRA, appreciation after the distribution becomes tax free” and the gain not taxed at the time of the distribution would be taxed at the 0%, 15% or 20% long-term capital gains rate, depending on where your beneficiaries would fall based on taxable income and filing status.


If the stock was in the IRA, the full value would be taxed as income in your beneficiary’s top tax bracket (as high as 37% as of 2024) as it is withdrawn.


Taxes & Retirement

Once you retire and start taking distributions from your retirement accounts, pensions, social security or railroad retirement benefits, you want to plan for the payment of your taxes in a proactive manner where possible.  You social security income could be taxable depending on the amount of your retirement income and whether you work part or full time after retirement.  Also keep in mind that taxation at the state level must be taken into consideration as many states exempt some or all income of retirees–and some states have no income tax at all.


In addition, consider the estate tax system in your state proactively, as even though you may not have estate taxes at the federal level–you may very well be required to pay them at the state level.


During your retirement years you will receive 1099Rs, Social Security Benefit statements, W-2s or 1099NEC if you decide to work, other 1099 statements for interest, dividends, capital gains etcetera, and you want to proactively plan with your tax professional so that you won’t have large surprises at tax time.


The IRS also receives copies of all of these documents so you want to do a “double take” to ensure that you have all of your documents at tax time.  Failure to do so and your inability to provide them to your tax pro for any reason could result in your return being audited.


Also realize that if you file your personal or business taxes by paper, the return will receive extra scrutiny from the IRS.  Even though many think paper is more secure, filing electronically has proven to be more secure and accurate.  You can also enroll in the IP PIN program (Identity Protection Personal Identification Number program) to further secure your filing, as even if they (scammers) have your social security number or ITIN (Individual Taxpayer Identification Number) they would still need your PIN to pretend they were you.


Your payment of taxes (ordinary income rates) will be based on your taxable income and filing status (10%, 12%, 22%, 24%, 32%, 35% or 37%) and you will pay taxes on your investment income at a rate of 0%, 15%, or 20% and that rate would be based on your taxable income and family situation (filing status).  If you are single with adjustable gross income over $200,000, ($250,000 married filing joint), you will have an additional 3.8% net investment income tax on your investment returns that were not offset by losses.


You also want to commit age 59.5 (age that you can begin withdrawals), age 73 (age at which you must take RMDs) and the age in which you will eventually transition (your assets will or will not receive “stepped up basis” treatment) to memory as those ages are important to know for planning purposes and particularly for tax and estate planning.  In addition, you want to know that short-term (less than 12 months) gains will be taxed at your ordinary income rates.


The above figures are based on the 2023 tax year and the numbers are adjusted annually.


Required Minimum Distributions & Retirement

Required Minimum Distributions or RMDs are the least amount of money you “must” withdraw from your traditional IRAs or pretax 401k and other pre-tax retirement accounts based on United States tax law.


Always remember that whatever your retirement (or pre-retirement) age, it is never too early to strategize your RMDs for 2024 and beyond.


The year that you turn 73 is the year that RMDs will be required to be taken by you.  If you are not turning 73 this year, you may still want to take withdrawals to reduce the amount of your future RMDs.  It will all depend on your goals, risk-tolerance level, income, personal situation–and tax bracket, the impact on the raising of your Medicare premiums and the impact of increasing the taxes on your Social Security income.


If you are now 70.5 or older, you can make a QCD (Qualified Charitable Distribution) directly from your IRA to a charity.  If you are 73 or older the QCD will count toward your RMD.  Though you can’t generally claim the deduction for the donation, you won’t be taxed either.


If you fail to take your RMDs in a timely manner, you want to notify the IRS of this “before they notify you” when possible (use form 5329) and explain with a letter why you didn’t take the RMDs by the December 31st deadline.


By doing so you can possibly avoid a 25% penalty on the amount you were required to withdraw–however you may still be subject to a 10% penalty!


Bond Management

Unless you have time to monitor and respond to the bond market, you may want to hire a pro as the pricing of bonds are normally out of the public view when compared to stocks.


Bonds have what is called a “bid price” and an “ask price” and shopping around for bonds can save you hundreds on commissions and markups.  If you are a buy and hold investor, you normally want to have at least $50,000 to spend and you want to assemble a portfolio of high quality corporate, treasury and possibly municipal bonds.  Mutual funds offer one stop bond diversification, but a portfolio of them typically costs “more to maintain” than a portfolio of individual bonds.


You want to have “at least two brokers” and check with each before placing your order.  You can also search online to compare prices and yields by going to:







All of the above sites would be a good starting point. allows you the opportunity to purchase directly without fees and you can manage savings bonds, T-bills, notes, bonds and TIPs (Treasury Inflation Protected securities) in a free online account.


You also want to ask the right questions whether online or with your broker.  You would want to know the following:


*What is the spread between the bid and ask price?

The closer you buy to the bid price the smaller the markup!


*Is the bond callable?

Bonds may be redeemed by the issuer, and if so you want to request the yield-to-worse call (which is the lowest potential yield)!


*Which yield are you quoting me?

The coupon, yield to call (YTC) or yield to maturity (YTM)!  Be ready to haggle as brokers expect it.  If you don’t like to haggle, consider treasuries.


Since you are retired or are now anxiously anticipating the day that you will be, you now or will one day have the time to learn about bonds and other investments that can possibly help grow your nest-egg with relatively low risk.  You want to put yourself in position to learn what you need to learn in a relaxed and as stress-free a manner as possible while you are improving your finances.


You may also want to set up a bond ladder system during your retirement years to “smooth out the ups and downs” of interest rates.  Treasuries are as close to a risk-free investment that you can buy and when purchased in a 5-year laddering system, it can provide you income that guards against inflation during your retirement years.


If you need more income, consider CDs, municipal and corporate bonds in a laddering system or even dividend paying stocks such as those offered by utility stocks and REITs (companies that own and manage office buildings, shopping centers, apartments and other large developments).


On occasion, annually at least–you may need to re-balance your asset allocation, as over time based on gains and losses–your asset allocation will go out of balance from what you initially selected.


If your stocks or bonds exceed your previously set allocations by more than 5% you may want to re-balance once that occurs.


You generally want to re-balance first inside of tax deferred IRAs or tax-free ROTH accounts to get their allocation back on track as no taxes would be due and you want your risk level to return to what you selected initially.


You can also invest RMDs that you receive from your retirement accounts that are out of balance back into those tax-deferred accounts–so they go back into the market (they will be taxed) and increase your returns further.



You will have to allocate your assets based on your goals, risk-tolerance, income and personal situation.


You want to buy and sell bonds appropriately and know how to set up a bond ladder if that is of appeal to you and something that you feel can be of benefit during your retirement years.  It is important that you choose the best option possible based on what you desire to achieve during your retirement years and after you transition.


As you can see from this discussion the “choices that you make” can lead to lasting, cost-effective or cost-ineffective results during your retirement and pre-retirement years–and even after you transition!


