The Pros and Cons of Taking Social Security Early

June 23, 2017

Social security card and American money dollar billsNobody knows exactly how long Social Security will last, but for the time being you’re still entitled to what the government has stashed on your behalf over the course of your life. So at least for now, the dilemma is not if you’ll receive the payout to which you’re entitled but rather when you should take it.

If you retire earlier than age 70, you may need the money to get by in your golden years. But is taking your Social Security early the best bet?

These pros and cons will help you decide what the right decision is for you:

Cons of taking Social Security Early

  • You won’t receive the maximum amount to which your entitled
  • The major problem with taking your social security before full retirement age is that you’ll receive a smaller benefit based on the number of months you took it before reaching that milestone — and that can result in a significant cash reduction.
  • You’ll miss out on future opportunities to increase your Social Security benefits
  • By taking Social Security early, you’re locked into that decision and all future increases will be based on the initial lower amount.
  • You may inadvertently ‘cheat’ your spouse out of benefits
  • You may be giving up a decent sum of money for your spouse if your earnings are not maxed out — and you pass away first.
  • “The surviving spouse receives the higher of their own benefit or their spouse’s benefit,” says Gary M. Shor, vice president of financial life planning at AEPG Wealth Strategies. “This would be especially painful if the surviving spouse with the lower benefit lives a long life.”
  • You may be taxed on your Social Security if you take it early and still earn a decent income
  • Social Security becomes taxable when your income reaches a certain threshold. Enrolled agent Jeffrey Schneider offers a quick way to determine if a taxpayer must pay taxes on those benefits.
  • “Add one-half of the Social Security income to all other income, including tax-exempt interest,” he says. “Then compare that amount to the base amount for their filing status. If the total is more than the base amount, then some benefits may be taxable.”

The three base amounts are:

  1. $25,000 — if taxpayers are single, head of household, qualifying widow or widower with a dependent child, or married filing separately and lived apart from their spouse in the previous year.
  2. $32,000 — if they’re married filing jointly.
  3. $0 — if they’re married filing separately and lived with their spouse at any time during the year.

Schneider adds, “It must be noted that no more than 85% of the benefits received are ever taxable.”


Pros of Taking Social Security Early

  • You’ll avoid going into debt if you’re strapped for cash
  • The most obvious reason for taking Social Security early is that you need the money if you find yourself retired or otherwise out of work before you’ve reach your retirement savings goal or the maximum-benefit age of 70. It may not be the best-case scenario, but if these payments can help you stay out of debt, it’s a no-brainer. Of course, you can also lessen your debt burden by downsizing to cut as much fat as possible from your budget.
  • Married couples can live more comfortably with smart decision-making
  • If you’re married and one of you retires earlier than the other, you can supplement that lost income by taking that partner’s Social Security early — while holding out for the fuller benefits of the other’s.
  • “It may be beneficial for the lower-income spouse to collect early, while growing the other spouse’s,” says Erin Ansalyish, director of financial services at he Prosperity Consulting Group in Baltimore. “Then once the other spouse collects theirs, the lower-income spouse can take the spousal benefit, assuming it’s higher than what they’re currently taking.”
  • If you don’t ‘need’ the money, you can use the additional income at your leisure
  • This scenario supposes that you have saved aggressively for retirement so that you don’t have to rely on Social Security once you call it quits at work. In that case, there’s no real downside to taking Social Security early. However, it will provide you with additional cash for discretionary expenditures such as vacations, charity donations, and gifting money to family or friends.
  • If longevity isn’t on your side, it may pay to take what you can get now
  • If you have no surviving spouse or children who qualify for Social Security survivors’ benefits when you die, your money reverts back to the Social Security trust fund.

“One thing to keep in mind about Social Security is that it’s not an asset you can pass on to your beneficiaries,” explains financial planner Andy Yadro, of Googins Advisors. “If you’d like to leave a legacy and don’t have longevity on your side, it might make sense to take Social Security earlier, and hold off on tapping into your retirement savings until later on.”


Source: Len Penzo Dot Com

20 Rules of Personal Finance

Start line1. Salary is not the same as savings. Your net worth is more important than how much money you make. It’s amazing how many people don’t realize this simple truth. Having a high salary does not automatically make you rich; having a low salary does not automatically make you poor. All that matters is how much you save out of your salary.


