Continuing to Work after Filing for Social Security

Contributed by: James Smiertka

If there’s a chance you will earn income while you are collecting Social Security, you will want to know about an extremely important rule put in place by the Social Security Administration called the “Earnings Test.” There are a variety of reasons why someone may earn income while receiving Social Security.  Whether it’s simply pursuing a passion after retirement or the financial need to pick up a part-time job, it’s important to fully understand the implications of earning income and collecting Social Security benefits prior to reaching your full retirement age (FRA). (Click here to see what your FRA is.) Once you reach full retirement age, however, you are not subject to any reduction of benefits from the “earnings test” on your earned income. Let’s take a look at two different examples in detail:

If you are under full retirement age (FRA) for the entire year:

• Earnings limit: $15,720

• Reduction of benefits: $1 for every $2 you earn above the earnings limit

• Example: John is currently 63 and his FRA is 66. John retires, immediately turns on Social Security benefits ($20,000/yr) but decides he wants to pursue his passion as a tutor and plans on earning $35,720 for the year. Since his earnings would be $20,000 over the Earnings Test limit ($35,720 – $15,720), one half ($1 of every $2 earned), or $10,000, would be withheld from his annual Social Security benefit, therefore, reducing John’s Social Security benefit to $10,000 for the year. 

In the year you reach full retirement age (FRA):

• Earnings limit: $41,880

• Reduction of benefits: $1 for every $3 you earn above the earnings limit

• Example: Sue is currently 65 but is reaching her FRA of 66 in a matter of months. She recently started collecting Social Security, which provides her $30,000/yr. Sue is still working, earning $161,880 annually and was not aware of the Social Security Earnings Test. Her earnings would be $120,000 over the earnings test limit ($161,880 – $41,880), one third ($1 of every $3 earned), or $40,000 would be withheld from her annual Social Security benefit. Since this amount is greater than her Social Security benefit, her entire benefit for this year would be withheld.

It’s important to note that if you have had Social Security benefits withheld because of your earnings, they are not lost forever. Once you reach full retirement age, your benefit will increase to compensate for the benefits that were withheld. It does, however, on average, take nearly 2 decades to essentially recover the benefits that were withheld. The bottom line is that there are very few instances where it would make sense to start collecting benefits if there is a strong likelihood that you will continue working. Instead of collecting Social Security early and more than likely having the majority (if not all) of your benefits withheld, you could simply delay benefits which permanently increases your Social Security benefit up to age 70 (More information on that here).

As you can see, there are many moving parts with Social Security, especially for clients who still plan to work prior to reaching full retirement age. Before turning your benefits on, we always recommend that you reach out to your financial planner to discuss your situation in detail to ensure the strategy you’re selecting is in line with your own personal goals and objectives. If you’d like to chat about your benefits and discuss different filing strategies, give us a call, we are happy to help! 

James Smiertka is a Client Service Associate at Center for Financial Planning, Inc.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Jim Smiertka and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Examples provided in this material are hypothetical and for illustrative purposes only.

Identity Protection: Freezing your Credit Report

Contributed by: Melissa Parkins, CFP®

Some 9 million Americans are victims to identity theft every year. Anyone who has ever had their identity compromised knows how frustrating it can be to fix – trust me, I know from the experience. Last year, I wrote about how to check your credit report and what to do if you see something unusual. As you may know, you are entitled to pull your full credit report from each of the 3 credit bureaus once per year at no charge; but what about the remaining 364 days a year (or 365, in 2016’s case)? Chances are you won’t realize that your identity has been compromised until you check your credit report once a year OR you go to apply for a new line of credit and are denied because your score has plummeted. What’s worse is that when you do not catch it right away, it becomes more and more difficult to fix.

So what else can you do to protect yourself?

You can actually block access to your credit report information with a “credit security freeze.” To do this, you contact the three major credit bureaus and instruct them to prohibit new creditors from viewing your credit report and score. Companies with whom you currently have existing accounts with will still be able to access your credit information. You can set up a freeze on your credit information even if you haven’t experienced any fraudulent activity before. A credit security freeze can increase the likelihood of catching identity thieves before they can open new accounts in your name.

How do you do this, and what are the fees?

