• How can you get an estimate of your future social security benefits?

    Knowing how much retirement income you might receive from Social Security may help you decide when to begin claiming benefits, and how Social Security might fit into your overall retirement income plan.

     

    One way to get an estimate of your future Social Security benefits is to use the benefit calculators available on the Social Security Administration website, ssa.gov. You can estimate your retirement benefit based on your actual earnings record using the Retirement Estimator calculator, then create different scenarios based on current law that will illustrate how different earnings amounts and retirement ages will affect the benefit you receive.

    For example, based on the information you input and your actual earnings history as maintained by the Social Security Administration, the Retirement Estimator generates an estimate of the reduced benefit you would receive if you were to claim benefits at age 62 (the earliest age you can receive benefits), the amount if you waited until full retirement age (which currently ranges from 66 to 67, based on year of birth), and the larger benefit you would receive if you waited until age 70 before claiming retirement benefits. Other benefit calculators are also available that can help you estimate disability and survivor benefits.

    You can also sign up for a my Social Security account so that you can view your online Social Security Statement. Your statement contains a detailed record of your earnings, as well as estimates of retirement, survivor, and disability benefits. If you're not registered for an online account and are not yet receiving benefits, you'll receive a statement in the mail every year, starting at age 60.

  • Are my social security benefits subject to income tax?

    A portion of your benefits may be subject to income tax if your modified adjusted gross income (MAGI), plus one-half your Social Security benefits, exceeds specific limits. Your MAGI equals:

     

    • Adjusted gross income (or the adjusted gross income of you and your spouse if married and filing jointly), including wages, interest, dividends, taxable pensions, and other sources,
    • Tax-exempt interest income (e.g., interest from municipal bonds and qualified U.S. savings bonds), and
    • Amounts earned in a foreign country, U.S. possession, or Puerto Rico that are exempt from tax
    Up to 50 percent of your Social Security benefits may be subject to income tax if your combined income (MAGI plus one-half your Social Security benefits) exceeds $25,000 for an individual filing single, unmarried head of household, or qualified widow(er) with dependent ($32,000 if married and filing jointly).

    If your combined income exceeds $34,000 ($44,000 if married and filing jointly), up to 85 percent of your benefits is taxable. If you are married and filing separately, up to 85 percent of your benefits will be taxed unless you and your spouse live apart for the entire year.

    Consult an accountant or other tax professional for more information or view IRS Publication 554, Tax Guide for Seniors.

  • How much money should I keep in a savings account for emergencies?

    Without an adequate emergency fund, a period of crisis could be financially devastating. Many financial professionals suggest that you set aside three to six months' worth of living expenses for emergencies. The actual amount, however, should be based on your individual circumstances. Do you have a mortgage? Do you have short-term and long-term disability protection? Other factors you need to consider include job security, your health and income. Be sure to review your cash reserve periodically. Since personal and financial circumstances often change, you'll want to make sure your cash reserve fits your current needs/situation.

  • Should I invest my extra cash or save it for emergencies?

    To answer this question, you must decide how your money can work best for you. Compare the money you might earn on other investments with the money you would pay on your debt. If you would earn less on investments than you would pay on debts, you should pay off debt.

     

    Let's assume that you have $1,000 in a savings account that earns an annual rate of return of 4 percent. Meanwhile, your credit card balance of $1,000 incurs annual interest at a rate of 19 percent. Your savings account thus earns $40, while your credit card costs $190. Your annual net loss is 15 percent, or $150, the difference between what you earned on the savings account and what you paid in interest on the credit card balance. It's even worse when you consider the tax effect. The interest on the savings account is taxable, and you have to use after-tax dollars to pay your credit card bill.

  • How can I figure out my net worth?

    To figure out your net worth, add up the current value of all of your assets, then add up the current amount of all of your liabilities. Subtract your total liabilities from your total assets. The amount you end up with is your net worth. Assets can include cash, checking accounts, certificates of deposit (CDs), mutual funds, stocks, bonds, IRAs, 401(k) plans, automobiles, and real estate. Liabilities can include debt from credit cards, student loans, mortgages, home equity loans, 401(k) loans, and car loans.

     

    If you are married, take this a step further. List your assets and liabilities under the name of the owner, so you can then calculate net worth values for you, your spouse, and the two of you as a couple.