THE LINK Newsletter
Provided by Nexus Financial Management
4600 Touchton Road E.
Social Security: Late Retirement Boosts Benefits
Building 100, Suite 150
Jacksonville, FL 32246 If your retirement savings have taken a beat- full retirement age of 66, and a base benefit at
Phone: 904-334-1376 ing, you may be wondering how you will make full retirement age of $2,000 (which is nearly
up a monthly retirement shortfall. One option the maximum Social Security benefit an indi-
might be to delay receiving Social Security vidual can receive).
Hi Everyone, benefits. Although you can receive retirement
The month of May turned out to benefits as early as age 62, the longer you put Social Security Retirement Benefit
be another good one for the
stock market. All three major off retirement, the larger your monthly benefit
indexes were up for the third check will be.
Unfortunately, oil prices also
rose and are being reflected in When can you retire?
gas prices that consumers are
paying at the pump. How much you'll receive from Social Security
Commodities prices in general every month depends
surged during the month mainly
due to the weakening of the mainly on how old you are
U.S. dollar, however demand when you begin receiving
has begun to increase as well.
Even though both Chrysler and benefits and on your lifetime
GM filed for bankruptcy earnings. Your full retire-
protection (as discussed in
April's newsletter), most ment age is 65 to 67, de-
investors are taking the quot;glass pending on the year you
half fullquot; approach as consumer
confidence has also improved were born. The Social Secu- In this hypothetical example (your individual
substantially over the past rity Administration calculates situation will be different), the Social Security
couple months. I think the stock
market will continue to move your base benefit--the amount you'll receive at benefit available at age 62 is $1,500, which is
higher over the short term, but I full retirement age--using a formula that takes 25% less than the $2,000 monthly benefit
expect a pullback, perhaps a
significant one, during the into account your 35 highest earnings years. available at full retirement age. But at age 70,
summer. the benefit available is $2,640, which is 32%
As always, please contact me If you begin receiving benefits earlier, you'll
more than the monthly benefit available at full
anytime for a free initial receive less than you would at full retirement
consultation. retirement age, due to delayed retirement
To many happy returns, age. If you begin receiving Social Security
credits. Keep in mind, too, that other factors,
Bryan benefits at age 62, each monthly check you
including post-retirement earnings and
receive will be 25% to 30% less than it would
In this issue: cost-of-living increases, can also affect your
be if you waited until full retirement age.
monthly benefit check.
Social Security: Late
Retirement Boosts Benefits If you begin receiving benefits later than full
You can explore various retirement benefit
retirement age, you'll receive more than you
scenarios by using the Retirement Estimator,
Retiring Early? Don't Forget would receive at full retirement age, because
about Health Insurance or one of the other benefit calculators avail-
you'll earn delayed retirement credits for each
able at the Social Security Administration's
Going to Graduate School: month you postpone retirement up until age
Ways to Pay 70. Delayed retirement credits will increase
the amount you receive by 7% annually if you There's no right or wrong time to begin receiv-
What is the Credit CARD Act
of 2009? were born in 1939 or 1940, 7.5% if you were ing Social Security retirement benefits, and
born in 1941 or 1942, or 8% if you were born you should determine how retiring at a certain
in 1943 or later. age affects your overall lifetime income, as
well as your monthly income. How long retire-
Retirement benefit illustration
ment is likely to last, the effect on your
The following chart illustrates how the age you spouse's income, and your tax situation are
begin receiving benefits can greatly affect the also considerations when deciding when to
amount of income you receive from Social retire.
Security every month. The chart assumes a
Retiring Early? Don't Forget about Health Insurance
Thinking about retiring early? As part of the medical records (called underwriting) in order
decision, you've got to calculate whether you'll to determine whether you qualify for insurance
have enough retirement income to meet your and at what cost. However, a few states do
needs. While adding up the costs of custom- not allow underwriting for health insurance
ary living expenses, utilities, and an occa- plans.
sional vacation, don't forget to include another Saving a few premium pennies
important retirement expense: health
insurance. Here are a few suggestions that might help
you lower the cost of individual health insur-
We're living longer and health-care costs are ance. Group rates are usually less expensive,
surging. Unless you qualify for so look for health insurance plans
Medicare (you must be at least 65 offered by trade associations or
for coverage) or you're very Unless you
churches. Be aware that while
wealthy, you probably can't afford qualify for
coverage might cost less, you may
to go without health insurance. Medicare (you
have to pay a membership or
And, unless you're lucky, you must be at least
association fee to the group
probably can't rely on your former 65 for coverage)
offering the coverage. Also, the
employer for coverage, since few or you're very
plan may have high deductibles
companies offer retiree health- wealthy, you
and co-payments, and the benefits
care benefits. Underestimating the probably can't
and options, including your choice
impact of medical costs could afford to go
of physicians and medical facili-
Retiree health benefits significantly hamper your plans for without health
ties, may be limited.
a comfortable retirement. insurance.