To freeze your credit reports, you must contact each of the three credit bureaus individually. This can be done online here: Equifax, Experian and TransUnion. Fees and filing requirements vary according to state law.

• In Michigan, The fee to freeze your credit report is $10 for each credit agency you decide to do this with – so $30 total if you freeze your credit with each bureau.

• Once you have frozen your credit report, it can be lifted at any time. In Michigan, it is another fee of $10 to permanently remove the credit freeze.

• You can also have the freeze temporarily lifted for a specific period of time or for a specific party (specific party lift is not available in Michigan, but it is in some states). For instance, if you were to start a new job or open up a new line of credit and that company needed access to your credit report, you would need to temporarily lift your freeze. Again, in Michigan it would be a $10 fee for a specific date range lift.

• If you are a past victim of identity theft, the fees are waived (must provide a copy of a valid complaint filed with law enforcement or a police report), so you can freeze your credit and utilize the temporary lifting at any time for no cost.

Who should freeze their credit reports?

As you can see, all of the fees can really add up. So if you are planning any action that requires a credit check, you may want to delay setting up a freeze. Some actions that would require a credit check are things like:

• Starting a new job

• Buying or refinancing a home

• Taking out a loan

• Opening a credit card

• Opening an account with anew utility company or cellphone provider

Placing a security freeze on your credit report does not affect your credit score, nor does it keep you from obtaining your credit report from each of the agencies at any time. Although a freeze can help block identity thieves from opening new accounts with your information, it does not prevent them from making charges on existing accounts. So you should still continue to monitor statements for existing accounts for fraudulent transactions. As you can see, freezing your credit report can be a useful tool for protecting your identity, but it may not be right for everyone. Before setting up a freeze on your credit report, you will want to make sure the timing is right for your unique situation. Let us know if we can be of help.

Melissa Parkins, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Melissa Parkins and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.

Raymond James is not affiliated with Equifax, Experian, or TransUnion.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

How Should I Use My Tax Refund?

Contributed by: Jaclyn Jackson

Tax filing season is over and many people are entitled to get money back from Uncle Sam.  While most of us are tempted to buy the latest gadget or book a vacation, there may be a better way to use your tax refund. If you are pondering what to do with your tax refund, here are a few questions to help determine whether you should SAVE, INVEST, or SPEND it.

Have you been delaying one of the following: car repair, dental or vision checks, or home improvement?

If you answered yes: SPEND

If you had to be conservative with your income last year and as a result postponed car, health, or home maintenance, you can use your tax refund to get those things done.  Postponing routine maintenance to save money short term may add up to huge expenses long term (i.e. having to purchase a new car, incurring major medical expenses, or dealing with costly home repairs.)

Do you have debt with high interest rates?

If you answered yes: SPEND

High interest rates really hurt over time. For instance, let’s say you have a $5,000 balance at 15% APR and only paid the minimum each month.  It would take you almost nine years to pay off the debt and cost you an additional $2,118 interest (a 42% increase to your original loan) for a total payment of $7,118. Use your tax return to dig out of the hole and get debt down as much as possible.

Could benefit from buying or increasing your insurance?

If you answered yes: SPEND

1. Consider personal umbrella insurance for expenses that exceed your normal home or auto liability coverage.

2. Make sure you have enough life insurance.

3. Beef up your insurance to protect against extreme weather conditions like flooding or different types of storm damage that are not normally included in a standard policy.  Similarly, you can use your tax refund to physically your home from tough weather conditions; clean gutters, trim low hanging branches, seal windows, repair your roof, stock an emergency kit, buy a generator, etc.

Have you had to use emergency funds the last couple of years to meet expenses?

If you answered yes: SAVE

Stuff happens and usually at unpredictable times, so it’s understandable that you may have dipped into your emergency reserves. You can use your tax refund to replenish rainy day funds.  The rule of thumb is to have at least 3-6 months of your expenses saved for emergencies. 

Are you considered a contract or contingent employee?

If you answered yes: SAVE

Temporary and contract employment has become pretty common in our labor-competitive economy where high paying positions are few and far between. If you paid estimated taxes, you may be eligible for a tax refund. Take this opportunity to build up savings to buffer against slow seasons or gaps in employment. 

Could you benefit from building up retirement savings?

