Phone: (909) 252-0453
plans for people with chronic needs and conditions

AW Elliott & Associates Certified Financial & Tax Advisor
slife Insurance, health insurance, retirement planning, Income Tax preparation

AW Elliott & Associates

Retirement Planning

Prepare for Retirement

Start Planning for Your Retirement Today

At AW Elliot & Associates we believe retirement is around the corner, and the best time to plan it is now. Your benefits from Social Security are the foundation on which you can build a secure retirement. The three major elements of your retirement portfolio are the following:

Retirement Planning

  • Benefits From Pensions

  • Savings and Investments

  • Social Security Benefits

To easily sustain your pre-retirement standard of living, most financial advisors say you’ll need about 70% of your pre-retirement earnings. If your earnings are average, your Social Security retirement benefits will replace about 40% only. For people in the upper-income brackets, the percentage is lower. The percentage is higher for people with low income. A pension, along with savings or investments, is what you’ll need to supplement your benefits.

The Social Security Administration helps you plan for retirement by including a Retirement Estimator. It lets you obtain a retirement benefit estimate based on current law and real-time access to your record of earnings. A Benefits Planner is also provided in case of the disability or loss of your family’s wage earner.

The Factors That May Affect Your Retirement Benefits

Your average earnings for most of your working career are the basis of your benefits you will receive. The higher your lifetime earnings are, the higher your benefits will be. If you have years of no or low earnings, the amount may be smaller than what you will receive if you had worked continuously.

Your age at the time you start receiving benefits also affects your benefit amount. For example, you start your retirement benefits at age 62 (the earliest possible retirement age). Your benefit will be lesser than if you wait until your full retirement age. If you start your retirement benefits only after full retirement age, the monthly benefit may be higher because of delayed retirement credits.

Things to Do if You Are Self-Employed

If you are self-employed, you must report your earnings and pay taxes directly to the IRS. If you operate a trade, business, or profession, either by yourself or as a partner, you are self-employed.

The time when you file your federal income tax return is when you report your earnings for Social Security. If your net earnings in a year are $400 or over, you must report your earning on IRS Schedule SE for Social Security purposes, along with the other tax forms you must file.

Things to Do if You Work for a Federal, State, or Local Government

If you are a federal, state, or local government worker and do not pay Social Security taxes, the pension that your agency will provide may reduce any Social Security benefits that you are entitled to, due to the following factors:

Things to Do if You Work Outside the US

If you work outside the US for an American company or, in some cases, an associate of an American company, you and your employer may have to pay Social Security taxes on the same earnings to both the US and the foreign country. However, if you work in one of the agreement countries included in the SSA fact sheet, the international agreements can help you. The following are included in the agreements:

  • Your Social Security coverage will be assigned to either the US or the foreign country.
  • You and your employer will not have to pay taxes to both countries.

Learn more about working outside the US by visiting the SSA website on international programs.

Prepare for Your Medical Needs

Medicare is a health insurance plan for people ages 65 and older and people with disabilities or permanent kidney failure. Most people have all three parts of this health insurance plan. Learn what these parts are by reading the information below.

  • Hospital Insurance – sometimes referred to as Part A, this covers inpatient hospital care and specific follow-up care. You’ve already paid for this while you were working since this is a part of your Social Security taxes.
  • Medical Insurance – sometimes referred to as Part B, this is optional and pays for physicians’ services, as well as specific services not covered by hospital insurance. Monthly premiums must be paid.
  • Prescription Drug Coverage – sometimes referred to as Part C, this covers prescription drugs. Like medical insurance, this is optional, and you must pay monthly premiums. However, you may be able to get additional help in paying monthly premiums, annual deductible, and prescription co-payments.

If you’re already receiving Social Security benefits when you turn 65, your Medicare (Part A) will begin automatically. If you’re not getting Social Security, you must sign up for Medicare before your 65th birthday even if you aren’t ready to retire.