The factors that should influence your decision should include your age, income tax bracket, insurance needs, income needs, estate plans, and whether you own individual stocks and/or mutual funds.  If you have adequate pension and social security income, you can supplement resources by spending income “generated in taxable accounts” and letting the “investments in your IRA grow tax deferred” until withdrawals are required.


Some people re-invest even after RMDs start, rather than spending their money.  You want to ensure that your allocation of stocks, bonds and cash are at the right mix to balance your need for both income and continued growth.  If you have Treasuries and Money Market accounts, corporate bonds and REITs that generate taxes, you may want to put them in your IRA.


You can put municipal bonds, index funds and stocks held for the long-term into a taxable account(s).


With the cap rate on most stock dividends capped at 20%, your IRA may not be the best place for dividend paying stocks.  And even though your stocks in a taxable account may generate capital gains taxes when you sell, the top long-term rate is 20% in 2024.  Keep in mind non-qualified dividends could be taxed at your ordinary income rate.


It is critical that you create a portfolio (or have your advisor do it) that is diversified among asset classes–from small company domestic companies to international equities, from bonds to commodities to help lessen the effects of an economic downturn during your retirement years as the funds in your accounts along with your social security (and possibly pension income) at a minimum must last through your remaining life expectancy.


Keep in mind that an all-stock portfolio will normally “fall more” during a downturn and also “rebound more” during an upturn in the economy.  As you get older during retirement, you may want to shift your allocation to a more conservative position such as 35% to 40% in the market, 10 to 15%% in cash and 45% to 50% in bonds.


By taking to heart and giving real consideration to how you will build up and  divvy up your retirement fund(s) during your lifetime, you can make your retirement stage or phase one that you can truly enjoy with your loved ones.  You can also “position your life” where volunteering your time and resources toward causes that are important to you while you are yet alive here on planet earth–can happen for you in a more realistic way–as you awake each and every day!


All the best as you make the best choices that will lead to continuous retirement success…



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Retirement Success & Wealth Building

Learn the importance of successfully planning for your retirement years…


In the current market many soon-to-be retirees are feeling short-changed to a degree, as 2022 was not a good year for many in the financial markets.  As a person who anticipates retiring and enjoying life abundantly in the future, it is imperative that you plan in advance to make a successful retirement a reality.


It is important that you realize that investment returns will go up and down from year to year but has historically averaged from 6% to 9%–which is more than you can get in most other places–relatively speaking.


In this discussion will focus on the importance of you choosing a portfolio that can lead you toward the goals that you desire–as you put a plan in place that will take you higher and higher–and lead to you reaching the retirement number that will not leave you in a quagmire.


Do the basics early so that you know where you stand

You must put yourself in position for a successful retirement by doing the basics or what you need to do on the front end.  That includes creating a budget or cash flow statement, an income statement, a balance sheet and a net worth statement at the earliest time possible during your working years.


By doing so, you give yourself a helpful guide that can provide more direction as you formulate goals that are more precise and forward moving toward the lasting wealth building success that you need to achieve–and particularly your retirement planning success.


You want to at the earliest time possible contemplate the amount that it would take for you to feel confident about retiring and doing what brings you joy and happiness–consistently.  There are a number of factors that you must consider (such as what your expenses will be) and unknowns (such as how long you’ll live) along with what you desire to do most during your retirement years.


You want to know the minimum number or baseline that you need to reach to pay your monthly expenses and live out the remainder of your life based on the life expectancy that you (or your financial planner) anticipate–based on sound analysis.


By using the 25x rule or other highly effective retirement planning formulas or techniques, you can get to your retirement funding in a manner that you can feel more comfortable as you approach your retirement.


The 25x rule, simply means that to stop earning new income (retire), you will want to have saved 25 times the amount you expect to need every year in retirement–as that should sufficiently fund your retirement for 25 years after you retire–and is generally a well planned life span for those who plan on retiring after age 60.


You can figure out what you’ll need for retirement using the 25x guideline by doing the following:


Your retirement calculation:


1. Start with your 25x number (25 times the amount you expect to need every year in retirement).

2. Subtract the savings you have today to get the savings you’ll need.

3. Estimate what your current savings may grow to by the time you reach, say, 62, by plugging that number into a compound interest calculator assuming a conservative 6%, 7%, 8% or 9% rate of growth.

4. Subtract that amount from your 25x number.

5. Divide the result by the amount you think you can save each year and you will have calculated the number of years you’ll need to get there.




1.  Say your 25x number is $2,000,000. ($80,000 a year times 25)

2.  Assume you’ve already saved $200,000.  $2,000,000 – $200,000 = $1,800,000 (your target!)

3.  If you’re 32 years old, by age 62 your $200,000 will be worth $1,522,451. (assuming 7% return compounded annually over 30 years)

4.  $2,000,000 – $1,522,451 = $477,549 (subtract the amount from line 3 from your 25x number)

5.  Say you can save $1,000 per month or $12,000 per year.   (divide result from number 4 above by what you think you can save each year) $477,549 / $12,000 = 39.8 years


If you’re 32 now and have already saved $200,000, you could retire at 71 with 2 million in your account by saving $1,000 per month for roughly 40 years.


If you’re 32 now and have already saved $200,000 and you desire to retire at age 62 with 2 million, you would have to bump your monthly savings up to $1,333 per month or $16,000 annually ($477,549 / $16,000 = 29.8 years) for roughly 30 years.


Always remember that this is just an estimate, and there are more caveats (in addition to the ones above) as you must consider inflation and other factors that could eat into your savings–but your savings and investments may help offset that along the way if you attain the right return over time.


Always remember that investing always involves risk!


Although the stock market has traditionally averaged from 6% to 9% return on investments over a number of intervals–that does not mean your portfolio will meet that average as it could be higher or lower over your retirement savings interval.


Therefore, your assumed rate of return is not what may occur in actuality, and your rate of return over the years will depend on how you invest, save and allocate your money, including the level of risk in your portfolio and other political, regulatory, economic, societal, technological and legal happenings in your country!


The 6% to 9% return is a reasonable expectation based on the history of the S&P 500 Index–but their are periods where that average has been lower–and higher.  You may want to consult a competent financial advisor if you want to be more precise in your calculations–and remember that financial markets don’t always act as they did in the past.


How Much Savings Will I Have When I Retire?


What will your portfolio numbers look like when you retire?


Here’s another way to figure it out!


The retirement calculation:

1. Think about how many years you plan to work.

2. Using an interest calculator, figure out what your current investments will be worth when you retire, assuming 6%, 7%, 8% or 9% annual growth.

3. Estimate your yearly savings.

4. Over ________ years, that regular contribution will get you to $________. (For comparison, if you just saved that money without investing it, you’d only have $__________).

5. Current Investment when you retire = $_________ +  your yearly savings estimate over x number of years $___________ = $____________ or the amount you would have when you retired!