If you answered yes: INVEST

Get ahead of the game with an early 2016 contribution to your Roth IRA or traditional IRA.  You can add up to $5,500 to your account (or $6,500 if you are age 50 or older).  Investing in a work sponsored retirement plan like a 401(k), 403(b), or 457(b) is also recommended so you could beef up your contributions for the rest of the year and use the refund to supplement your cash flow in the meantime. 

Are you interested saving for your child’s college education?

If you answered yes: INVEST

College expenses aren’t getting any cheaper and there’s no time like the present to start saving for your child’s college tuition.  Money invested in a 529 account could be used tax-free for college bills with the added bonus of a state income tax deduction for you contribution.

Could you benefit professionally from entering a certification program, attending conferences/seminar, or joining a professional organization?

If you answered yes: INVEST

It’s always a good idea to invest in your development.  Why not use your tax refund to propel your future?  Try a public speaking or professional writing course; attend a conference that will give you useful information or potentially widen your network.   

Did you answer “no” to all the questions above?

If you answered yes: HAVE FUN

Buy the latest gadget.  Book the vacation.  You’ve earned it!

Jaclyn Jackson is an Investment Research Associate at Center for Financial Planning, Inc. and an Investment Representative with Raymond James Financial Services.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Jaclyn Jackson and not necessarily those of Raymond James. You should discuss any tax or legal matters with the appropriate professional. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Please include: Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members. Hypothetical examples are for illustration purposes only.

"Help! I’m Facing a Larger than Expected Tax Bill,"

Contributed by: Matt Trujillo, CFP®

Every year, as the initial filing date approaches for federal tax returns, inevitably a client calls or emails with something along the lines of “Help! I owe the feds some money! Is there anything I can do to avoid the tax?!” 

I can certainly empathize with getting hit with an unexpected tax bill, and depending on your situation sometimes there are perfectly legal ways to avoid an unexpected tax bill. I have summarized a list of ideas below to keep in mind in case you find yourself in this situation:

Max out the HSA

If you have a qualified high deductible health plan and have an account established, you can defer up to $6,650 in 2015 and this can be done up to the filing deadline of April 18th for 2016.

SEP IRA

For 1099 earners look at setting up and contributing to a SEP IRA; this can be as much as 25% of your net income after expenses that are accounted for on the 1099 income.

Spousal IRA contribution

Maybe you work and have access to a 401(k) or 403(b) plan so you’re not able to make a deductible IRA contribution, but don’t rule this out entirely as your spouse could potentially make a deductible IRA contribution even if they aren’t working. Up to $5,500 for those under 50 and $6,500 for those over 50.

All of the aforementioned can be done right up to the filing deadline of April 18th for 2016, so it makes sense to review these even if it's passed December 31st of the calendar year! If none of these apply to your situation and you are wondering how to avoid owing a big tax bill again on next year’s tax return, consider the following ideas to help mitigate the upcoming year’s tax liability:

Max out 401(k)’s

For those under 50, you can contribute $18,000 and for those over 50 you can contribute $24,000. This has to be done through payroll deduction so you only have until December 31st of the calendar year to defer money into the plan and avoid income tax.

Deferred Compensation Plan

Some plans will allow you to defer your entire salary if desired so make sure you explore the options in your plan and know the specifics of how it works. These plans can be subject to substantial risk of forfeiture, so be very careful and make sure your organization is on solid financial footing before contributing to these plans.

Increase withholding on your paycheck

Nothing fancy here. Sometimes it's just as simple as sending an email to human resources and letting them know you want to withhold more state and federal taxes from your paychecks so you don’t get hit with a big tax bill at the end of the year.

Be sure to consult with a tax professional before implementing any of these strategies. 

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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Any opinions are those of Matt Trujillo and not necessarily those of Raymond James Financial Services.

Three Ways to Establish and Improve your Credit Score

Contributed by: Matt Trujillo, CFP®

In a previous blog I discussed how your credit report is composed and what goes into a credit report; I would encourage you to check out to find out how your score is calculated. Now, I want to discuss methods for improving your credit score, if you are unhappy with your current number, and/or establishing credit if you are just getting started.

