Blog - Page 28 of 59 - CapSouth Wealth Management

9 Facts About Social Security

July 27, 2020
Uncategorized

Social Security has been a fact of retirement life ever since it was established in 1935. We all think we know how it works, but how much do you really know? Here are nine things that might surprise you.

The Social Security trust fund is huge. At $2.9 trillion at the end of 2018, it exceeds the gross domestic product (GDP) of every economy in the world except the ten largest: China, the European Union, the United States, India, Japan, Germany, Russia, Indonesia, Brazil, and The United Kingdom.¹
Most workers are eligible for Social Security benefits, but not all. For example, until 1984, federal government employees were part of the Civil Service Retirement System and were not covered by Social Security.²
You don’t have to work long to be eligible. If you were born in 1929 or later, you need to work for 10 or more years to be eligible for benefits.³
Benefits are based on an individual’s average earnings during a lifetime of work under the Social Security system. The calculation is based on the 35 highest years of earnings. If an individual has years of low earnings or no earnings, Social Security may count those years to bring the total years to 35.⁴
There has not always been cost-of-living adjustments (COLA) in Social Security benefits. Before 1975, increasing benefits required an act of Congress; now increases happen automatically, based on the Consumer Price Index. There was a COLA increase of 2.9% in 2019, but there was only an increase of 2% in 2018.⁵
Social Security is a major source of retirement income for 67% of current retirees.⁶
Social Security benefits are subject to federal income taxes — but it was not always that way. In 1983, Amendments to the Social Security Act made benefits taxable, starting with the 1984 tax year.⁷
Social Security recipients received a single lump-sum payment from 1937 until 1940. One-time payments were considered “payback” to those people who contributed to the program. Social Security administrators believed these people would not participate long enough to be vested for monthly benefits.⁸
In January 1937, Earnest Ackerman became the first person in the U.S. to receive a Social Security benefit—a lump sum of 17 cents.⁹

To learn more about CapSouth and the services we provide, contact our office at 800.929.1001 or visit our website at www.capsouthwm.com

CapSouth Wealth Management – Dothan, AL, McDonough, GA, Charlotte, NC

1. Social Security Administration, 2018; CIA World Factbook, 2018
2-5, 7-9. Social Security Administration, 2019
6. Employee Benefit Research Institute, 2018

The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG, LLC, is not affiliated with CapSouth Wealth Management. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. Copyright 2020 FMG Suite.

CapSouth Partners, Inc., dba CapSouth Wealth Management, is an independent Registered Investment Advisory firm. CapSouth does not offer tax, accounting or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences.

Healthcare Costs in Retirement

July 27, 2020
Healthcare, Retirement, Social Security

In a 2020 survey, 36% of all workers reported they were either “not too” or “not at all” confident that they would have enough money to pay for their medical expenses in retirement. Regardless of your confidence, however, being aware of potential health care costs during retirement may allow you to understand what you can pay for and what you can’t.¹

Health-Care Breakdown

A retired household faces three types of health care expenses.

The premiums for Medicare Part B (which covers physician and outpatient services) and Part D (which covers drug-related expenses). Typically, Part B and Part D are taken out of a person’s Social Security check before it is mailed, so the premium cost is often overlooked by retirement-minded individuals.
Copayments related to Medicare-covered services that are not paid by Medicare Supplement Insurance plans (also known as “Medigap”) or other health insurance.
Costs associated with dental care, eyeglasses, and hearing aids – which are typically not covered by Medicare or other insurance programs.

It All Adds Up

According to a HealthView Services study a 65-year-old healthy couple (male living to age 87; female, age 89), can expect their lifetime health care expenses to add up to around $606,337.²

Should you expect to pay this amount? Possibly. Seeing the results of one study may help you make some critical decisions when creating a strategy for retirement. Without a solid approach, health care expenses may add up quickly and alter your retirement spending.

Prepared for the Future?

Workers were asked how much they have saved and invested for retirement – excluding their residence and defined benefit plans.

Source Employee Benefit Research Institute, 2020

To learn more about CapSouth Wealth Management contact our office at 900.929.1001 or visit our website at www.capsouthwm.com

CapSouth Wealth Management – Dothan, AL, McDonough, Ga, Charlotte, NC

1. Employee Benefit Research Institute, 2020
2. HealthView Services, 2019

Choosing a Retirement Plan that Fits Your Business

July 27, 2020
Retirement, Retirement Planning

One survey found that 79% of small business owners expect at least some of their retirement income to come from tax-advantaged retirement savings accounts.¹ If you have yet to develop a retirement plan for your business, or if you’re not sure the plan you’ve chosen is the right one, here are some things to consider.

How much can my business afford to contribute?

The cost of contributions may be managed by the plan type.

A simplified employee pension plan (SEP) is funded by employer contributions only. SEP contributions are made to separate IRAs for eligible employees.²

Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRAs blend employee and employer contributions.³ Employers either match employee contributions up to 100% of the first 3% of compensation or contribute 2% of each eligible employee’s compensation.

A 401(k) is primarily funded by the employee; the employer can choose to make additional contributions, including matching contributions.⁴

What plan accommodates high employee turnover?

The cost of covering short-tenured employees may be reduced by eligibility requirements and vesting.

With the SEP-IRA, only employees who are at least 21 years old and have been employed in three of the last five years must be covered.

The SIMPLE IRA must cover employees who have earned at least $5,000 in any prior two years and are reasonably expected to earn $5,000 in the current year.

The 401(k) and defined benefit plan must cover all employees who are at least 21 years of age. Under the SECURE Act, these retirement plans are open for employees who have either worked 1,000 hours in the space of one full year or to those who have worked at least 500 hours per year for three consecutive years.

Vesting is immediate on all contributions to the SEP-IRA, SIMPLE IRA and 401(k) employee deferrals, while a vesting schedule may apply to 401(k) employer contributions and defined benefits.

Do I want to maximize contributions for myself (and my spouse)?

The SEP-IRA and 401(k) offer higher contribution maximums than the SIMPLE IRA. For those business owners who are starting late, a defined benefit plan may offer even higher levels of allowable contributions.

My priority is to keep administration easy and inexpensive.

The SEP-IRA and SIMPLE IRA are straightforward to establish and maintain. The 401(k) can be more onerous, but complicated testing may be eliminated by using a Safe Harbor 401(k). Generally, the defined benefit plan is the most complicated and expensive to establish and maintain of all plan choices.

1. Gallup, March 16, 2017. Most recent survey available.

2. Like a Traditional IRA, withdrawals from a SEP-IRA are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Under the SECURE Act, in most circumstances, once you reach age 72, you must begin taking required minimum distributions.

3. Like a Traditional IRA, withdrawals from a SIMPLE IRAs are taxed as ordinary income and, if taken before age 59½, may be subject to a 10% federal income tax penalty. Under the SECURE Act, in most circumstances, once you reach age 72, you must begin taking required minimum distributions.

4. Under the SECURE Act, in most circumstances, you must begin taking required minimum distributions from your 401(k) or other defined contribution plan in the year you turn 72. Withdrawals from your 401(k) or other defined contribution plans are taxed as ordinary income, and if taken before age 59½, may be subject to a 10% federal income tax penalty.

To learn more about CapSouth Wealth Management and the services we provide, contact our office at 800.929.1001 or visit our website at www.capsouthwm.com

CapSouth Wealth Management – Dothan, AL, McDonough, GA, Charlotte, NC

Choosing a Retirement Plan that Fits Your Business

Help us keep you informed!

You have Successfully Subscribed!