For Those Already Receiving Disability or Survivors’ Benefits During Retirement Application

There will be no changes if you are receiving disability benefits when you reach full retirement age, except that your benefits will be called retirement benefits rather than disability benefits. You are also eligible for your own higher benefits if you’re receiving survivors’ benefits. You can switch from survivors to retirement benefits as early as the age of 62 or as late as the age of 70.

In several cases, widows or widowers start receiving one benefit at a reduced rate and shift to the other benefit at an unreduced rate at full retirement age. However, if you change your benefit, you will be paid only the higher of the two benefits, not both.

Annuities in a Nutshell

A contract between you and an insurance company is called an annuity. This is where you agree to make a lump sum payment or a series of payments. In return, the insurer agrees to pay you periodically that starts immediately or at some later date. 

Annuities usually offer a tax-deferred earning. This may include a death benefit that will pay your beneficiary a guaranteed* minimum amount, like your total purchase payments. Moreover, unlike retirement plans, the amount of money that you can put into an annuity isn’t limited.

Choosing the most suitable annuity can be confusing due to the sheer number of annuity products on the market today. In fact, there are three types of annuities. These are the following:

  • Timing of Payout (Immediate or Deferred) – In an immediate annuity, the annuitant starts receiving payments right after purchase. This is for individuals needing immediate income from their annuity. In a deferred annuity, payments start at some future date, usually at retirement.
  •  Investments by Insurers (Fixed or Variable) – High-grade corporate bonds and government securities are where insurance companies invest annuity assets in. Insurers offer a guaranteed* rate, usually over a period of 1-10 years. Variable annuities give you more control of where your premium goes, such as securities portfolios, fixed interest accounts, and money market securities.
  • Liquidity Options – An annuity may permit you to withdraw your interest earnings of up to 15% per year without a penalty (although any withdrawal from an annuity may be subject to taxes and a 10% federal penalty if taken before the age of 59 and a half).

More Information on the Types of Annuities

  • Fixed Annuity: It is guaranteed by the insurance company that you’ll earn a minimum rate of interest in the annuity’s accumulation phase. Another guarantee is that periodic payments will be a fixed amount. These payments may last for a definite period, such as 20 years, or an indefinite period, such as your lifetime or yours and your spouse’s.
  • Variable Annuity: Through an array of subaccounts, similar to mutual funds, variable annuity gives the purchaser more options on where their premium goes. The return rate on your purchase payments, as well as the amount of periodic payments you will eventually receive, differ depending on the performance of the subaccounts you chose.
  • Equity-Indexed Annuity: This is a hybrid kind of annuity. During the accumulation period, when you make a lump sum payment or a series of payments, the insurance company credits you with a return based on an equity index’s changes. For example, the S&P 500 Composite Stock Price Index (An annuity’s index account does not credit the same return or a percentage of the return of any index. Dow Jones indices are exclusive of the dividend income of the company stocks that comprise it.) A minimum return is usually guaranteed by the insurance company. After the accumulation period, periodic payments will be made to you by the insurance company under your contract’s terms, unless you choose to receive a lump sum.

The SEC regulates variable annuities, which are securities. Fixed annuities are not securities. Therefore, they’re not regulated by the SEC.

Equity-indexed annuities combine parts of traditional securities (opportunity for earnings potential of interest, with an index’s performance as the basis) and traditional insurance products (guaranteed minimum return). An equity-indexed annuity may or may not be a security depending on the mix of features. The common equity-indexed annuity is not registered with the SEC.

Important Considerations

If you are thinking about purchasing an annuity, it is helpful to carefully consider the following before doing so:

  • The rating of the insurance company (with their financial strength indicated) issuing the annuity, particularly in a fixed annuity’s case
  • The fees paid to the brokers who market the annuities on the insurance company’s behalf
  • Any withdrawal from an annuity may be subject to taxes and a 10% federal penalty if taken prior to the age of 59 and a half.

Read answers from the SEC for more information about annuities. If you cannot access the link provided, kindly get in touch with us to request a copy.

*Annuity guarantees depend on the issuing insurance company’s claims paying-ability and financial stability.

retirement planning, san bernardino county,ca RIVERSIDE COUNTY, CA LOS ANGELES COUNTY CA