Ask: Anthony from Bridgetown: My father is retired but has decided that he wants to return to work for a while. Will this affect his benefit?
A: Yes, his advantage can be affected (at least temporarily). But it will depend on a few different factors.
First, if your father has already reached full retirement age (FRA), there’s good news: he can earn as much as he’d like, and his benefits will not be reduced.
On the other hand, if your father has not yet reached his FRA, an income cap will come into effect. In 2022, he can earn up to $19,560 and his benefit will not be reduced. But any earnings about that amount shall be reduced; he loses $1 in benefits for every $2 earned. For example, let’s say he makes $24,000 this year. This is $4,440 above the annual income limit, so Social Security would reduce its benefit by $2,220 over the year ($4,440 divided by 2). (Note: If your father is self-employed, Social Security only counts net income.)
If your father are FRA . reaches this one year the profit cap is higher at $51,960. The benefit discount is also more lenient: He would lose $1 in benefits for every $3 in additional earnings.
The good news? Any benefits he “loses” will be recouped down the line. Once he eventually reaches his FRA, Social Security will recalculate his benefit to account for these reductions.
Working in some capacity during retirement is becoming more common. So the Allworth Advice is to make sure your dad understands all the financial implications. And remember, extra income can push him into a higher tax bracket, which can make his Social Security benefits taxable as well.
Q: Corey from Edgewood: My mom and dad are in their mid-60s. Is it too late for them to take out a long-term care policy?
AQ: First, the question is, do your parents even need long-term care insurance? Some retirees, depending on their savings, may “self-finance” long-term care needs — usually defined as nursing home stays — raising the question of the need for a policy.
If your parents don’t think they can finance it themselves, the decision comes down to whether the premium is affordable. Unfortunately, over the past decade, policies have become more expensive, while the benefits covered by those policies have diminished. If your parents can’t afford the premium, it’s probably not a financially wise move to take.
Now we come to the issue of age. In general, premiums rise in price as a person ages. The sweet spot for buying a long-term care policy is usually in the early to mid-1950s. This doesn’t mean that someone in their mid-60s can’t (or shouldn’t) buy a policy – but it’s important to know that it will be more expensive.
Overall health is also an important part of pricing.
Here’s the Allworth advice: This is a conversation to have with a fiduciary financial advisor, someone who is legally required to make recommendations based on the best interests of their clients. There are many factors to consider, including quality of life, financial situation and the type risk that must be covered.
Every week, Amy Wagner and Steve Sprovach of Allworth Financial answer your questions. If you, a friend or someone in your family has a money problem or problem, feel free to send those questions to [email protected]
The answers are for informational purposes only and individuals should consider whether a general recommendation in these answers is appropriate for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has questions about the applicability of a specific topic discussed above to his/her individual situation, he/she is encouraged to consult the professional adviser of his/her choice, including a tax adviser and/or attorney . . Retirement planning services offered through Allworth Financial, an SEC registered investment advisor. Securities offered through AW Securities, a registered broker/dealer, member of FINRA/SIPC. Visit allworthfinancial.com/?c3=allworth-advice or call 513-469-7500.