In 2008, only 31% of To lower premium costs, consider
large employers (200 What are some of your options? increasing your deductibles. By
or more employees) shouldering the cost of any treat-
Check out your working spouse's insurance to
offered retiree health ment you might need, you'll decrease your
see if you can be added to his or her policy.
benefits, while a mere premium expense.
But adding you as an insured likely will
4% of small employers
increase the premium cost to your spouse. Also, in states that allow underwriting, the cost
(3 to 199 employees)
offered retiree health Ask your employer if it's possible to remain of an individual policy of health insurance is
benefits. covered under its group plan. Usually, plans based, in part, on your age and health. A
don't extend coverage beyond active employ- preexisting medical condition could affect your
ees and their dependents. But, it's sometimes premium or even cause you to be denied
Health Benefits 2008
possible to remain covered, though you'll coverage. So before applying for new health
Annual Survey. Kaiser
probably have to reimburse your employer for insurance, consider getting in better shape,
the cost to keep you on the plan. especially if you think you're a little over-
weight. Smoking is also a ticket to a higher
COBRA may be another option allowing you premium, so quit if you can. Since the insur-
to remain covered under your employer's ance company will examine your medical re-
group health plan. If your retirement causes cords, review them first with your doctor to
you to lose your health insurance, you can remove any inaccuracies, and to clarify the
remain on your employer's plan for a maxi- reasons for examinations or treatments.
mum of 18 months (with some exceptions).
You'll have to pay the entire premium amount, Finally, if you're denied coverage because of
plus a possible 2% administrative fee. And poor health, don't despair; you may still be
keep in mind that employers with fewer than able to get insurance if your state sponsors a
20 employees don't have to offer COBRA, so high risk pool. If your state does, you can't be
it might not be available. denied coverage, so long as you can show
you aren't able to get insurance elsewhere. Be
Shop for individual coverage aware, however, that coverage might not be
as comprehensive as other options, you may
If you're going to buy an individual health
have a six-month or longer waiting period, and
insurance policy, you may find the premium
not all states offer this type of health
cost to be quite steep, especially if you're also
insuring your spouse and dependents. And
there's no guarantee you'll even receive
coverage. In most states, insurance compa-
nies can examine your health history and
THE LINK Newsletter Page 3
Going to Graduate School: Ways to Pay
Are you thinking about going to graduate students. Many scholarships and
graduate school? Whether you grants are awarded at the departmental level,
want to advance in your current so your chances might depend on what sub-
field or move your career in a ject you plan to study.
new direction, graduate school
might open doors for you. But it Employer educational assistance
isn't cheap. Here are some suggestions on If you plan to work while you attend graduate
where to look for financial help. school, check to see if your employer offers
any educational assistance. The first $5,250
Loans, loans, loans
of such assistance is exempt from federal
Students attending graduate school can bor- income tax. But make sure to read your em-
row from two sources: the federal government ployer's fine print: some may require that you
and private lenders. Uncle Sam's three major maintain a certain grade, or that you remain at
loan programs--the Stafford loan, Perkins the company for a certain number of years
loan, and graduate PLUS loan--are all avail- after you obtain your degree.
able to graduate students, provided they at-
tend school on at least a half-time basis. The Education tax benefits
following chart highlights each loan program: Education tax benefits may not help you pay
the upfront costs of tuition, but they might help
Stafford Perkins PLUS defray some of those costs later on when you
1 file your taxes. For more information, see IRS
Based Subsidized: Yes No
on Yes Publication 970, Tax Benefits for Education. In
need? 2009, you may qualify for the:
No Lifetime Learning credit--Is worth up to $2,000
Loan Subsidized: $6,000 Up to full for tuition and fees if your modified adjusted
limit for $8,500 cost of gross income (MAGI) is below $50,000
2008/09 Unsubsidized: education (single) or $100,000 (married filing jointly).
for year Graduate school
$12,000 Deduction for qualified higher education numbers heading up
expenses--Lets you deduct $4,000 in tuition Many colleges have
Interest Subsidized: 5% 8.5%
rate 6.0%2 and fees if your MAGI is below $65,000 seen graduate school
(single) or $130,000 (married filing jointly). applications rise 10%
6.8% Student loan interest deduction--Lets you to 20% over last year,
1 deduct up to $2,500 of qualifying student loan and applications are
Subsidized means the government pays the expected to grow
interest during school, deferment, and grace interest if your income is $60,000 or less
(single) or $120,000 or less (married filing even more next year,
2 jointly). because graduate
The interest rate on subsidized Stafford loans school enrollment is
disbursed on or after July 1, 2009, and before July A partial credit/deduction is available for each typically a lagging
1, 2010, is 5.6%. of these tax benefits for filers with slightly indicator of the
higher incomes than those listed. economy.