First, let’s start by establishing how you get credit. If you want to establish credit, you need a regular source of income. The income can be derived from a job, trust fund dividends, government benefits, alimony, investment dividends, or any number of sources. What’s important is that you have some kind of continuing and predictable cash flow. Without regular income, you cannot demonstrate an ability to make regular payments. Establishing a regular source of income is your first step.

Once you have a steady source of income it is time to start applying for credit. If you are just starting out or are looking to repair credit, I recommend starting small. Here is a short list of ideas that you can consider for getting easy access to credit and slowly starting to improve or establish your score.

An overdraft line of credit on your checking account at your bank

• Here is how it works. You have a checking account. You apply for and are granted an overdraft line of credit in the amount of $500. Your checking account balance is $40. You write a check for $75. When the check is presented to the bank for collection, the bank does not return it for insufficient funds. Instead, it credits your checking account in the amount of $100. Now you have a balance of $140 in your account. The bank can honor the $75 check, leaving you with $65 in the account. The bank bills you monthly for the $100. You can repay the $100 all at once, or make minimum monthly payments. You will be charged interest and perhaps a service fee. Although it may not look like a loan, it is. Activity on these accounts is regularly reported by many banks.

Getting a secured credit card

• Many credit issuers offer secured credit cards. A secured credit card provides you with an open line of credit secured by a cash deposit. These types of cards typically come with a high interest rate. Here is how a secured credit card works. You give the credit card issuer a cash deposit. The credit issuer gives you a credit card with a credit limit equal to the cash deposit. You can charge up to the credit limit using the card, and then make monthly payments on the balance. If you fail to make the payments, the credit card issuer uses your cash deposit to cover the unpaid balance. If you make your payments as agreed, you will eventually establish credit (or improve your current score) and qualify for an unsecured credit card. The secured credit card issuer will return your deposit, less any unpaid balance due, when you cancel the account.

Using collateral when applying for new lines of credit

• When you secure credit, you give the lender collateral to back your loan. The risk is reduced for the lender. If you do not pay, the lender can use the value of the collateral to satisfy the debt. Collateral can be anything of value, but usually takes the form of cars or real estate. If you have something of value, but no credit rating, you may be able to acquire credit by offering to post your valuables as collateral.

These are just a few simple and easy ways to either establish credit or improve your credit score in order to build a credit report you are comfortable with.  

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Matt Trujillo and not necessarily those of Raymond James.

What The Bachelor taught me about Personal Finance

Contributed by: Clare Lilek

I know what you’re thinking, how could the reality TV show The Bachelor teach me financial lessons? Well, dear reader, you will be surprised at what you can learn from other peoples’ misguided actions.

As of late, I have gotten into a new TV show. Ironically, one I thought I would never watch. Yup, you’ve guessed it: The Bachelor. I never really saw the point in the show—the excess drama, the crafted confessions and personas, and of course, all of this under the guise of finding “true love”—until I had a group of friends to watch the show with and debunk all the over-the-top drama. It actually can be fun and kind of engrossing. So, along with half of America, I resigned myself to having a guilty pleasure.

Recently, I came across an article, “25 Behind-The-Scene-Secrets about The Bachelor.” The title alone caught my eye. I knew it would be a little foray into the actual reality behind the “reality TV show.” Just like the appeal of tabloid magazines, getting behind the scenes gossip on The Bachelor, or any TV show obsession, is deeply satisfying. I, however, was most shocked by the reveal of the financial aspect of the show.

While watching with my friends, we frequently comment on the outfits of the female contestants because during every Rose Ceremony they are all dressed to impress in ensembles that can rival the most ostentatious red carpets. This could be their last chance to appeal to The Bachelor before he makes a final decision—aka their last time on TV—so they consistently look like an entire hair and makeup team, equipped with fashion expert, styled them. According to this article, that is false. These women, apart from the first and very last episode of the season, do all their own styling and have bought all their own clothes. Before coming on the season they have to prepare for 7 weeks of filming. If they are in it to win it, they have to buy gorgeous gowns and sassy dresses for 10 different rose ceremonies! Not to mention group and individual dates, making sure they look approachable yet at the same time like a glam team primped them before. Do you know how much time, effort, and most importantly, money that takes?! A lot. The answer is a lot.