Note: You can also use a financial calculator if you are proficient in the use of one


Make adjustments as needed

You must not only have the commitment to do what you need to do–you must also continuously review, if you are sincere in making your dreams come true.  That includes having a flexible mindset to make adjustments as adversity and life happenings that you did not or could not plan for–will occur.


Know what your retirement budget or monthly cash flow will look like

Retirement is a new era, but just like the rest of your life, it will all fall in place if you plan appropriately.  In each stage of your life, your concerns, goals and budgets (cash flow) will vary–therefore effective planning is essential.


You may want to break down your retirement in intervals to help simplify your retirement.


●    First 10 years of retirement. As you adjust to your new lifestyle, you’ll likely be in good health and excited by the transition into retirement and as long as you stick to your plan you can take vacations and enjoy life in a more bountiful manner.  It is important that you don’t overdo it on spending, as you must withdraw your retirement savings accounts appropriately because those funds still have to last you a while!


●    Second ten years of retirement. Hopefully you’ve had some fun during the first ten years, and now you might be settling down a bit—as spending usually drops some for most who are over age 70.  If you have downsized or paid off a mortgage and your housing costs are down you should be in great shape.  Be alert for home improvement or accessibility costs going up if you need them as you age, as well as healthcare costs.  If your investments have done better than expected and you need some extra cash you can utilize that cash if you have saved appropriately.


Third ten years of retirement. At this point, you may have a need to move into an assisted living facility or even needing long-term care.  You will likely spend less on everyday necessities, but be prepared for increased healthcare costs, especially if you need assistance.  As you slow down, you can increase your percentage of withdrawals further, though keep in mind how much you want to leave behind in your estate for your heirs.


Put a plan into action that will lead you to reach your “retirement number” that will position you to do what you desire during your retirement years

You must put effective forward moving plans in place if you are to reach your retirement goals.  That consists of knowing what you need to save annually to reach your desired goals and live out your life in a more joyful manner.


The 25x formula mentioned above or another retirement savings formula that provides you a way of reaching the number that you need to reach, can lead to you reaching the number that allows you to pay your monthly utilities, entertainment, taxes, charitable giving–along with traveling at the level that you desire during your retirement years.


It is important that you know the age that you want to retire along with the age that you can retire!  Their is no secret to your retirement success, you must save and manage your money consistently until you reach your retirement number!


While you can’t tell you how many grey hairs will be on your head by the time you are able to retire, you can help reduce stress in your life and estimate roughly when you’ll be financially ready to enter the “retirement zone” that you always aspired to reach by planning proactively and expecting success!


You have already assessed how much you’ve been able to set aside so far by doing the analysis above–and you now know what you can save moving forward (again based on the analysis that you did above)–therefore you must now do and review–as you already have the planto make your dreams come true–or you will soon have one!



Additionally, you want to know how much social security and other income that you and/or your household will receive, know when your required minimum distributions are required for your various retirement accounts and know the taxes that you will have to pay during your retirement years at the federal, state and local level (particularly your income taxes at the state and federal level, property and sales taxes in your area–along with any other taxes in your area that could be of a burdensome nature).


It is important that you get out in front of your retirement planning so that you can achieve greater success! 


With many now living well into their 80s and 90s–it is important that you plan for the years after you stop working with the expectation that you too will live well into your 80s or 90s (or beyond) so that you can enjoy life in a more bountiful manner.


You also want to be on the lookout for financial fraud as scammers are highly adept at creating accounts using your identity and getting your retirement benefits–particularly utilizing phishing scams and setting up fraudulent social security accounts.


Whether you anticipate receiving traditional IRA income, ROTH IRA income, pension income, 401k income, 403b income, railroad retirement benefits, government thrift savings plan payments, social security or any other source, you want to proactively plan for what those payments will be (in total) at the earliest time possible–if possible (no pun intended).


The monthly retirement payments that you will receive must be clear in your mind and not vague or cloudy–or even worse not even in the ballpark of what you need to carry on with your life in the manner that you intended–as no one cares more about you–than you–and that is as it should be.


By making a “real effort” to reach your “retirement number” you can put yourself in position to have a more rewarding and enjoyable retirement.


By applying what you sincerely feel can help you achieve your retirement goals more efficiently you will be putting yourself and your family in a better position as you age–and it is the desire of–that you will do just that as a result of visiting this page.


May all of your retirement dreams come true, as you now know what you must do–therefore the retirement success that you desire is now up to you!


You want to know at the earliest time possible what you value as far as saving for a more rewarding retirement and you want to put plans in place for what will happen after you transition because there is a good chance that you will have assets when you transition–and “you” can decide where they go if you plan now.


It is important that you utilize the values that you have acquired over your lifetime that are positive and uplifting so that you can reach your “retirement number” and improve humanity while you are here on planet earth–and even after you transition?


Do you have the endurance that you need to lead or are you at this time “not ready” to succeed–as you more effectively plant your retirement seed?


All the best as you operate daily at a level that will lead to your retirement success…



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10 Questions you must ask prior to your retirement…

What will I receive from Social Security on a monthly basis…

Retirement Cautions

5 Common Mistakes to Avoid

20-30-40–plan for success–for those who are age 30 or less


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Retirement Planning & Wealth Building

Learn the importance of properly preparing for your retirement years so that you can build wealth more effectively…


It is important that you plan for a prosperous retirement at the earliest time possible.  In addition to knowing your cash flow position at this time and how you can use financial statements to achieve more–you also need to have an awareness of your “financial retirement number” that you will need to reach at a later time so that you can live out your retirement years in a dignified manner.


Regardless of whether you contribute to a 401k, 403b, thrift plan, railroad retirement plan, social security, IRA’s or other retirement funding vehicles, you must have a target amount that you need to hit to make your retirement years enjoyable and more beneficial.


There are a number of retirement funding vehicles and strategies that you can use to reach your “retirement number” once you get a handle on what that number is!


If you are conservative, and you desire to create a diversified portfolio, you can use a United States total market index fund, a United States total market bond fund, and a broad-based international fund.


You can simplify your choices even more by selecting a balanced fund or target date funds to reach your goals.  If you are more riskier, you can use Exchange Traded Funds, Mutual Funds, Stock Portfolios and other more exotic investment vehicles to reach your goals.


The key is you must have a plan at some level–and the sooner you get started–the better the odds are that you can reach your retirement number and live out your retirement years in the manner that is best for you and your family!


In this discussion will discuss the importance of planning appropriately for your retirement years so that you can “achieve your goals” and live out your retirement in the manner that you choose so that you can have more enjoyment during your golden years.


It is imperative that you have a basic understanding of retirement planning at a minimum and you have a willingness to learn more as you approach your retirement years.


Common Types of Income During Your Retirement Years


Social Security

In retirement you will have social security if you reside in the U.S. and worked and contributed at a level that allows you to collect benefits during your retirement years.  You can generally start receiving social security in your mid 60’s and the payments would continue throughout your lifetime.