2. Saving is more important than investing. Pay yourself first is such simple advice, but so few people do this. The best investment decision you can make is setting a high savings rate because it gives you a huge margin of safety in life.


3. Avoid credit card debt like the plague. Carrying credit card debt is a great way to negatively compound your net worth.


4. Live below your means, not within your means. The only way to get ahead financially is to stay behind your own earnings power.


5. But credit itself is important. Likely the biggest expense over your lifetime will be interest costs on your mortgage, car loans, student loans, etc. Having a solid credit score can save you tens of thousands of dollars by lowering your borrowing costs. So use credit cards, but always pay off the balance each month.


6. If you want to understand your priorities look at where you spend money each month. You have to understand your spending habits if you ever wish to gain control of your finances. The goal is to spend money on things that are important to you but cut back everywhere else. And if you pay yourself first you don’t have to worry about budgeting, you just spend whatever’s left over.


7. Automate everything. The best way to save more, avoid late fees, make your life easier and get out of your own way is to automate as much of your financial life as possible. It probably takes me one hour a month to keep track of everything because it’s all on autopilot.


8. Get the big purchases right. I know I shouldn’t be so judgmental but whenever I see $50-$70k SUVs on the road or enormous McMansions the first thing that pops into my head is, “I wonder how much they have saved for retirement?” Personal finance experts love to debate the minutia of brown bag lunches and lattes but the most important purchases in terms of keeping your finances in order will be the big ones — housing and transportation. Overextending yourself on these can be a killer.


9. Build up that savings account. I don’t even like calling it an emergency savings account anymore because most of the time these “emergencies” are things you should plan on happening periodically. You have to have liquid assets to take care of things when life inevitably gets in the way.


10. Cover your insurable needs. This is another huge personal finance margin of safety item. Just remember that insurance is about protecting wealth, not building it.


11. Always get the match. I can’t tell you how many times I’ve talked to people who aren’t saving enough in their 401(k) plan to get the employer match. That’s like turning down a tax-deferred portion of your salary each year. I’d like to see more people max out their retirement contributions, but at a minimum you should *always* save enough to get the match.


12. Save a little more each year. The trick is to increase your savings rates every time you get a raise so you’ll never even notice that you had more money to begin with. Avoiding lifestyle creep can be difficult, but that’s how you build wealth.


13. Choose your friends and neighborhood wisely. Robert Cialdini has written extensively on the concept of social proof and how we mirror the actions of others to gain acceptance. Trying to keep up with spendthrift friends or neighbors is a never-ending game with no true winners.


14. Talk about money. It takes all of 5 minutes before I hear about politics in almost any conversation these days, but somehow money is still a taboo subject. Talk to your spouse about money. Ask others for help. Don’t allow financial problems to linger and get worse.


15. Material purchases won’t make you happier in the long-run. There is something of a short-term dopamine hit we get through retail therapy but it always wears off. Buying stuff won’t make you happier or wealthier.


16. Read a book or ten. There are countless personal finance books out there. If it bores you to death then at least skim through a few and pick out the best pieces of advice from a few different sources to test out. This stuff should be taught in every high school and college, but we’re often on our own. That means you have to take the initiative.


17. Know where you stand. Everyone should have a back-of-the-envelope idea about where their net worth (assets – liabilities) stands. Before knowing where you want to go you have to know where you are.


18. Taxes matter. I think everyone should try to do their own taxes at least once just to understand how it all works (maybe with an assist from TurboTax). It can be maddeningly complicated, but it can help you save money over time if you know where to look. Take advantage of as many tax breaks as you can and always understand your personal tax situation.


19. Make more money. Saving and/or cutting back is a great way to get ahead, but it’s an incomplete strategy if you’re not trying to earn more by enhancing your career. Too many people are stuck in the mindset that there’s nothing they can do to get a better job, take on more responsibilities or earn a higher salary. That’s nonsense.


20. Don’t think about retirement, but financial independence. The goal shouldn’t be about making it to a certain age so you can ride off into the sunset, but rather getting to the point where you don’t have to worry about money anymore.