How then, you might wonder, do these 20-somethings afford being on The Bachelor? First of all, it’s important to note that many of the contestants have to either quit their job or go on unpaid leave for two months. After which, the winner, might chose to move locations to be with her new beau. Many of the contestants, in order to foot the bill have reportedly either borrowed against or completely cashed in their 401(k)s. Apparently retirement savings can wait when you’re looking for love on national television. More contestants go into credit card debit to front the money that can’t be found in their savings account.

Let’s look at an example:

The average contestant could be a single woman, age 25, who earns $50,000 a year putting her in the 25% tax bracket. Let’s say she has about $10,000 in her 401(k). If she needs an influx in cash she has a few options: take out a personal loan, remortgage her home, max out her credit cards, borrow against her 401(k), or take a distribution from her 401(k) (essentially cashing it out). Taking out a distribution before you are 59.5 years of age means you have to pay a 10% penalty on that distribution on top of the income taxes for that money. So not only does this particular contestant not have savings for her eventual retirement or investments growing over time, she now has only $6,500 to spend on clothes, beauty products, and whatever else they need in order to find “true love.”

Now let’s look at the potential financial upside of being on The Bachelor, and no, this usually doesn’t come with benefits or a retirement plan. The contestants don’t get paid for going on the show, but when they arrive they receive a goody bag filled with clothes and beauty products. There is also the chance that the contestants fall into fortune after gaining fame from the show by endorsing products and the like. Also, The Bachelor gets paid a reported $100,000 and gets a lot of endorsement deals. So along with getting an expensive Neil Lane diamond engagement ring (which after two years of being together, the couple can cash in with written producer approval— “cha-ching”), winning the show might mean you fall into quite a bit of money.

Of course, not every woman can (or would!) trade in her 401(k)s for a chance at landing a fiancé. But the next time you’re watching The Bachelor (or thinking about applying yourself) remember the money and tough choices it takes to get there. I guess the reality behind reality TV is a lot less glamorous than you might think.

Clare Lilek is a Challenge Detroit Fellow / Client Service Associate at Center for Financial Planning, Inc.

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Any opinions are those of Clare Lilek and not necessarily those of Raymond James.

Links are being provided for information purposes only. Raymond James is not affiliated with and does not endorse, authorize or sponsor any of the listed websites or their respective sponsors. Raymond James is not responsible for the content of any website or the collection or use of information regarding any website's users and/or members.

How Market Volatility Can Be Your Friend

Contributed by: Nick Defenthaler, CFP®

Chances are if you’re in your thirties or forties, the financial media is something you don’t watch on a daily basis (don’t worry; we think that’s a good thing). You’re busy with life. Between your career, family, after-school activities for your kids, commitments with friends etc., it’s hard enough to carve out a few minutes to unwind at night, let alone find the time or interest to keep up on recent updates in the stock market.  Even if you aren’t a financial media junky, you’ve probably still seen a few headlines or overheard co-workers discussing how crummy the markets have been so far in 2016 and that 2015 wasn’t a great year either.

If you’re in “accumulation mode” and retirement is 15 years or more out, don’t get caught up in the noise or the countless investment tips and stock picks you’ll inevitably hear from others. If your investment accounts are positioned properly for your own specific goals, with personal objectives and risk comfort levels in mind, roller coaster markets like we’ve experienced over the last few months are your friend. For some reason, investments are the only things I can think of that people typically don’t like to buy when they may be undervalues OR at attractive valuations. Why? Because it can be a little nerve wracking and possibly seem counterintuitive to continue to “buy” or invest when markets are falling. But what is occurring when you do just that? You’re purchasing more shares of the investments you own for the same dollar amount! Let’s look at an example: 

Sarah is 38 and is putting $1,000/month into her 401k, which is roughly 10% of her salary. She owns a single investment with a current share price of $10, meaning for this month, she bought 100 shares ($1,000 / $10/share). What if, however, the market declines like we’ve seen so far in 2016 and now the share price is down to $9? That same $1,000 deposit is going to get Sarah just over 111 shares ($1,000 / $9/share). Since she is about 25 years out from retirement, Sarah welcomes these short-term market corrections because it gives her the opportunity to buy more shares to potentially sell at a date in the future at a much higher price. If we look back in history, those who stayed consistent with this strategy typically had the greatest success.  