Although pensions are a distant memory and thing of the past for most, some companies still provide them and if you now receive one or are on track to receive pension income in the future you must know what to expect and when to expect this stream of income.  There are also 401k ROTHs, Simplified Employee Pensions, solo 401ks and other retirement products on the market that may be appropriate for you–depending on your unique financial position.


401k, 403B, Thrift Plans and others

By contributing to retirement plans during your working years you can use pre-tax contributions to build your retirement nest egg in a more efficient manner.  There may be an employer match component to the plan and if so, you can use effective investing to achieve your goals even more efficiently.



You may be able to contribute to IRA’s (Traditional or ROTH) if you qualify and build a sizable nest egg that you can have available to fund your living conditions during your retirement years if you contribute to the max “and” you have a decent rate of return and choose a fund with low management fees.


There are tax and compounding advantages of using these retirement vehicles and they are worth real consideration if you qualify.


Railroad Retirement Benefits

If you work for the railroad system in the United States you could be eligible for a retirement plan that is generally more generous than that of the social security system.


Home Sale, Refinance, Home Equity Loan or Reverse Mortgage

If you were to sell your personal residence and downsize you could possibly be eligible for a $250,000 exclusion on the gain if you were single and you otherwise qualified–or $500,000 if you were married and otherwise qualified.  You can also refinance your personal residence (or your rental properties if you had any) to pull money out, get a home equity loan or home equity line of credit–or if your situation was dire (you failed to save appropriately during your working years) and you exhausted all other possibilities–possibly a reverse mortgage.


Keep in mind that when using any of the above approaches–you must do so strategically as your financial position is uniquely your own and what may be effective for others–may not be effective for you.


Investment Income

If you invested during your working years outside of your retirement accounts and reinvested you could have also possibly built a large nest egg that could be used during your retirement years to help fund your lifestyle.


Keep in mind an Exchange Traded Fund is more efficient for investing than a mutual fund when you are investing outside of your retirement as you will not have capital gains that would be taxable on an annual basis.  Other investments held outside of your retirement accounts may or may not be taxable.  Municipal bonds, individual stocks that are not sold may avoid or defer the payment of taxes.



You have the option of planning now for a more effective and rewarding retirement regardless of the life stage that you are now in.  Whether you invest in a traditional manner or you invest in cryptocurrency and other more exotic investment vehicles–you must have a plan to reach a level of success that allows you to not outlive your income sources–but also live comfortably and possibly leave something behind for your heirs or other causes that are dear to your heart.


When investing for your retirement years there are a number of key concerns that you should be aware of and you want to avoid common mistakes that many have made in the past by being aware on the front end and not being complacent during your working years.


You particularly want to be aware of fees that you pay and you want to minimize those fees on the front end because at retirement time it would be too late!  Look for no-load funds that don’t charge a percentage of your upfront investment.  Also choose a fund with a low expense ratio, which includes management fees and other costs of running the fund.


You can generally find this information on the funds website or in advertising brochures.


It is not uncommon to see retirees who invest $100,000 over a 30-year period with high fees end up with tens of thousands less than those who invest in funds with a low expense ratio.


You can change the direction that you are now on to that of real success if you now decide to plan appropriately–and give it your best.


You must analyze the sale of your home and the tax consequences (basis, depreciation, exclusion from taxes on gain must be analyzed) prior to and after you retire on the front end to ensure that you make the best decision for the short and long run regardless of where you are now at in your life stage.


Even if you have to pay for good advice, the value will more than likely be greater than the cost as you can avoid costly mistakes at the wrong time that have held so many back as they were building wealth.


It is important that you do all that you can to fund your retirement so that you can reach your retirement number and live at a level of comfort that you desire or need to live at.  Also keep in mind that with many retirement vehicles you will have mandatory withdrawals beginning at age 72.


If you project monthly income of $8,000 and monthly expenses of $5,000 and you are age 65 and you plan on living until at least age 95 you must hit the target number that will allow you to have “for a 30 year period” the $8,000 monthly income when all sources are added up.  You also want to know the tax implications and the effects of inflation on your retirement income so that you are “not surprised” during your retirement years.


Isn’t it time you try a new informative, powerful, revolutionary and results oriented approach to wealth building as opposed to the same tired approach that has been presented by many others in the finance industry over the years?


When it comes to retirement planning and wealth building  reaching your retirement number and having streams of income that are stable, reliable and predictable during your retirement years should be your primary goal.


When you combine your social security benefits, pension, other retirement income and all other sources of income during your retirement years, will it provide you with what you need to live out your retirement years in comfort?


By being particular, precise, clear and concise–about what you expect to happen during your retirement years–you set yourself up to avoid financial fears and eliminate financial tears during your golden years!


All the best to your retirement wellness and a lifetime of success as you are now in position to proactively give it your absolute best…



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Learn about the 3 Step Approach that was revealed in 2010 as it is the only system in existence that uses 7 words that allow you to have a comprehensive overview of what you need to do to comprehensively manage your finances throughout your lifetime…


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Early Retirement & Wealth Building

Learn how you can build wealth efficiently and retire early…


In 2003 the creator of came up with a strategy to help young adults and those graduating from college implement a new system for building wealth efficiently and possibly retire early if that was their goal.


After reading a most recent article in Kiplinger Magazine about Millennials who retire early (in their 30’s) found it quite inspiring to see young workers retire early and that inspiration brought to the surface the topic of early retirement in the current economy and how you can do so in a more efficient manner.


In the article they were called FIRE (Financially Independent Retire Early–a great acronym and financial success formula that did not create–however, did create FAM® that is assisting those who desire real financial success achieve more than just financial literacy) and they are a group that is growing as more individuals and families see real advantages of retiring early and living life on their terms.


Regardless of your age you can retire early or achieve your goals more efficiently during your lifetime by understanding “your life stages” and determining the path that you will take toward making what you desire most during your lifetime–occur!


You must also have an expectation of success and a real knowledge within that you truly want to pursue early retirement or reach your goals in a more efficient manner.


You can achieve success more effectively and efficiently by doing the following on a consistent basis:


1)   Have a real understanding of the X Factors…


Experience, expertise, exercise and excellence must be a part of your make-up if you are to achieve at your highest level.


Your past experiences helped shape where you are now at and you must use that experience to your advantage.  You must also determine what you are good at or what you desire to be good at and pursue toward that with zeal and expertise will follow.


You must ensure that you are around to enjoy your early retirement or any retirement by ensuring that you exercise regularly, eat healthier and you feed your mind with the right information that can move you forward in a manner that works with your mind.


Lastly, you must have a mindset of excelling in all that you do.  You then develop the habit of consistency that you need to have to achieve at your highest level throughout your lifetime.


2)   Have high standards throughout your lifetime…


You must set lofty goals whether they be financial or otherwise.  However, setting lofty goals is only the starting point!


You must have every intention on achieving the goals that you set and you must visualize yourself achieving what you see.


You want to do your absolute best toward reaching your goals and you must be fully committed and have a high level of determination to reach or exceed the standards that you set.