To apply for federal loans, students should file Source: Council of
Look before you leap
the government's aid application, the FAFSA. Graduate Schools,
It can be filed online at www.fafsa.ed.gov. Finally, before you make that Washington, D.C.
first tuition payment, ask
Students can also obtain loans from private
yourself whether a graduate
lenders, though such loans typically carry
degree makes sense for your
higher, variable interest rates.
long-term career goals. Will
Scholarships and grants you be more marketable
after getting your degree?
At the graduate level, most scholarships and Will the return on your invest-
grants come from the school itself, rather than ment be worthwhile? Do you plan to stay in
outside organizations, and are often awarded this career going forward? Assuming the an-
on the basis of merit, not need. So it's always swers to these questions are yes, the ex-
a good idea to contact the financial aid office pense of graduate school might be a worth-
of any school you're considering to see what while investment for you.
special scholarships and grants they offer for
Ask the Experts
What is the Credit CARD Act of 2009?
On May 22, 2009, President the cardholder of the right to cancel the
Obama signed into law the account before the effective date of the
Credit Card Accountability rate increase. If the cardholder cancels
Responsibility and Disclo- the account, that won't be considered a
sure Act (the Credit CARD default on the account or trigger an obli-
Act) of 2009. This Act amends the Truth in gation to repay the account in full.
Lending Act, and includes the following • Credit card companies are prohibited
Nexus Financial provisions:
Management LLC from calculating interest using a two-cycle
Bryan Dudones • Credit card companies are prohibited billing method.
4600 Touchton Road E. from increasing the annual percentage • Credit card companies are required, in
Building 100, Suite 150
Jacksonville, FL 32246 rate (APR) applicable to a cardholder's cases where different annual percentage
Phone: 904-334-1376 existing balance unless the account falls rates apply to different balances
firstname.lastname@example.org 60 days past due, or other specific condi- (purchases, balance transfers, cash ad-
www.nexusfm.com tions apply. If the APR is increased be- vances), to allocate payments exceeding
cause the account falls 60 days past due, the minimum payment due to the balance
Nothing in this document should the cardholder must be informed that the with the highest rate first.
be construed as specific rate increase will be terminated (and the • Credit card companies are prevented
investment advice. For rate restored to what it was before the from issuing a card to any individual un-
investment and tax concerns
specific to your needs, please increase) once the credit card company der 21 years old, unless the individual
request a personal consultation. receives the minimum payments due in a demonstrates the independent means of
timely fashion for six months. repaying the debt or has a cosigner over
• Credit card companies must notify a card- 21 capable of repaying the debt.
holder in writing of any change in the Notification requirements take effect August
annual percentage rate (APR) on the 2009, and the remaining requirements take
account at least 45 days prior to the effect in February 2010.
change. The notification must also inform
What is two-cycle billing?
Most credit cards compute any applicable finance charge for the second cycle. Why?
finance charge using a single-cycle billing Because, under two-cycle billing, your aver-
formula (generally a month), where the aver- age daily balance isn't zero for the second
age daily balance for the cycle is multiplied by cycle.
the daily interest rate and the number of days
Here's a simple example: Assume no previous
in that cycle. Assuming that you had no bal-
balance and a $10,000 purchase (you bought
ance carryover from the previous billing cycle,
a living room suite for your new home) on the
are given a grace period, and pay your bal-
first day of the first 30-day cycle that's paid in
ance in full, you incur no interest charge on
full on the last day of that cycle. Further
purchases you made during that cycle. And if
assume a second 30-day cycle during which
you make no purchases in the following cycle,
you make no purchases. Your average daily
you incur no finance charge for that cycle
balance for the second 30-day cycle under the
either, because your average daily balance for
two-cycle billing method is $5,000 ($10,000 x
that cycle is zero.
30 days, divided by 60 days). At an annual
Two-cycle billing, however, computes the rate of 18% (0.0493% daily), the finance
finance charge based on the average daily charge for the second 30-day cycle would be
balance over two billing periods. If you consis- $73.95 ($5,000 x 0.000493 x 30).
tently carry a balance, you won't experience
As of February 2010, creditors will no longer
much difference between single-cycle and
be allowed to use two-cycle billing.
Prepared by Forefield Inc, two-cycle billing finance charges. However, if
Copyright 2009 you incur charges in the first cycle, pay them
in full by the due date, and incur no new
charges in the second cycle, under the
two-cycle billing method, you'll still owe a