What is the Best Age to Start Receiving Social Security Checks?

One of the most important decisions you will need to make as you approach retirement is when to start taking social security.  Generally, the longer you can wait to collect, the better off you will be at an older age because the amount of your monthly payment increases as you delay the start of your collection.

The earliest that you can start collecting social security is age 62.  If you need the money and do not have other ways of supporting yourself, you may need to start collecting right away.  However, there are financial benefits to waiting.

The Vanguard Group, Inc. recently published an article where it assumed that a 66 year-old person would collect a “full retirement” benefit of $1,000 per month from social security.  They then showed how this amount changed if the person changed the time when they started collecting their benefits.  More specifically, the article reported the following social security payments for specific ages: $750 (age 62); $800 (age 63); $866 (age 64); $933 (age 65); $1,000 (age 66); $1,080 (age 67); $1,160 (age 68); $1,240 (age 69); and $1,320 (age 70).

As you can see, there is a $570 per month difference between collecting social security at age 62 and age 70.  This is not an insignificant difference and is increasingly more important as you age.  For example, using the numbers from the article, if a person lived until age 80 and started collecting social security at age 62, their total payments would be $162,000.  If that same person waited until age 70 to start collecting their total payments would be $158,400.  However, if that same person lived until age 90 instead of age 80, the difference between collecting at age 62 and age 70 is $64,800.

It should also be noted that your options for working and earning money are generally better at age 62 than they are at age 70.  This can weigh in favor of delaying the time when you start collecting.  Thus, if you are in good health and financially secure, you should consider delaying the collection of social security to increase your monthly benefits.   If your health is poor and you don’t have any other income sources, you may want to collect right away.

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What Affects Your Credit Score?

There are many different factors that can influence a person’s credit score.  Paying bills late, filing bankruptcy, failing to make loan payments, etc. can all adversely affect your credit score.  There are also a few things that can adversely affect your score that may not be as obvious.   Let’s review a few of these:

  • Having high credit card balances relative to your credit limit. Even if you pay off your balance in full each month, if you charge amounts close to the limit on your cards, this can taint your credit score.
  • Closing old credit card accounts. Since credit bureaus look at the length of your credit history, if you had a long-standing credit card account that was in good standing and then closed it, that history may no longer be available to help boost your credit score.
  • Applying for new credit card accounts or loans. Credit inquiries can account for as much as 10% of your credit score, so only apply for a new account if you really need one.
  • Not paying a parking ticket. Some large cities will send unpaid parking tickets to collections and this can damage your credit score.
  • Credit report inquiries. If a potential lender pulls your credit report, your score may be negatively affected.  On the bright side, if you check your own score or report, that doesn’t negatively affect your score.

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IDAs: A Great Way for Low-Income Families to Start a Nest Egg

Most people have probably heard about IRAs (Investment Retirement Accounts), which are special savings accounts allowing people to save for retirement and earn a tax advantage while they save.  But there’s also a savings vehicle out there specifically designed to assist low-income individuals save money: the IDA, or Individual Development Account.  The first IDA was established in 1993 by the state of Iowa and since then, 33 states have laws governing the operations of IDAs.  States, non-profit and for-profit organizations may all administer IDAs.

An IDA is a savings account whereby the investor (who is low-income) deposits a certain amount of money in the account and the account administrator matches the deposit dollar for dollar (or in some states, up to five or six dollars per dollar!).  The money for the matching comes mostly from the U.S. government and partly from banks.  This is a great savings option because you can deposit a small amount, for example–$200, and get a match of anywhere from $200 to $1200.

To qualify to open an IDA, your income must be below a certain amount, and you must have assets of generally less than $5,000.  Withdrawals must be made to achieve a certain goal such as buy a home, pay for education, repair a home, buy a car or start a small business.  Usually there’s a one to three year probation period during which you can’t withdraw the matched funds.

To find an IDA program near you, go to http://cfed.org/programs/idas/directory_search/.

