Permanent Value

Week in Review 8/29/14

Bruce Doole
August 29th, 2014

Plans Change: Working After Retirement

A new Merrill Lynch/Age Wave study found that 47% of respondents age 50 or older who identified themselves as retired have worked or plan to work during their retirement years. What’s more, 72% of pre-retirees in that age range said that their ideal retirement will include some form of work.

“We’re seeing an increase in what people normally think of as retirement age,” says Ken Hoffman, managing director at HighTower’s HSW Advisors, an independent private wealth management boutique in New York. “It had been 62 to 65 but now it’s typically between 65 and 69.”

The unforgotten financial crisis plays a role in such extended working years, according to Hoffman. “Many people are still shell-shocked after what happened in late 2008 and early 2009,” he says. “That’s especially true for the people who panicked then, got out of stocks, and never got back in. They’ve locked in the losses they took then, with a permanent impairment to their investment capital.”


The tendency to keep working longer affects planning for retirement income in several ways. “By working, people are able to defer Social Security and increase their benefits by 8% a year,” says Hoffman.

Historically, starting Social Security as early as possible has been common. If financial planning clients are now working longer and will do so in the future, thus starting Social Security later, the difference in ongoing retirement income can be enormous. Someone who could start benefits at age 66 with about $30,000 a year (or a reduced benefit of $22,500 at age 62) would receive around $40,000 a year by delaying until age 70, not counting cost-of-living adjustments. Delaying also can increase spousal benefits for married couples.

Moreover, seniors with some earned income are less dependent on portfolio withdrawals for retirement income. Therefore, a smaller drawdown—and a smaller portfolio—might be adequate for a comfortable retirement lifestyle, especially in the early years of retirement, when clients may be healthier and more likely to earn substantial income. “By working longer and waiting to start portfolio withdrawals,” says Hoffman, “people can knock off a huge amount from their required retirement funding.”

Source: Donald Jay Korn, Financial Planning


  • Consumer prices rose 0.1% in July and were up 2% over the past 12 months.
  • July housing starts rose 15.7% to 1.09 million.
  • Weekly jobless claims fell by 14,000 to 298,000 for the week ending Aug. 16.
  • Existing home sales rose 2.4% in July to a seasonally adjusted annual rate of 5.15 million.

Source: Ivy Funds

Week in Review 8/21/14

Bruce Doole
August 21st, 2014

When To Claim At 66: Social Security

It is reccommended to claim Social Security earlier than age 70 in some situations. For a married couple, one spouse can take the spousal benefit at age 66 while they both delay until age 70 for maximum benefits.

With this strategy John Smith might claim benefits at 66, his wife Ann would claim a spousal benefit at 66 that’s equal to 50% of John’s benefit, and John would suspend his full benefit to as late as age 70. Meanwhile, Ann’s own benefit continues to grow by 8% a year, plus cost-of-living adjustments, until Ann claims her own benefits at age 70.

In addition, some people have very large pensions and don’t need Social Security for retirement income. They may take Social Security early and use the money to purchase a properly-structured permanent life insurance policy. Such a policy might eventually accumulate substantial cash value that can be accessed tax-free, via loans and withdrawals, while also providing an increased estate to the client’s beneficiaries.

Source: Donald Jay Korn, Financial Planning


  • Retail sales were flat in July following a 0.2% gain in June.
  • Jobless claims increased 21,000 to 311,000 in the Aug. 9 week, the highest level since late June.
  • Producer price inflation eased in July to a 0.1% gain after a 0.4% increase in June.
  • Industrial production increase a robust 0.4% in July, surpassing expectations.

Source: Ivy Fund

Week in Review 8/14/14

Bruce Doole
August 14th, 2014

Tax Trick: When to Start Social Security

A client reaching age 66 now is at “full retirement age,” according to the Social Security rules. Such seniors can claim their retirement benefits without any reduction, no matter how much they continue to earn.

Most seniors claim Social Security at age 66 or earlier but they don’t have to do so. Many advisors typically recommend that clients wait until age 70 to take benefits. The obvious reason to wait is an 8% annual increase in benefits for up to four years, for those who wait past 66 to begin.


Many people who need retirement income in their 60s claim Social Security then, supplementing those benefits with IRA withdrawals if necessary. A double tax on Social Security benefits and IRA withdrawals has been called the tax torpedo; to reverse the process, seniors can delay Social Security until age 70 while using IRA funds for spending money until then. The later a person starts Social Security the larger the benefit will be, so smaller IRA withdrawals can generate the total required for retirement income.

“The formula for determining the tax on Social Security benefits includes IRA distributions in full but only half of Social Security benefits,” says Lumia. Thus, increasing Social Security by waiting until age 70 and consequently reducing the desired IRA withdrawals can dramatically lower the tax on Social Security benefits. Lumia calculates that a retired couple with $97,000 of income ($70,411 in Social Security after delaying benefits to age 70 plus $26,589 from their IRA) would owe $6,492 less in federal income tax than a retired couple with the same $97,000 income receiving $40,006 in Social Security benefits after starting early plus $56,994 in IRA distributions. Over an extended retirement, such tax savings can be substantial.

Source: Donald Jay Korn, Financial Planning


  • Factory orders rose a higher-than-expected 1.1% in June following a 0.6% decline in May.
  • ISM non-mfg index posted an economic recovery best of 58.7 in July, up 2.7 points from June.
  • International trade deficit shrank to $41.5 billion in June, from $44.7 billion in May.
  • Jobless Claims fell a sizable 14,000 in the Aug. 2 week to 289,000.

Source: Ivy Fund