Source: A Wealth of Common Sense

How to Avoid These 12 Summer Travel Mistakes

June 16, 2017

Open suitcase on bedPlanning to get away this summer? Conserve your cash on general expenses so you can spend more on the things you’d like to do. Some pricey travel hiccups are unavoidable, but most of them you can definitely sidestep with a little bit of planning. Here are 12 tips on how to avoid costly travel mistakes.

  1. Booking your entire hotel stay with one reservation

Like the stock market, nightly hotel rates fluctuate based on demand, time of year, and other factors, which means that you may not be getting the very best deal if you book the entire length of your stay in one reservation.

In fact, you could save up to 40 percent off your entire stay by playing with your booking dates within the reservation system before you commit. For example, a five-night reservation at a popular hotel may book for $190 per night, but if you book the transaction as a one-night and a four-night reservation, the nightly rate drops to $127 the first night and $126 per night for the additional four nights. A great site to help you master this technique is, which will use its patent-pending technology to optimize your saving potential by providing cost-cutting solutions over two reservations instead of a single booking.

  1. Overbooking your activity itinerary

I’m a planner through and through. My vacation days are jam-packed the moment I arrive at my destination, sometimes to the dismay of my travel partners who prefer a more leisurely approach to new-area exploration. While staying busy and active on vacation is my idea of a good time, I can admit that my tight schedule has hit a few snags in the past. Things don’t always go according to plan and I’ve lost money on activity reservations because I was just too tired to do one more thing that day. Avoid this mistake by creating a loose itinerary ahead of time — do your research but don’t lock down everything hour by hour unless it’s something that’s only offered on specific dates and times, or is in danger of being sold out. Once you have what you’d like to do on paper, fill in when you’d like to do them once you’ve arrived and are settled.

  1. Over-packing things you don’t need

Over-packing can present several dilemmas over the course of your trip, starting with the cost of exceeding the 50-pound checked bag limit before boarding your flight. If you’re unable to transfer the overage to other bags you may be carrying, you will be required to pay up. Not a great start to your vacation. Then you have to lug that luggage around with you wherever you go, and you’ll curse the day you bought that extra pair of shoes when you’re hunched over like Quasimodo because you’ve carried the equivalent of a well-fed preteen on your back for miles.

Let’s not forget the trip home either. Now you have to buy an additional bag or leave clothing and accessories behind to make room for the items you’ve acquired during your travels. You can avoid all this hassle by editing your bag before you ever leave your house. Pack it, let it sit for a day so you can think about everything thing that’s in it, then revisit it and pare down to only the essentials.

  1. Racking up international transaction fees

While abroad, you could get slammed with international fees for both your credit and debit cards. Call your card providers to understand their international fees, and consider getting a new card if your current ones don’t have good rates for overseas purchases.

“Be sure to set a travel notice for your credit card so that your provider doesn’t lock your account on suspicion of fraud,” adds Benjamin Glaser, features editor for shopping-comparison site DealNews. “For debit cards, find your bank’s international ATM partners. You will still get charged a fee every time you withdraw money, but you will avoid an additional fee for going out of network.”

It’s also a good idea to keep at least $100 cash on you at all times during vacation for emergency situations. You don’t want to be S.O.L. if your card is declined or if it gets lost or stolen.

  1. Traveling solo

I thoroughly enjoy dining alone and going shopping or to see a movie by myself, but when I travel I prefer to have a partner. For starters, how spectacular will my trip be if I don’t have anyone with whom to share my experiences? Secondly, traveling with a companion cuts almost all expenses in half, including lodging, grocery bills, ground transport fares, and more. The buddy system is always a more economical option if you practice good personal finance, in my opinion.

  1. Waiting to book ground transportation at your destination

A few years ago I traveled to Memphis, Tennessee, for my birthday and decided to book the car at the destination airport. It’s Memphis, I thought to myself, how many people are renting cars here? Big mistake. Murphy’s Law dictates then when I think something stupid like that, all the cars are sold out when I arrive. As such, I had to pay a premium for the car they were able to find me, which was a major letdown and an expensive annoyance.

Booking ahead also applies to chauffeured transportation to avoid higher-than-standard rates on the ground.