Everything I’ve described above is pretty straightforward. It’s not flashy or “sexy” and it might even sound somewhat boring. Good! Investing and financial planning does not have to be overcomplicated. I recently heard this quote and it really resonated with me: “Simplicity wins every time. Complexity is the enemy of execution.”  Why make things more complicated than they have to be?

Here are a few examples of simple, but effective ways to build wealth:

• Live within your means.

• Save at least 10% of your income for retirement each year starting early and increase that percentage 1% each year. For more information, check out a blog I wrote on this topic.

• Invest in a well-balanced, diversified portfolio that matches YOUR needs, not someone else’s.

• Work together with a financial planner that you trust and who can help to take as much stress out of money for you and your family as possible.

• Tune out the “noise” from financial media – the world doesn’t end very often!

You might be thinking, “I know this stuff is important, but I just don’t have the time or desire to understand it better.” Fair enough. This is one reason of the many reasons our clients hire us. They know we’re experienced and are passionate about an area in their life that is extremely important, and our clients want to get it right. Our goal is to work with you to make smart financial choices and help take the stress out of money for you and your family during each stage of your life. Let us know how we can help you do just that. 

Nick Defenthaler, CFP® is a CERTIFIED FINANCIAL PLANNER™ at Center for Financial Planning, Inc. Nick is a member of The Center’s financial planning department and also works closely with Center clients. In addition, Nick is a frequent contributor to the firm’s blogs.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Nick Defenthaler and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Past performance is not a guarantee of future results. Dollar-cost averaging cannot guarantee a profit or protect against a loss, and you should consider your financial ability to continue purchases through periods of low price levels. Investing involves risk and investors may incur a profit or a loss regardless of strategy selected. There is no guarantee that using an advisor will produce favorable investment results. Diversification and asset allocation do not ensure a profit or protect against a loss. The example provided in this material is hypothetical and for illustrative purposes only. Actual investor results will vary.

How Your Retirement Age Could Affect Your Social Security Benefits

Contributed by: Melissa Parkins, CFP®

When planning for retirement, one of the biggest factors to figure out is how you will recreate your paycheck when you are no longer working to receive one from an employer. A couple of questions to think about:

• Do you have a pension through your employer and if so, when are you eligible to start receiving income?

• Will you live off of your portfolio?

• Is Social Security the only income stream you have access to?

Many people (including myself!) long to retire early, but doing so could reduce your Social Security benefits. Your benefit will depend not only on how much you have earned in the past, but also when you decide to leave the workforce.

If you stop working before you have 35 years of earnings reported, then a zero is used for each year without earnings when your benefit amount is calculated. Any zeros will bring down your earnings average and reduce the benefits you will receive. Even if you have 35 years of earnings reported, if some of those years are low earning years (maybe at the beginning of your career), they will be averaged into your calculation and bring your benefits down lower than if you had continued to work for a few more years while, ideally, earning higher wages during your peak earning years.

One potential point of confusion when planning to retire early comes on your Estimated Benefits statement. When you look at your Social Security statement, your reduced expected benefit at age 62 actually means the amount you are expected to receive if you work until age 62 and begin collecting benefits at that time. Likewise, your increased expected benefit at age 70 means the amount you are expected to receive if you work until age 70 and then begin collecting benefits. So if you do retire early or at different ages than the two listed, the number shown as your estimated benefit could be different.

At my current age of 25, retiring early is something I aspire towards – I picture a long, lavish (read: expensive) life of luxury! Hey, a girl can dream! Many people (maybe more realistically than me) also strive to retire early, and if you don’t have access to a pension, then you may be depending more heavily on your Social Security benefit. If you do retire early, then you may receive a reduced benefit. However, retiring early is not unrealistic; but in order to have enough money to live at your comfort level, it may require working part time for a bit after retirement or even saving more now to make up for a potentially lower Social Security benefit. When making these decisions, talk with your Financial Planner about your retirement goals to see how best to build your plan to financial independence.

Melissa Parkins, CFP® is an Associate Financial Planner at Center for Financial Planning, Inc.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Melissa Parkins and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete.