3)   Have a mindset that is geared for success…


You must not let worry, anxiety, fear and frustration direct your life as it will in many cases lead to you not putting in the effort that is necessary to achieve at an optimal level and reach your financial goals in an efficient manner.


Although uncertainty at some level resides inside all of us—you must have an outlook of your future that is clear to you and doable by you (within your mind) if you put in the effort and stick to your plan.


Your ability to focus on what is important along with having the success qualities that are needed for consistent success will help direct your mind on a daily basis in the direction where success lives–and you will increase your odds of achieving your goals exponentially.





Early retirement or having the option to retire early is a lofty goal and many are pursuing that path in the current economy.


If you are one who would like to position yourself for early retirement you can do so by gaining the required knowledge and skills that are needed to do so at the earliest time possible.


For those of you who would like to continue working, you can put yourself in position to have an “early retirement” as a real option by planning now and doing so with a realistic picture of what it will take to get you there.


You must pursue your retirement goals in a righteous manner and in a manner that is in alignment with your core values.


You must ask and answer the right questions at the right time in your life so that you can repair, improve, or avoid that which serves against your early retirement ambitions.


You can go to the following links to learn more about early retirement and retirement in general and really make the goal of early retirement happen for you and/or your family:


Young Investors & Personal Finance

 9 Tips for Retiring Early 

College Graduates & Wealth Building

Wealth Building Now

Mr. Money Mustache Blog

Retirement Basics

All About Retirement

Compounding & How You Can Benefit

Life Stages of Financial Planning

Understanding the Various Types of Income

Invest like Warren Buffett


FIRE (Financial Independence, Retire Early) is a lifestyle, also referred to as a movement, aimed at reducing expenditures and increasing investing in order to quickly gain financial independence and the possibility of retirement at an early age.


All the best to your early retirement and lifelong success…


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Financial Security & Wealth Building

Learn why planning, discipline and patience is critical for your financial success…


After recently returning from Las Vegas, Nevada and having a great time, the creator of thought that the topic of not gambling on your future was a timely topic.  Although investing in the financial markets are somewhat of a gamble, it is important that you plan for long-term success or any success in an appropriate manner.


In this discussion will discuss why planning for your future, having the required discipline–and patience are the cornerstone for you to attain financial success in your future.


You Must Plan for Success


You must plan for your future and that includes knowing where you now stand as far as your finances are concerned.  A monthly cash flow statement will put you in position to know just that.  In addition,  you must know how your credit score is calculated whether it is your  FICO score by Fair Isaac & Company or your Vantagescore by the 3 credit bureaus.


Your financial success also depends on you obtaining the financial knowledge and preparation that is needed on the front end–not “after” you encounter financial difficulty.  It is imperative that you obtain a financially alert mind and not just “financial literacy” at this time if you desire to achieve at your highest levels throughout your lifetime.


You Must Have a Disciplined Approach Toward the Success that You Desire


You must understand that it is your responsibility to do what needs to be done financially throughout your lifetime.


By consistently doing what you need to do you will achieve your goals more efficiently and you will be rewarded for your discipline in the future by having your investments grow and also be able to enjoy life on your terms along the way.  You can reach your “retirement number” and achieve other goals along the way as long as you remain focused and disciplined on a consistent basis.


Above All You Must Have Patience


It is important that you realize that many of your goals will not occur overnight as they will often take time to reach.  This is where your patience will come in as you must use the planning stage to determine the time frame on when your various goals will be reached.  Whether you have short-term, intermediate or long-term goals, you must prepare your mind mentally for the time period that it will take to reach your various goals.


You must not do like others who give up to soon, or lack the mental fortitude to stick it out and make their dreams come true.  By having patience and knowing inside that you will truly reach your goals if you stick to your written plan–you bring comfort, peace of mind and joy–inside of your heart and mind.



By planning for your future, showing discipline on a consistent basis and having the needed patience to reach your various goals you put yourself in a much better position for reaching the success that you desire or the success that you need to attain throughout your lifetime.  You are displaying a serious commitment to improve the living conditions for yourself and your family and you are showing that you are accountable for your future.


In short, you are approaching your future with the attitude of a winner and joy will be in your heart in an everlasting way as you will see success in all that you do.  Will there be setbacks? Absolutely!  However, by taking initiative at this time by planning for your future, showing discipline on a consistent basis and having the needed patience to reach your various goals–success lies in the horizon.


By doing so you are gravitating toward the goals that you see as opposed to remaining where you are, moving slowly toward your goals or worse of all–moving away from what you desire.


In the end (and beginning) you must realize that achieving financial security and effectively building wealth in large part depends on your current and future mindset being in the place where success lives.


All the best as you plan for success in a disciplined and highly effective way as you now have the ability to change your mindset (and future) in a highly beneficial way…


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Financial Ratios & Wealth Building

Learn how you “CAN” use financial ratios to build wealth by taking Conscious Action Now…


In this discussion will look at a myriad of financial ratios that can lead you closer to the success that you desire.  With 2017 coming to an end and a new year only days away, it is the desire of that this page will serve as an inspiration for you to do more in 2018.  OK, here we go–hopefully won’t bore you too much and you can use the following paragraphs to achieve more in 2018 and beyond!


Rule of 72 Ratio:


Dollar Amount Invested/ Interest Rate

1,000 / 7% = 14.3 or just over 14 years to turn $1,000 into $2,000

1,000 / 14% = 7.1 or just over 7 years to turn $1,000 into $2,000




Lets you know what percentage of your assets are liquid (cash, certificates of deposits, money market etc versus stocks, bonds, mutual funds, home equity etc.) so that you can plan your lifestyle accordingly.


Credit Ratio:


Credit Owed / Available Credit or Credit Balance ÷ Credit Limit = Credit Ratio, for example


500/40,000 = .0125 or 1.25% very low ratio–good

30,000 / 40,000 .75 or 75% very high ratio–bad


To further drive it home, if you had a $5,000 credit limit and held a $2,000 balance, your credit ratio would look like this for one creditor:


2,000 ÷ 5,000 = .4, or 40%


If you had a $25,000 credit limit with all of your credit cards and monthly installment payments and held a $12,000 balance, your credit ratio would look like this for all of your creditors:


12,000 ÷ 25,000 = .48 or 48%


Relevance: The lower your credit ratio the better as lenders use the credit ratio to grant you more credit or provide you credit at the best rates based in large part on how you use credit and your payment history.  See the chart below to determine your current risk level!


Credit Ratio                                      Risk      
< 30%                                                Low (ideal)
30-49%                                              Medium
50-75%                                              High
76% or more                                    Very High


The types of credit available include: Revolving Credit, Installment Loans and Open Credit. 


Finance Company Accounts and Mortgage Loans will fall in the above categories, however realize that some lenders categorize them separately as well.


Debt to Income Ratio:


 Total Debt / Total Income


Also called Front End Ratio


Let’s say you have $10,000 in Gross Monthly Income (your income before any taxes or other deductions are taken out – your actual paycheck will likely be much less).