“In many cases you can order a shared or private transfer at a lower cost than taking a taxi,” says Isar Meitis, president of travel-booking site Last Minute Travel. “Plus, you can have a designated driver waiting with your name, saving you a lot of time, and, in many cases, money. Also, many tourist attractions are cheaper if you book them prior, compared to a ‘walk-in.’ For a family with kids, these savings add up very quickly. In addition, these tickets can usually be picked up from a will-call kiosk or booth, which also means you don’t have to wait in lines.”

  1. Dining out for most meals

One of the most budget-draining parts of your vacation is food, especially if you’re eating out for most of your meals. You already know this. But you can cut the fat — literally and figuratively — by taking advantage of the complimentary breakfast that may be included with your hotel stay, locating free happy hour snacks and deals in the area (many hotels are now offering a free wine reception in the afternoons for guests); and buying groceries locally that you can make in the kitchen at your accommodations. And I always consult Groupon and for discounts before choosing where I’ll eat.

  1. Leaving the hotel fridge stocked

Minibars are problematic if you have self-control issues, or children. It’s easy to ravage these goodies when you’re famished, and eventually you’ll give in to your kids begging to get at the gummy bears in the bear-shaped bottle. Your resistance is futile, in fact.

“Hotel fridges can come in handy, but they can also be expensive — especially with hungry little ones looking for a drink or snack,” says Lissa Poirot, editor-in-chief of travel-review site Family Vacation Critic. “Many times, the cost of a single in-room water bottle is the same cost as what you’d spend on a full case of water — so take advantage of that. Ask your hotel to clear out the in-room fridge — they can do that — and then fill it with your own supplies.”

  1. Assuming you’re locked into your original reservations

Airlines and travel-booking sites have given us cause to pause before canceling our reservations, because they hit us straight in the pocket if we want to make an amendment to our itineraries. But that’s not always the case, and it’s worth investigating the fine print of your reservations if you’ve since found a way to save additional cash.

“Most hotel bookings today are refundable, up to almost the very last minute,” Meitis says. “Even after a booking was made, if a traveler can find a better deal, they can make the same reservation for less, and then cancel the original reservation. Obviously, the traveler needs to first verify he or she is not within penalty at the time of cancellation.”

  1. Traveling to popular summer destinations during peak season

The term “peak season” is enough to keep me away, and you should avoid the high time at popular destinations, too. Not only will you pay far and above for just about everything you would during the offseason — from transportation to lodging to gas — but you’ll have a heck of a time getting around and staying sane. If traffic and hourslong waits in line at amusements don’t drive you crazy, your restless companions will. Do yourself a favor a book the road less traveled.

  1. Failing to budget for extra costs on cruises and at resorts

While you might have snagged a great cruise or resort fare, it’s important to keep in mind additional costs when budgeting for your trip. You never want to be caught off-guard when you’re just about broke at the end of your journey. Avoid sticker shock by familiarizing yourself with all additional costs on a cruise or at the resort in advance.

“Gratuities are one of the top costs that can catch travelers by surprise,” explains Colleen McDaniel, senior executive editor of “While it can be quite convenient not worrying about tipping while onboard, remember that gratuities are automatically added to your final bill, generally on a per person, per day basis. The total cost can add up to hundreds, maybe more, depending on the number of guests in your party and the number of days you’re sailing.”

Take that cost into account when budgeting for your trip to be sure that deal really is as great as it seems. Other added costs to consider include beverages, internet, shore excursions, and alternative dining.

  1. Overreliance on your mapping apps

I traveled to Costa Rica once where my husband and I rented a car to drive from our first stop at a resort below the Arenal Volcano to a beach resort a few hours away in Guanacaste. We decided to follow new friends on their newly planned scenic route, but when it turned out to be much longer than anticipated, we broke off from the group to get back on an easier path. We plugged the destination into Google Maps, which we assumed would choose the most efficient route, but our choice was ill-advised. The service cut us across the country through about 30 miles of very rocky and mountainous rural terrain that, frankly, scared us half to death.

Asad Raza, co-founder of the travel blog Off the Beaten Trails, offers a similar warning against relying too heavily on mapping services when you’re in foreign territory.

