LEGACY INSIGHTS

LBA Quarterly Newsletter - Winter Edition

2025 • Quarter 1 • Issue 13

Robert Dumais

Principal, LBA

1. Who’s Eligible? – Earning Your Way to Retirement

To qualify for Social Security benefits you’ll need to earn 40 credits, which for most people is 10 years of work. Each 3 month period you work, you earn credits helping you move closer to the full 40-credit mark.

Pro Tip: There’s an annual earnings cap, meaning the maximum amount you contribute (and that contributes to your benefits) increases each year. As your income grows, your future benefit rises too, so each working year builds a stronger foundation.

2. Choosing the "Goldilocks" Age – Just Right!

The age you start collecting Social Security matters. Your Full Retirement Age (FRA) falls between 66 and 67, but you can start as early as 62 for reduced benefits or delay until 70 for a higher monthly payout.

Pro Tip: Starting at 62 reduces your benefits by 25-30%, while waiting until 70 increases your monthly payout by about 8% per year after FRA — adding up to a 24% increase overall. "Early birds" get smaller checks, but "patient planners" enjoy bigger payouts for life. Finding the "just right" age depends on your goals, lifestyle, and even your family history.

3. When Should You Start Social Security? It’s a Bit of a Gamble!

Deciding when to start Social Security is like betting on your longevity, and part of that decision may come down to your genes. If no one in your family has lived beyond age 70, starting early might make more sense. But if your parents are still thriving in their 90s, that could mean you’ve inherited good longevity genes, and waiting longer to maximize your benefits might pay off.

The break-even age for most people is around 80:

• Passing away before 80? Starting early is the better choice.
• Living beyond 80? Delaying benefits pays off.

Pro Tip: While waiting as long as possible often maximizes benefits, the best time to start is when you need the money. Social Security is there to support your retirement — not stress over it!

The tricky part? None of us can predict the future. That’s why it’s essential to consider all factors — financial needs, lifestyle, and family history — when making your decision. We’re here to help you weigh your options and find the right fit for your goals.

4. Spousal and Survivor Benefits – Maximizing Joint Income

If you’re married and are not eligible for your own benefit, you might be eligible for a spousal benefit — up to 50% of the spouse’s benefit. This can be a valuable addition to household income in retirement.

Survivor benefits are also available after a spouse’s passing, allowing the surviving spouse to receive a portion of the deceased partner’s benefit. LBA can help you map out a plan so that your spouse is secure, regardless of what the future holds.

5. Navigating Taxes on Social Security – Don’t Be Caught Off Guard

Depending on your total income, up to 85% of Social Security benefits may be subject to federal taxes. Managing income sources wisely can help reduce this tax impact. By combining Social Security with other income streams in a tax-efficient way, we can help make sure you’re keeping as much of your hard-earned benefits as possible. The new federal government administration has promised to eliminate taxes on Social Security benefits. We will keep you updated.

6. Cost-of-Living Adjustments (COLA) – Keeping Up with Inflation

Social Security benefits receive annual COLAs to help offset inflation. While COLA increases are beneficial, they don’t always match rising costs, especially for essentials like healthcare.

Pro Tip: We’ll show you how to incorporate investments or other sources of income into your retirement plan to ensure that your buying power remains strong, year after year.

7. Working While Receiving Social Security – The Rules for Double Dippers

Want to work part-time during retirement? You’re not alone! Just remember, if you’re collecting Social Security before reaching your FRA, exceeding your earnings limits could temporarily reduce your Social Security benefits. If you’re over your FRA, you can work without worrying about reductions.

8. Earnings Limits for Early Claimers:

In 2024, for example, those under FRA can earn up to $21,240 without impacting benefits, and there’s a higher limit in the year you reach FRA. We’ll help you explore how to make the most of your benefits while enjoying a fulfilling part-time gig.

The fear of long words is called hippopotomonstrosesquippedaliophobia.

Unfortunately, the fear of retirement is just called getting older... Fortunately, this is a diagnosis we can help with!

When Judy and Mike came to us, they weren’t sure when to file for Social Security. After a few strategy sessions, we helped them see the advantage of waiting a bit longer to file, which increased their monthly payout significantly. Now, they have a stronger retirement plan and peace of mind for the years ahead.

Turning 65 and working?

If you have health coverage through your or your spouse's work, Medicare lets you postpone Parts B and D. But Part A (typically free) might be wise to enroll in as a safeguard.

Can You Roll Over Your 401(k), 403(b), 457, IRA?

If your retirement accounts feel sluggish, rolling over some funds might give you more investment options. Just check with Human Resources about “In-Service” withdrawal rules.

Stock Market Jitters and Low CD Rates?

Consider a balanced portfolio with safe, high-quality annuities, which offer low-risk growth options.

Managing Healthcare Costs in Retirement:

Medicare is complicated and choosing the right option requires careful consideration regarding your health, lifestyle, and budget. Look forward to the next LBA newsletter to learn more about Medicare options.

Leaving a Legacy:

Life insurance and a well-thought-out Estate Plan can help ensure your loved ones are cared for after you’re gone. LBA will work with you to make sure your legacy is preserved!

Taxes in Retirement:

Expect Social Security, Pensions, and 401(k) withdrawals to be taxable. Converting some funds into a Roth IRA, which offers tax-free distributions, can help.

We recently received this question from Jonathan B:

"What’s the difference between an HSA and an FSA?"

Well Jon, an HSA and an FSA are two ways to save for healthcare expenses, but they play by different rules. An HSA is like a trusty savings account you can only open if you have a high-deductible health plan (HDHP). It’s all yours, rolls over forever, and even lets you invest the money if you want! On the other hand, an FSA is like a gift card from your employer for medical expenses—but it expires, so you must use it or you will lose it (though some plans let you carry over a small amount). Think of the HSA as the long-term planner and the FSA as the short-term spender.

Got Questions? We’re Here to Help!

Whether you’re curious about Social Security, Medicare, long-term care, or just want to make sure all your bases are covered, Bob Dumais and the Legacy Benefit Advisors team are just a call or email away. We’re ready to help you make informed decisions and build the retirement you’ve been dreaming of.

Thank you for trusting us with your retirement planning.

Here’s to a secure, confident future!

We have covered so many critical topics in our many quarterly newsletters over the past few years. We've created a simple roadmap to all of these great articles for your benefit.