John M. Hoffman

Certified Public Accountant

Is John Retiring? NOT JUST YET...

Sources of Income:

 

Once you know what your budget is, the next thing to look at is your sources of income outside of what my accumulated savings can generate. In my case this is simply social security income (for both my wife and myself). Let’s say that I will collect $24,000 and my wife will collect $12,000. A total of $36,000 for the two of us; but buyer beware – if one of us dies, the smaller amount will go away. As such, I will plan on only receiving $24,000 in annual social security benefits (the other $12,000 will be “gravy”).

Many people have pensions (particularly government workers). It is important to get a good handle on just what benefits that retirement plan will provide. Some plans even provide continued health insurance. Other sources of income to contemplate:

  1. Rental or royalty income. For those folks who own rental property or perhaps mineral rights.

  2. Part time earnings. Many people contemplate continuing to work part time into their retirement. Be careful not to plan on doing that forever as many times your health might not allow that - or you might simply not want to do it forever..

Don't forget that social security is a complicated arrangement. There are opportunities to commence collecting benefits early but BUYER BEWARE of the pitfalls of such - essentially a reduced benefit for lifetime. There is also the opportunity to get larger benefits if you delay commencing collecting benefits (only until age 70). Essentially this comes down to a question of how long you think you or your spouse is going to live. If you think you will live to a long time, and you can make it happen, you might think of delaying commencement of benefits. Also, look carefully at spousal benefits and how you want to maximize those. As mentioned above, a married couple might be collecting two benefits when both are alive but that quickly changes to one benefit (the larger one) when one spouse dies.

Another pitfall is that if you do commence collecting your social security benefits early (before your normal retirement date - age 66 and 4 months for John), you are limited as to how much you can earn (working not investing) without giving back the social security benefits.