“We planned to go to Hoota Cave in Oman and decided to check the route on Google Maps and follow it,” he recalls. “Unfortunately, the route given was only accessible with a four-wheel drive and we just had a saloon car [that’s a sedan in the U.S.]. It wasn’t until we consulted with a local that we found the right route to follow. We ended up wasting four to five hours.”

“We learned that we should not only rely on Google Maps, but also should do plenty of research and always be ready to consult with locals,” Raza adds.

Sound advice for staying alive while traveling, for sure.


Source: WiseBread

5 Simple Money Lessons For Tweens That Will Make Them Great With Money

little, happy, smiling, relaxed excited girl giving thumbs upIf your child learns the value of a dollar early in life, she’ll turn her future income into wealth.

I’m a career financial planner and a mom, so money lessons were an important part of my kids’ upbringing. As I watch my adult children make money decisions today, I can see that they took the lessons to heart.

My son negotiated a $5,000 bump in salary after receiving his first job offer. As a result of that money move, he may make $600,000 more over his lifetime (according to a study by George Mason and Temple University). Another son saved all of his bonus money and bought himself a condo at age 27. He didn’t want his rent to pay for someone else’s mortgage.

Where do you start with your pre-teen, and what lessons should you teach them?

  1. Teach your kids to pay for their own stuff with their allowance.

This may seem basic, but in order to learn about money, they need some to work with. Tie allowance to chores so they see the correlation between working and money.

My kids got $1 per week for every year of their age. When they were 10, they got $10 per week, and they had to put half in savings. In fact, I really only gave them $5 and put the other $5 in savings for them before they even saw it (similar to a 401(k) plan at work).

The kids had to manage their allowance money to buy the things they wanted, which was a great learning experience. As an added bonus, I didn’t have to constantly hand out $20 bills. For example, they paid for entertainment, such as going to the movies with their friends and buying video games, with the allowance money.

Granted, I could afford to give them this money at the time. Do what works for your family.

Lesson: People learn through experience. Give kids a bit of money and put them in charge of managing it.

  1. Learn simple negotiation skills.

My son Rick’s first job offer was not his first negotiation. He started at age 10 at local yard sales. My husband and I taught him two tactics: Negotiate for price and ask for additional value.

We started with action figures that cost $1. Rick asked if they would part with them for 50 cents. When he heard a no, he’d ask for three for $2 instead. We just wanted to get the kids into the habit of asking politely to find out the seller’s bottom line.

Lesson: Ask for a better deal, and you may get one. Find the other parties’ true price. There is no harm in asking. 

  1. Set a budget.

Instead of simply purchasing your child’s sporting equipment or hobby supplies, set a budget and work with them to maximize it. For example, if your child plays baseball or softball, determine an amount to spend on their bat, gloves, and cleats.

Take your time and shop three ways: retail (on sale if possible), used sporting goods stores, and person to person. Compare prices and put your money where the value is.

Lesson: Teach your kids how get their needs met within a budget. If they want to purchase everything new, they may need to watch for sales and promotions.

  1. Dollars add up, so don’t waste them. Save them for something fun.

To teach your kids the value of a dollar, play the dollar game. Get 50 $1 bills from the bank and put a big glass jar on the kitchen counter. For one week, find ways to change behavior in the family to save $1 at a time.

Some examples:

  • Drink a glass of water when going out to eat instead of buying a soda
  • Peek in your freezer and pantry before heading to the store instead of buying duplicate items by mistake
  • Make dinner at home with what you already have
  • Use a coupon to purchase toiletries
  • Buy specialty hair-care products at discount stores such as TJ Maxx or Marshalls instead of the salon or grocery store
  • Every time you save on a purchase or don’t make a purchase because you don’t need it, toss one of the dollars in your jar. Then use that money toward family fun, such as entrance to the zoo or a movie night.

Lesson: A dollar here and there adds up. Spend your dollars where they bring your family the greatest value.

  1. Do it yourself.

One of the most valuable lessons I learned as a kid was how to sew. At the time, I didn’t know it was a money lesson! When I moved into my first apartment, I was able to make my own curtains out of old sheets, as well as repair clothes. The skill of sewing and my Mom’s old sewing machine served me well over the years.

