Switched Keys

While maintaining my knowledge of tax laws and various business concepts, I've been dipping into financial planning somewhat consistently. While I've learned a lot about financial planning and its tangential fields of expertise, I've noticed that retirement is either directly or indirectly linked to most of those areas. Retirement seems to be the central theme around which the other subjects revolve. Annuity plans, estate planning, social security, investments, and many other areas can be a part of retirement concerns, so it's extremely important that any advisor or financial consultant know how they may interact. I'm speaking here about what a retiree, or prospect might need to consider, rather than who they should consult. Like so many fields, I think the individual should be knowledgeable enough about the subject to know if advice he receives is reasonable.

Social Security

The one thing that almost every retirement prospect will encounter is social security, and most people should know that the later you retire the more you get per month. The most common advice from financial planners, then, is that the benefits of waiting can be quite profitable. There is a significant penalty if retiring early and after full retirement age, benefits increase about 8% each year.

All of that, of course, hinges on life expectancy. If you don't expect to live past 80, there may not be much benefit in waiting. By realistically estimating your life expectancy, you can calculate your cumulative earnings and compare early, timely, and delayed retirement ages. Using a spreadsheet you can see when full and delayed retirement cumulative amounts exceed early retirement.

Undoing your social security  is another of the things that you may have heard about. During the first year of drawing social security prior to full retirement ago, you can pay it back and start over later. There are rules that you need to be aware of, and you have to be careful to time the undoing to get it right. If you had to begin social security early, you might be able to recover amounts you would have lost by undoing early retirement. In fact, early retirement could be a method of getting a "short-term loan" to start a business.

While social security law is not near as complex as tax law, it is complex and has quite a number of choices that you may want to consider. File and suspend, spousal benefits, file and restrict are a few of the most common options promoted. But, don't wait until early retirement age to look into your benefits. Depending on other resources available, there may be many other things to consider at the same time you consider social security, such as IRAs and other retirement income. Retirement is also a good time to begin thinking about your estate, if you haven't already done so.