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The Emotional Stress of Bankruptcy

Going through bankruptcy can be challenging because it requires work (e.g., completing paperwork, meeting with your attorney, meeting with the trustee, etc.), and money (e.g., paying the filing fees, paying for your attorney, etc.).  But most people don’t really consider how emotionally stressful the experience can be as well.  Filing bankruptcy is often a last resort for people because they are ashamed of declaring bankruptcy.  They may be afraid that their family or friends may find out and look negatively upon it.  It helps to take comfort in the fact that millions of people have filed bankruptcy—maybe including people you know. 

In addition, some of the most common causes of bankruptcy are: job loss, divorce, and large medical expenses.  These types of events can happen to anyone and sometimes there is very little that can be done to prevent them from occurring. 

It’s helpful to view bankruptcy as a stepping stone toward achieving a more financially stable life and not to let it affect your own self-esteem or feelings of self-worth.  Joining a support group for people also going through the process or seeing a licensed therapist can help achieve this goal.  

-A. Geving, Ph.D.

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Spending Wisely on Pets

According to U.S. News, (http://www.usnews.com/news/articles/2013/05/22/americans-spend-61-billion-on-pets-annually) Americans spend an average of $61 billion each year on their pets, which winds up being about $500 per household per year.  Since so many households spend so much money on their furry (feathery, and scaly) little friends, it’s helpful to discuss how to spend this money wisely and save money where you can.  Here are a few ways to save:

1)      Consider buying a mixed-breed pet.  With dogs especially, pure-breds often get sicker more frequently and require more health care. 

2)      Trade pet-sitting services.  If you need someone to watch your dog or feed your fish while you’re away for a short while, ask friends and family if they will do it at no cost.  In return, offer to watch their pet while they are gone.

3)      Do the math before buying pet insurance.  Think about how much you usually spend each year on pet healthcare, and if the annual premiums are less, consider buying it.  If not, consider setting some money aside each year in case of an emergency rather than buying the insurance.

4)      If you need to buy medicine for your pet, shop around.  Buying meds at the vet’s office is often more expensive than buying them online or at a pharmacy.

5)      Buy pet food in bulk. Buying large amounts of pet food at one time from Costco or Amazon can often save you a lot of money.

6)      Go in for preventative care.  By taking your pet in every so often for a check-up and vaccinations, you can prevent them from getting sick later on.  

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Keeping Watch Over Your Credit Cards

As you probably know, this past year, many Target customers had their Target credit or debit card information stolen due to a security breach.  Target asked customers to report any unauthorized card expenses to them so they could reimburse their customers for these charges, and the company provided one free year of credit report monitoring to any customer who wanted to sign up. 

It looks like a similar security breach may have occurred recently at the DMV.  The DMV is now investigating the situation.  (For more information, visit kpcc.org’s website at: http://www.scpr.org/programs/take-two/2014/03/24/36614/dmv-investigating-possible-credit-card-data-breach/)

Since this seems to happen frequently, what are some things you can do?  First, monitor your credit.  Annualcreditreport.com can provide you with one free credit report per year.  Be sure to review your report annually and check for anything inaccurate.  If you see any errors, report them to the credit bureau to ensure they are corrected.  Second, consider signing up for an ID theft monitoring service.  For a small monthly fee, these companies will alert you immediately if something occurs that might be due to identity theft.  Third, be diligent about protecting your credit card information: destroy unused or unwanted cards, don’t leave cards in vehicles where they can be stolen, and don’t provide card numbers to any companies who call you or email you unless you know what the transaction is for.  Lastly, ensure you have a method for paying for things in case your card information does get stolen.   It happens far too frequently to not have a back-up plan.  

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A Helpful Article: Don’t Leave Money on the Table

Earlier this month, I read a very helpful article describing some possible ways you could save money that most people don’t consider.  The article is available here: http://online.wsj.com/news/articles/SB10001424052702304302704579332291392874138.  Some helpful tips from the article are: 1) you can save money from buying mass-transit passes from a pre-tax account, 2) buying a car at the end of the month rather than earlier in the month can save you $500 to $2000 off the sticker price, and 3) it can save you money to check in once a year with your car insurance and homeowner’s insurance companies to see if they can offer a better price and/or policies that fit you better.

-Allison G.

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