One way to promote learning skills that are valuable is to make gifts for others. Grandparents especially love this, of course, but learning to D-I-Y gives teens a sense of accomplishment and confidence.

For example, your child with artistic tendencies can make their own greeting cards with some cardstock, a pen, and a simple watercolor set. Check out The Postman’s Knock page on making watercolor cards. Sign them up for a class on watercolor painting and get them started bringing joy to others with their talent!

Lesson: Learn a skill that is valuable to save money and potentially be marketable in the future. Share your talents and gifts with others rather than making a purchase.

Teach your kids to understand the value of a dollar early on. Over their lifetime, millions of dollars will flow through their fingers. If they understand that one simple dollar can make a difference, then it will — to their future.


Source: Forbes

6 things to give up if you want to get out of credit card debt

Worried couple reading a letterIf you’ve racked up credit card debt, you’re not alone. Credit card users owe more than $1 trillion in debt, and the average American family owes $8,377.

But taking on credit card debt that isn’t immediately paid off is risky and makes it nearly impossible for you to build savings.

To help you save more and tackle your debt, CNBC rounded up six things to give up starting today.

Only paying the minimum on your balance

Thanks to exorbitant interest — the typical credit card charges 16.4 percent — not paying off your balance in full each month can end up costing a fortune in the long run … and keep you in the red.

Get in the habit of making payments in full. The easiest way to do that is to make it automatic. Simply arrange to transfer the full amount of money you owe from your checking account to your credit card company every month.

Trying to keep up with your friends

Choosing where to live, what to wear and what gadgets to buy based on what your friends do often means spending more money than you have.

To avoid the temptation of trying to live up to your friends’ standards, dial back your use of social media, advises Derek Sall, who paid off $116,000 worth of debt before age 30.

“The best tip I can give is just live your own life,” he tells CNBC. “The best way to just live simply and be content is just to turn it all off and hardly pay attention to it at all. Because that’s what gets people in the most trouble. They see ‘Oh, my friend went on this great vacation, and I wish we could do that!'”


“I would recommend seriously looking at the story you tell yourself about your debt,” says Amanda Page, who paid off her $48,500 in student loans in less than a year.

Ignoring your debt — whether it be student loans or credit card debt — or telling yourself you have it under control when you don’t, will only prolong the process. And the longer you wait to tackle it, the more interest you’ll owe.

“For a long time, I resented my undergraduate debt and felt like it wasn’t mine to pay,” says Page. “Once I re-framed the story, took responsibility for my role in accumulating it and told myself that I was capable of eliminating it, then my life opened up.”

Going out to eat

Eating out can add up quickly. In general, the more food you can prepare at home, the more you’ll save.

“My biggest [savings tip] I learned from my parents,” says Scott Alan Turner, who paid off more than $70,000 in loans and became a millionaire by 35. “My dad worked for the town his whole life. He packed a lunch every day and brought it to work. In our small-town upbringing, we didn’t have restaurants and we didn’t go out to eat all the time.”

Turner carried that habit into to his own life: In the 10 years he spent working a corporate job, he only bought lunch out a handful of times. Instead, he cooked large batches of food on Sunday to eat throughout the week.

Other financial goals

If you’re serious about becoming debt free, you might have to put other priorities on hold, such as investing or buying a home.

Take David and Meg Cahill, who paid off $18,000 worth of student loans in 54 days. During that time, the couple decided to focus exclusively on eliminating their debt.

They stopped investing, other than their required pension contributions, and took a large chunk out of their emergency fund to make the final payment, Cahill tells CNBC: “Around day 45, we realized that our emergency fund was out of balance with what we really needed. We decided to make a big push and raid our emergency fund, and that gave us the final little boost we needed.”

They did leave one month’s worth of living expenses in the fund, and now that they’re debt free, “we’re working on building it back up to six months’ worth again,” Cahill says.

Your plastic

If you’re deep in debt, consider ditching your plastic all together and going cash only. This doesn’t have to be a long-term strategy, but it will help you to save big relatively quickly.

Simply withdraw a predetermined amount of cash for the week and commit to spending only that amount. It’ll force you to stay on budget. Plus, using cash rather than credit cards will give you a better idea of just how much money you’re spending. You may be surprised by how quickly your cash can disappear.


Source: CNBC