What can you afford as far as your home purchase is concerned?


x / 10,000 = .28

2,800 / 10,000 = .28 which is the maximum debt you could have on the front end (excludes housing payment)

X = 2,800  max on front end


You may not be approved for a mortgage loan in which the PITI payment exceeds $800 per month if you maxed out your front end ratio of 28 percent.  On the flip side, if you had zero outstanding balance you could possibly qualify for a loan up to $3,600 per month!


On the back end your maximum debt would be $3,600 calculated as follows:

x / 10,000

3,600 / 10,000  = .36 which is the maximum debt you could have on the back end (includes housing payment)


If you maxed out your credit on the front end (bills totaling $2,800 per month) you would only have $800 available for housing payment (includes principal, interest, taxes and insurance or PITI).  If you had bills greater than 10 months averaging $400 per month you would qualify for a loan up to $3,200 per month.


What that means in purchasing power or how much home you can afford based on this ratio depends on the current interest rates, the local property tax rate, the amount of your down payment, mortgage insurance, and homeowners insurance.  In other words, how you manage your finances and your particular market are the key factors that can lead to you purchasing the home of your dream.


The amount that you will be approved for will vary over time and across different locations as the market interest and where you are will play a factor.  However, always realize that high debt on the front end will bring down the amount of house you can afford based on the conventional ratio breakdown of 28% on the front end and 36% on the back end.


To further drive it home let’s look at another example, monthly debt in excess of one year divided by gross monthly income is your debt to income ratio or front end ratio!  If you earned 3,600 per month and had credit card and car payment totaling $800 your front end ratio would look like the following:


800/3,600 = .22.22 or 22% on the front end for conventional–good


1,300 / 3,600 = .36 or 36% which only leaves $500 per month available for housing payment on the back end for conventional–probably not enough for quality housing in most markets



The front end and back end ratios provides you the ratio that you need to determine the level of debt that you are carrying in relationship to your monthly income.  You don’t want to overextend yourself with debt and make life more difficult and painful while here on earth.  You must know how to manage your credit wisely and pay your debt in a timely manner.

You also don’t want to put yourself in position where you are house and/or car rich and cash poor–your life will be a bore!  Use these very telling and powerful ratios to make life as enjoyable as possible for you and your family while you are here on planet earth.


Housing and Debt to Income ratio:


Also called the back end ratio


Monthly debt in excess of one year plus expected housing payment (PITI)  divided by gross monthly income, for example


1,200/3,600 = .33 or 33%


To further drive it home, the back end ratio is the total debt to income ratio, which includes your housing debt AND other debt owed for at least the next 10 months or so, by you the borrower.


Back End Ratios may not exceed 36% in most cases.


Some Qualified Mortgages (FHA) may let the Back End Ratio be as high as 43%.


If you the buyer have $1,000 worth of other debt and monthly income of $4,800 (car loan, student loan, credit card, etc.), how much can you afford?

1,000 / 4,800  = 21.7%–Good on the front end ratio for conventional


2,000 / 4,800 = 41.6%–Not good on the back end for conventional but some lenders could possibly still make it happen for you


As far as FHA goes, you would qualify with both the front end  ratio 31% and the back end ratio 43% because both of your ratios are lower than those percentages (21.7% and 41.6% respectively).


When your other debt is taken into consideration, you the buyer(s) can afford a home with a PITI payment of $1,000 using and FHA loan and you would not qualify for a conventional loan according to the financial ratio guidelines.  However, you could possibly qualify for a conventional loan even with those ratios if a conventional lender worked with you to make it happen.


If you are like most buyers, going up to a 36% debt to income ratio is not comfortable!


A 43% back end ratio is even more difficult to handle, even for the most frugal purchaser(s).


However, a better school district and/or being closer to your job or family members may well be worth the trade off!  It all depends on what you value and your ability and willingness to put into place a process that allows you to know your cash flow position up front so that you can better plan for your living conditions in the future.


Do you have an adequate emergency fund and have you planned for your future in a comprehensive way?  By answering these questions you can get on a path toward making the best decision for you and your family.


If you like to eat out, entertain and save abundantly for your future you might determine that a 43% ratio is too high a price to pay at this time and you might postpone your home purchase until you could get more income coming in on a monthly basis or you paid off certain debt.  Your lifestyle and plans for your future will play A LARGE PART IN DETERMINING THE BEST APPROACH TO TAKE.


The temptation may be great and you may want to go for a 43% back end ratio. What would that look like with our current example?


You still would only qualify for a loan of $1,060 (2,160/4,800) unless FHA decided to allow you to go higher or you paid off some debt or increased your monthly income.


NOTE: When you decide to purchase your home where you will seek a loan, remember that Lenders will pull your credit reports and ask for 2-3 months of your past bank statements.


If there is a sudden, large amount of money added to any of your bank accounts, or if your credit card balances or car loan are paid off just prior to applying for a loan, this sends up a red flag and some lenders will be hesitant to offer you a loan without a reasonable explanation of why you took those actions.


Lenders may ask for a gift letter, indicating that the money does not have to be paid back, and may request a larger down payment, such as 10% instead of 3.5% or 5%.


It is wise for any buyer to get their financial accounts in shape “well before” applying for a mortgage loan so that they will not be disappointed! 


The critical back end ratio shows your ability to take on more debt (your new housing payment).


Mortgage lenders generally will not lend more than what would constitute 28% of a person’s monthly gross income before adding their monthly home payment to the back end.


If there is other debt, mortgage lenders will generally not originate a loan that causes a borrower’s total debt to income ratio to exceed 36% (mortgage plus other debt).


Conventional 28% front end and 36% back end, or


FHA 31% front end and 43% back end


Certain circumstances allow lenders to go higher…


Sales Price to List Price Ratio:


Sales price of a home divided by what the property listed for, for example


290,000 / 310,000 = .9355  or 94%



By calculating the ratio of sales price to list price of recent sales in your target market (the area where you plan on buying your home or listing your home for sale) you can get a better feel of what you should offer as purchase price, or if you are selling—the listing price:


Is it 90%? 95%? 103%?


By knowing that ratio you put yourself in position for a more realistic purchase price offer or sales price listing.


Loan to Value Ratio:


Loan amount / purchase price or refinance value


For example,


288,000 / 360,000 = .80 or 80%


You may also see CLTV or combined loan to value which simply means all of your outstanding loans (2nd mortgage, home equity loan etc.) divided by purchase price or refinance value



By knowing your loan to value ratio you understand immediately how much debt you are taking on from a percentage standpoint.  When you get to a certain equity position you may also be able to eliminate PMI or MIP from your monthly housing payment so it is important to know this number.


