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4 Questions to Help You Avoid Social Security Mistakes

By WTOP Staff

Shame on you. I know what’s going on. You’ve been trashing your Social Security statement without even a glance or second thought. Or maybe you haven’t begun to consider Social Security’s role in your future retirement. After all, as far as you know, Social Security won’t be around when you retire — that’s what you keep hearing on the news, anyway. So, why bother?

Well, I’ve got news for you. Although the future of Social Security is certainly unknown — particularly for today’s millennials — there’s a good chance the program will persist in some form. And since half of Americans 65 and older rely on Social Security for at least 50 percent of their family income, you’d be wise to come up with a strategy to maximize your benefits and give yourself the highest retirement income possible.

Here are four questions to ask yourself if you want to avoid potentially leaving thousands of dollars on the table:

1. When am I eligible to receive Social Security benefits? The earliest you can start collecting Social Security is age 62. However, you’d be taking a 30-percent cut by doing so. Waiting until full retirement age, on the other hand, entitles you to receive 100 percent of the monthly benefit to which you’re entitled. An individual’s full retirement age is determined by birth year — for American workers born in 1960 or later, your full retirement age is 67.

Depending on your income needs, it’s in your favor to wait as long as possible before collecting. By applying for benefits at full retirement age and requesting to have the payments suspended until age 70, you can increase your monthly check another 8 percent annually through delayed retirement credits. Please note: There’s no advantage in delaying Social Security beyond age 70.

2. How much am I entitled to receive from Social Security? Social Security payments are based on your 35 highest-earning years. The Social Security Administration applies a formula to your earnings to arrive at your basic benefit or “primary insurance amount.” As workers generally earn more as they advance in their careers, your Social Security benefit should similarly increase. Sign up for a free ” my Social Security” online account to get today’s estimate of your future benefits — and take advantage of the Social Security Administration’s “Retirement Planner” while you’re there.

3. What is my primary Social Security goal? Your claiming strategy might differ based on your goals. Consider these scenarios:

— Begin receiving benefits as soon as possible. To accomplish this goal, submit your application three months before you turn 62 so that your benefits start around your birthday.

— Receive the highest monthly benefit available to you. To take advantage of delayed retirement credits and grow your benefits, wait to apply until you’ve reached age 70. Doing so would increase a $1,000 monthly benefit (at full retirement age) to $1,240. The difference is even greater for an “early” claimant, whose monthly benefit would be $700/month if he/she started drawing benefits at age 62.

— Maximize your lifetime benefits. Social Security is designed to provide you with roughly the same lifetime benefits regardless of when you start receiving payments, but there could be a significant difference when you factor in life expectancy. If you need the money to pay for living expenses, taking benefits at a younger age would mean receiving payments over a longer time period — but your monthly check would be much lower than if you waited until full retirement age (or even until age 70). Meanwhile, waiting that long to collect may not be feasible depending on your other sources of retirement income, such as your 401(k), individual retirement account or brokerage account. Calculators on the SSA website can help you decide the best option for your situation.

— Maximize the money your spouse receives from Social Security. A spouse who did not work or who has lower lifetime earnings is eligible to receive spousal benefits based on your earnings record. If you’re looking to maximize spousal benefits to help provide for your family after you’re gone, you may want to delay claiming benefits, so your spouse will have a higher monthly income. This applies to both spousal and survivor’s benefits.

4. How does Social Security fit into my overall retirement strategy? People nearing retirement may want to work an estimated Social Security benefit into their retirement-planning calculations. For example, if you’ve calculated you’ll need a monthly income of $4,000 in retirement, and Social Security will give you approximately $1,000 per month, you need to save and invest enough money to draw $3,000 per month from your other sources.

If you’re within a few years of applying for Social Security, there’s a good chance the rules won’t change before you begin collecting. Beyond that, there could be a reduction in benefits — or maybe not. It’s unknown. According to the SSA, “The law governing benefit amounts may change because, by 2033, the payroll taxes collected will be enough to pay only about 77 cents for each dollar of scheduled benefits.”

For those with a longer time horizon, focus on maximizing your lifetime income while also stashing away as much cash as possible in your work retirement plan.

Here’s the bottom line: If you ignore Social Security and don’t create a plan, chances are you’ll fail to give yourself the highest retirement income possible. So regardless of where you are in your career, do your due diligence and determine a preliminary strategy for your situation based on current Social Security laws.

The SSA website should provide a good starting point, but for a more in-depth look, consult a qualified investment advisor who can design a plan for how Social Security and all your investments will work best together to achieve your retirement goals.

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4 Questions to Help You Avoid Social Security Mistakes originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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