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Key Questions to Answer Before Taking Social Security

Social Security may be a critical component of your financial strategy in retirement, so before you begin taking it, you should consider three important questions. The answers may affect whether you make the most of this retirement income source.

 

When to Start? The Social Security Administration gives people a choice on when they start receiving their Social Security benefit. You can:

  1. Start benefits at age 62 or later.
  2. Claim them at your full retirement age.
  3. Delay payments until after full retirement age.

 

If you claim early, you can expect to receive a monthly benefit that will be lower than what you would have earned at full retirement. If you wait until age 70, you can expect to receive an even higher monthly benefit than you would have received if you had begun taking payments at your full retirement age.

 

When researching what timing is best for you, it’s important to remember that many of the calculations the Social Security Administration uses are based on average life expectancy. If you live to the average life expectancy, you’ll eventually receive your full lifetime benefits. In actual practice, it’s not quite that straightforward. If you happen to live beyond the average life expectancy, and you delay taking benefits, you could end up receiving more money. The decision of when to begin taking benefits may hinge on whether you need the income now or if you can wait, and additionally, whether you think your lifespan will be shorter or longer than the average American.[i],[ii]

 

Should I Continue to Work? Besides providing you with income and personal satisfaction, spending a few more years in the workforce may help you to increase your retirement benefits. How? Social Security calculates your benefits using a formula based on your 35 highest-earning years. As your highest-earning years may come later in life, spending a few more years at the apex of your career might be a plus in the calculation. If you begin taking benefits prior to your full retirement age and continue to work, however, your benefits will be reduced by $1 for every $2 in earnings above the prevailing annual limit ($17,640 in 2019). If you work during the year in which you attain full retirement age, your benefits will be reduced by $1 for every $3 in earnings over a different annual limit ($46,920 in 2019) until the month you reach full retirement age. After you attain your full retirement age, earned income no longer reduces benefit payments.2,[iii]

 

How Can I Maximize My Monthly Benefit? The easiest way to maximize your monthly Social Security is to simply wait until you turn age 70 before claiming your benefits.1,2

 

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

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.nerdwallet.com/blog/investing/take-social-security-benefits/

 

[ii] https://www.thestreet.com/retirement/social-security/maximum-social-security-benefit-14786537

 

[iii] https://www.fool.com/retirement/2018/12/01/4-things-you-need-to-know-about-filing-for-social.aspx

 

Child and Dependent Care Credit

Working moms and dads can get a break with the Child and Dependent Care Credit. Child care is expensive, and this credit is designed to offset some of that cost. The credit covers children age 12 or younger, a spouse if they are unable to take care of themself, or any other person claimed as a dependent who can’t take care of themself. More details:

 

  • The total expenses that you may use to calculate the credit may not be more than $3,000 (for one individual) or $6,000 (for two or more individuals).
  • You must have paid for the care, so that you could work or look for work.
  • If you are married, you must file a joint tax return.
  • When filing, you’ll need to provide information on the caregiver, such as name, address, and Taxpayer Identification Number.

 

* This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax professional.

 

Tip adapted from IRS.gov[i]

 

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.irs.gov/taxtopics/tc602

 

The Great Debate Continues: Active vs. Passive

In sports, music, and politics, there are “great debates” that never seem to conclude. In the investment world, one great debate asks a thought-provoking question: which investment approach is better – Active or passive?

 

Equally intelligent, educated people can take distinctly opposite sides in this discussion, which may mean no definitive answer exists.

 

Passive pointers. The case for passive investment management is anchored in the evidence that the preponderance of money managers has failed consistently to beat their comparative index. Why is this? Adherents of passive investing cite two primary reasons:

 

One, markets are efficient, and all known information is already reflected in the price of the stock, making it difficult for managers to find companies that are expected to outperform. Over the 15 years ending in 2017, more than 90% of small-cap, mid-cap, and large-cap asset managers of active equity funds failed to beat their benchmarks. Some did for a particular year, but across successive market years, their ranks quickly thinned.[i],[ii]

 

Two, actively managed equity funds often have an elevated expense ratio. That presents a hurdle, which can make it hard to match or exceed the return of a low-expense index fund. In 2017, actively managed funds had an expense ratio averaging 0.79%, according to the Investment Company Institute (ICI), compared to 0.09% for the average equity index fund.2,[iii]

 

Even so, a studious investor has to decide if the potential cost savings of a passive investing approach outweigh the possible opportunity cost.

 

Active arguments. Active investment managers counter that while the markets may be generally efficient, there are windows of inefficiency created by the time it takes for information to be properly reflected in a stock’s price.

 

Active managers further argue that performance is not just about relative return, but also, about managing risk. Since the performance of an actively managed account or fund is not tracked to an index, that freedom allows the manager more leeway and options to hedge or reduce exposure to disappointing sectors of the market.

 

Unlock the combination. Ultimately, the active vs. passive decision comes down to preference. Do you prefer the approach taken by index funds or the strategy behind active management? For some, the combination of both methods represents a strategy that takes no sides but seeks to tap into the distinctive potential benefits of each method. Some investors choose to have a portion of their invested assets actively managed and another passively managed. Perhaps this is not indecision so much as experimentation.

 

As a reminder, equity funds are sold only by prospectus. Please consider the charges, risks, expenses, and investment objectives carefully before investing. A prospectus containing this information and other information about the investment company can be obtained from your financial professional. Read it carefully before you invest or send money.

 

To read more about investment and wealth management, visit capsouthwm.com/services/investment-wealth-management/

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

 

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://www.investopedia.com/ask/answers/032615/what-are-differences-between-weak-strong-and-semistrong-versions-efficient-market-hypothesis.asp

[ii] http://www.aei.org/publication/more-evidence-that-its-very-hard-to-beat-the-market-over-time-95-of-financial-professionals-cant-do-it/

[iii] https://www.thestreet.com/investing/etfs/expense-ratio-14686652

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