Investor Ratios


Return on Investment with Appreciation Ratio:


Cash Flow before Tax + Principal Reduction + Tax Saved + Appreciation  / Cash Invested 

6,000 + 3,000 + 3,500 + 5,000 / 85,000 =  20.59%


Return on Investment without Appreciation Ratio:


Cash Flow before Tax + Principal Reduction + Tax Saved  / Cash Invested

6,000 +3,000 + 3,500 / 85,000 =  14.7%


The following ratios are used to Value Real Estate & the Relative Value Depends on Your Particular Market, therefore what is acceptable in one area may not be acceptable in another area, use with caution in mind.


Capitalization Rate Ratio:


Net Operating Income (from Schedule E or elsewhere) / Purchase Cost

30,000 / 390,000 = 7.7%

 Limitation: does not take into account financing


Cash on Cash Ratio:


Cash Flow before Tax / Cash Invested

6,000 / 85,000 = 7.1%

Is the strongest Method, it does take into account income, expenses and financing


Price per Square Foot Ratio:


Cost / Number of Square Feet = price per square feet

300,000 / 3,000 = $100 per square feet

Limitation: does not take into account income, expenses and financing


Price per Unit Ratio:


Cost / Number of Units = price per unit

300,000 / 4 unit quadplex = $75,000 per unit

Limitation: does not take into account income, expenses and financing


Gross Multiplier Ratio:

Cost / Gross Operating Income

300,000 / 50,000 = 6%

Limitation: does not take into account  expenses and financing


NOTE: the above numbers are rounded for illustrative purposes




For those who invest in rental property it is imperative that they understand the amount of CASH FLOW that they will receive (be sure to look at schedule E of the seller(s) tax return prior to purchase), they estimate the APPRECIATION that is expected or projected, they know the amount of PRINCIPAL REDUCTION that is expected at various intervals of the loan and they know the amount of DEPRECIATION (and how to break down the various elements of depreciation for their greatest benefit).  Always remember that you cannot depreciate land on rental properties.


By properly analyzing the rental property that you plan on purchasing and utilizing the appropriate ratios you CAN get a better appreciation (no pun intended) of the returns that you will or potentially can achieve based off of your purchase.


You can then know in the future if selling your property, refinancing your property, continuing to hold your property or doing a 1031 exchange will serve your best interest.  You also want to have an awareness of the tax implications at the time of purchase or preferably before you purchase so that you will have no future surprises.


Will you be taxed at ordinary income or capital gain rates?  What is your basis and what will you pay taxes on after depreciation.  You must understand that depreciation recapture will occur whether you take the depreciation—or you fail to do so.  Will you plan to avoid taxes in the future or will you just jump into your real estate investing career with no real plan of action as it relates to your tax implications that you will face at the time of your purchase, yearly and when and if you sell in the future?


Do you know about form 3115 and how you could possibly amend your tax return to get the depreciation that you overlooked if you currently own investment property and you failed to claim the depreciation?    By claiming the depreciation that you were entitled to you in essence put cash back in your pocket in a real way!  These are just some of the more pressing questions that you must ask–and answer on the front end if you are to maximize your rental property purchase.


Even if you purchase and quick turn properties for short term gains, you must realize that there will be tax implications (ordinary income rates if sold in less than a year and capital gain rates if sold after a year).  Whether you quick turn for a profit or buy and hold for cash flow and appreciation you must consider the combined tax implications at the federal as well as at the state level.




It is important that you use financial ratios (where and when appropriate) so that you can maximize your returns and minimize your mistakes during your lifetime.  By utilizing the above ratios among others–you can put yourself and your family on a positive path toward building wealth.


Always realize that there are many other financial ratios available at the corporate as well as personal level that may also be of benefit to you and your family.  In short, you don’t want to stop with what you have learned on this page.  Continue to pursue better ways that can lead you toward success in a more timely manner and use financial ratios where appropriate to help along the way.


All the best to applying financial ratios in a manner that will fill up your nest…


By taking Conscious Action Now–this page and site will show you how…


You CAN achieve lasting success–if you at this time make a conscious decision to give it your best…


By using the ratios appropriately you CAN put procrastination to rest…


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SEP-IRA versus SOLO 401k


Learn what the best choice is for your retirement future if you are a single employee at your company or you are a small company considering whether an SEP-IRA or a SOLO 401k is your best choice


If you operate a small company or you are a single person owner–you may be deciding among a number of retirement plans to stash away money for your retirement years.  Trying to decide the best option can be a daunting task for those who are new at facing retirement options or have recently opened a business for the first  time.


In this discussion will present ways that you can make this sometimes grueling decision—less grueling and help put you on a path to enjoying your retirement  in the manner that you desire and provide you with more clarity so that anxiety will not play a role in your life as you build wealth for yourself and your family.


It is the desire of that you will use this page as a guide so that you can experience joy on the inside that will lead to your retirement portfolio and your conscience experiencing a smoother ride!


Retirement Plan Options:


Depending on your line of work there could be many retirement options available to you.


Some of the more common include IRA’s (many versions), 401k’s, 403b’s, SIMPLE IRA Plans (Savings Incentive Match Plans for Employees), SEP Plans (Simplified Employee Pension), SARSEP Plans (Salary Reduction Simplified Employee Pension), Payroll Deduction IRAs, Thrift Plans, RRB Plan (Railroad retirement Benefits Plan), Traditional Pension such as Defined Benefit Plans, Money Purchase Plans, ESOPs (Employee Stock Ownership Plans), Government Plans, 457 Plans, 409A Non-qualified Deferred Compensation Plans and other profit sharing options.


If you desire a more in-depth understanding of the various retirement types or you feel that a SEP-IRA or a SOLO 401k is not right for you—consider going to the following links to learn more about the retirement account that may be a better choice for you. finance


If you are a small operator, depending on your yearly income—you could be choosing among a number of options but in the end the choice of which “Retirement Plan Option” is best for most and possibly you as well—normally comes down to the choice between an SEP-IRA versus SOLO 401k as they both allow you to maximize your contribution limits and control your investment options better than other plans.


However, as a practical matter it is important that you look at and  appropriately analyze all options available to you and not just base your decision on how you feel or think or based on what others are doing.


You must analyze all retirement options to see where you will benefit most from a revenue, savings, tax and goal oriented perspective.  After thorough analysis (and possible professional advice) you can select a retirement vehicle that serves your future goals and allow you to maximize your savings and tax advantages on an annual basis.




A SEP-IRA allows you to make contributions that are capped at 25% of your income after a reduction for self-employment taxes.  A SEP-IRA is used by those who have a small firm and solo entrepreneurs as well.


SEP IRA contributions for sole proprietors, on the other hand, are limited to 20% of your net self-employment income (business income minus half of your self-employment tax), up to a maximum contribution of $54,000 for 2017.


SEP Contribution Limits (including grandfathered SARSEPs) controls what an employer can contribute to an employee’s SEPIRA.  The amount cannot exceed the lesser of 25% of the employee’s compensation, or $53,000 (for 2015 and 2016, $54,000 for 2017).


Example: Lets say you are 52 years old and earned $60,000 in income after receiving your w-2 from your Limited Liability Corporation business in 2017.