The Truth Behind Getting Your Resolutions to Stick

Contributed by: Kali Hassinger

It’s New Year’s Eve, which means it’s time for New Year’s Resolutions!  Typically, this is a point when we think about the big changes in store for next year.  It’s a fresh start.  Come January, gyms will be packed, diet commercials will be constant, and people will be committed to making the New Year better!  As the days roll on, however, it’s easy to lose focus and old habits tend to creep back into our lives.  Eventually, it’s difficult to remember the resolutions that you felt so passionately about a few months ago.  In some cases, it’s because we set unrealistic expectations.  Other times it’s because life gets too busy and it’s hard to remain motivated.

I know you may be expecting me to provide you with a list of suggested financial resolutions for 2016, but honestly I’m not sure that would really help you. Change isn’t as simple as writing a list or reading a blog.  Making a real change requires so much more effort, which is part of the reason why resolutions can be so easily forgotten after a few months.  There are so many pieces that go into our habits and behaviors in life, and in order to really enact change, we have to connect our goals to our actions, logic, resources, and emotions.

According to a quick Google search, here are the most common financial resolutions each year: 

• Save More

• Pay off Debt

• Spend Less

These are very modest and sensible goals; however, these are the top 3 resolutions every year.  Keep in mind, if you are planning to include one of these three resolutions, they are great goals!  But try to be specific when establishing your plan for the New Year.  Instead of “Save more,” try saving an additional $100 each month and set it up to occur automatically.  Instead of “Pay off Debt,” try determining which credit card has the highest interest rate and target that first. I am absolutely not trying to suggest that resolutions aren’t worthwhile (I make them every year, too!).  I’m only suggesting that you ask yourself, “Why do I wait until January 1st to make my life better?”

Consider your motivation behind saving more and spending less.  It’s not because we just want to see a bigger number in our accounts.  Feeling financially secure enables us to enrich our lives with new experiences.  Instead of “Save More,” connect your savings’ goal to what it truly means – building toward a future, a trip, retirement, or whatever it is that is genuinely important to you. 

Instead of making a resolution, make a change that is:

1. Attainable

2. Sustainable

3. Meaningful

If you find that you missed a monthly deposit into your savings account (or you skipped the gym for a week), don’t give up.  Life is unpredictable and our resolutions for change have to be adaptable and resilient.  Reconnect your resolution with what it means to you on a long-term and emotional level.  We don’t need January 1st to make a change, we just need resolve and determination (both are synonyms for resolution – see what I did there?!).  Have a happy and healthy 2016, everyone!

Kali Hassinger is a Registered Client Service Associate at Center for Financial Planning, Inc.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. Any opinions are those of Kali Hassinger and not necessarily those of Raymond James.

How to use your Year End Bonus

Contributed by: Matt Trujillo, CFP®

It’s that time of year. The weather is getting cooler, family is in for the holidays, and yearend bonuses are about to be paid! For some the bonus might already be spent before it is paid, but for those of you that are still looking for something to do with that money consider the following:

Here are 5 things to consider in allocating your year-end bonus:

1. Review your financial plan. Are there any changes since you last updated your financial goals? 

2. Have you accumulated any additional revolving debt throughout the year? If so consider paying off some or all of it with your bonus.

3. Are your emergency cash reserves at the appropriate level to provide for your comfort?  If not consider beefing them back up.

4. Are your insurance coverages where they need to be to cover anything unexpected?  If not, consider re-evaluating these plans.

5. Review your tax situation for the year.  Make an additional deposit to the IRS if you have income that has not yet been taxed so you don’t have to make that payment and potential penalties next April.   

If you can go through the list and don’t need to put your bonus to any of those purposes, here are some other ideas:

• If you’re lucky enough to save your bonus consider maximizing your retirement plan at work ($18,000 for 2015), including the catch-up provision if you’re over 50 ($6,000 for 2015). 

• Also, consider maximizing a ROTH IRA ($5,500 for 2015) if eligible or investing in a stock purchase program at work if one is offered. 

• Another idea is a creating/or adding to an existing 529 plan, which is a good vehicle for savings for educational goals. 

• If all of these are maximized, then consider saving in your after tax (non-retirement accounts) with diversified investments.

Matthew Trujillo, CFP®, is a Certified Financial Planner™ at Center for Financial Planning, Inc. Matt currently assists Center planners and clients, and is a contributor to Money Centered.

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This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Matt Trujillo and not necessarily those of Raymond James.