Your total contributions would be capped at $15,000 for 2017!  


If you earned $144,000 your contributions would be capped at $36,000.


If you earned the maximum income for the year $270,000, your contributions to the SEP-IRA would be capped at $54,000.   The reason being that you have exceeded the contribution limit.


Can I make catch-up contributions to my SEP-IRA?


Because SEP IRA’s are funded by employer contributions only, catch up contributions  usually don’t apply because you as an owner (employer) would be making the contributions.


Catch-up contributions apply only to employee elective deferrals.


However, if you are permitted to make traditional IRA contributions to your SEP-IRA account, you may be able to make catch-up IRA contributions.


Compensation doesn’t include amounts deferred under a Section 125 cafeteria plan.


Compensation is limited to $270,000 in 2017 and $265,000 in 2015 and 2016.


SOLO 401k


A SOLO 401k allows you to stash away up to $18,000 in 2016 and 2017, or $24,000 in 2016 and 2017 if age 50 or over.


In addition, you can also use SOLO 401k’s to make ROTH 401k deferrals of after-tax money that you can withdraw tax free during your retirement years.


Solo 401(k), (also known as a Self Employed 401(k) or Individual 401(k)), is a 401(k) qualified retirement plan that was designed specifically for employers with no full-time employees other than the business owner(s) and their spouse(s).


A one-participant 401k also goes by other names, such as solo-k, Uni-k, one participant k and possibly other names as well as they are becoming more popular.


Although unknown by many in the general public a one-participant 401(k) has been around for a while (early 2000’s) and is basically a plan covering a business owner with no employees or just their spouse–and have the same rules and requirements of any 401(k) plan!


Contribution limits in a one-participant 401(k) plan


In a SOLO 401(k) plan the business owner (you) are both employee and employer.


You must always realize that contributions can be made to the plan in both capacities and you as the owner can contribute both:


  • Elective deferrals up to 100% of compensation (“earned income” in the case of a self-employed individual) up to the annual contribution limit of $18,000 in 2016 and 2017, or $24,000 in 2016 and 2017 if age 50 or over; plus


  • Employer non-elective contributions up to 25% of compensation as defined by the plan


For self-employed individuals:


Total contributions to a participant’s account, not counting catch-up contributions for those age 50 and over, cannot exceed $54,000 (for 2017; $53,000 for 2016)


Example: Lets say you are 52 years old and earned $60,000 in W-2 wages from your S Corporation in 2017.  You deferred $18,000 in regular elective deferrals plus $6,000 in catch-up contributions to the 401(k) plan.


Your business contributed 25% of your compensation to the plan, $15,000.


The total contributions to your plan for 2017  that would be allowed is $39,000 with your maximum contribution for the year being $60,000 “if” you earned $144,000 in 2017 ($144,000 * .25 plus $24,000).


This would be  the maximum that you could contribute to the plan for Tax Year 2017.


If you had income from other sources and you participated in another 401(k) plan–your deductions would not be allowed and you would have to take corrective action.  By reading this discussion you now know that your limits on elective deferrals are by person, not by plan–meaning once you reach the limit–that’s it!


In essence, you must consider “the limit” for “all elective deferrals that you makes during a year”–regardless of source to ensure that you don’t exceed the limits and have to take corrective action–that could get costly!


Contribution limits for self-employed individuals


You must make a special computation to figure the maximum amount of  non elective (25% of your earned income) and elective ($18,000 in 2016 and 2017, or $24,000 in 2016 and 2017 if age 50 or over) contributions that you can make for yourself.


When figuring the contribution, compensation is your “earned income,” which is defined as net earnings from self-employment after deducting both:


  • one-half of your self-employment tax, and


  • contributions for yourself.


Testing in a one-participant 401(k) plan


A business owner with no common-law employees doesn’t need to perform nondiscrimination testing for the plan, since there are no employees who could have received disparate benefits.


The no-testing advantage vanishes if the employer hires employees. No matter what the 401(k) plan is called by a plan provider, it must meet the rules of the Internal Revenue Code.


If you hire employees and they meet the plan eligibility requirements, you “must include them in the plan” and their elective deferrals will be subject to nondiscrimination testing (unless the 401(k) plan is a safe harbor plan or other plan exempt from testing).


A one-participant 401(k) plan is generally required to file an annual report on Form 5500-SF if it has $250,000 or more in assets at the end of the year.


If you are a one-participant plan with fewer assets you may be exempt from the annual filing requirement.


Alternatives to a one-participant SOLO 401(k) plan and SEP-IRA


Other possible plans for a single business owner that might work for you depending on your business revenue and future goals include:








With a SOLO 401k you could contribute up to $54,000 for 2017 with a $6,000 catch-up provision if you are over age 50 (maximum contribution $60,000).

If you desire to establish a SOLO 401k you can go to:


If you had annual income of $250,000 with a SEP-IRA you could contribute up to $54,000 for 2017.

If you desire to establish a SEP IRA you can go to:


Be sure to consider other factors as well such as your years in business, when you plan to exit, tax ramifications now–and in your future, setup fees and administration fees, your anticipated future income, company growth and other factors that may be unique to you or the business that you operate.


You can choose to use an SEP IRA or SOLO IRA  if you are a sole proprietor, LLC or Limited Liability Company, S Corporation and possibly other legal structures that meet the IRS guidelines.


As you might expect the SEP IRA was once cheaper to set up and administer, however  that has now changed as many brokerage companies offer low cost SOLO-IRA setup and administering.  In addition, you must look at more than just  setup costs and the administrative fees as those are just a small piece in the overall puzzle toward your retirement goals.


Always keep in mind that SEP IRA contributions for sole proprietors, on the other hand, are limited to 20% of your net self-employment income (business income minus half of your self-employment tax), up to a maximum contribution of $54,000 for 2017.


You may have more investment choices with a SEP IRA as opposed to a SOLO 401k.


With a SOLO 401k you have the 25% employer contribution amount (non-elective deferral) based on your income minus the self-employment taxes–plus the elective deferrals and catch-up provision that would allow you to save more annually than a SEP IRA generally–depending on your income.


With both plans you would have to pay taxes on withdrawals, however at that time you might be in a lower tax bracket.  Both plans allow you to use the power of compounding to help you reach your retirement number.


Early withdrawals or tapping into  the account by you will result in serious tax penalties and vary depending on your age, years of contributions and whether an exception may apply.


Investments and Withdrawals basically follow the same guidelines that the IRS has set for IRA’s and 401k’s in general!


If you know that you will come out of the gate making $150,000 the decision as to the best choice will be much clearer for you.  However, if you come out of the gates slow and steady with your income increasing steadily from a low amount such as $20,000 in year one–$40,000 in year two and a steady upward trend an IRA SEP may serve your best interests during your early years.


In the end “proper analysis” and not just going on what you hear or see others doing –or what you feel will work is the real key.  It is the hope of that this discussion has at least provided you a starting point toward making your retirement dreams come true.


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