Retirement

Should I Take Lump Sum Social Security Benefits?

March 10, 2022 by Hans Blake, CFA, CPA

Reading Time: 3 minutes So, you are about to start taking Social Security, and you set up a call with a Social Security agent. While on the phone, they tell you about a special option to receive up to six months of benefits in a lump sum when initiating Social Security retirement benefits. You look over at your spouse who shrugs, and you tell the agent, “Yes. We’ll take a lump sum amount.” Little do you realize, you may have rushed the decision and you didn’t understand the tradeoffs in taking this lump sum. This blog is intended to educate you in understanding the tradeoffs so you can be more an Intelligent Investor and make a wise decision.

Social Security Lump Sum Benefit History

The lump sum benefit option isn’t new and has been available when claiming retirement benefits at your full retirement age (FRA) or later. This is usually between the ages of 66 and 70. Social Security representatives are required to fully explain this choice to eligible applicants, whether they ask about it or not, and since it is offered last minute, a knee-jerk reaction can make the applicant decide to take the offer—not fully realizing what they have done until hanging up the phone. The representative may even try and persuade the applicant to take the lump sum by saying things like, “Most people take it.”

The Way the Lump Sum Works

Once you’ve hit FRA (age 66 for those born in 1943-1954, and over age 66 on a sliding scale for those born after 1954), the option to take a lump sum is available. You can choose to receive a lump sum of up to six months of benefits. You’ll get to start your Social Security retirement benefits with a nice big bonus payment. Sounds pretty good, doesn’t it?

The Cost of Taking the Lump Sum of Social Security Benefits

First, the amount of your monthly benefit going forward is reduced. Let’s walk through an example: John Smith contacts Social Security and says he wants to start taking Social Security benefits when he hits age 70, receiving the maximum allowable benefit. Under his earnings history, he’s due $4,000 per month. After hearing the representative explain the lump-sum option, he chooses it and receives a lump sum of around $23,040 (six times the monthly benefit he would have received at age 69 ½). But taking the lump sum option moves his official beginning age for benefits back to 69 ½ instead of 70, and the monthly benefits he’ll begin receiving will be based on that age. He’ll receive $3,840 per month, which is 4% less than his maximum benefits at age 70. (Remember, by delaying benefits after FRA, your benefits increase 8% annually through age 70.)

What Should You Do?

Well, like most financial planning, it depends on several factors. If John Smith decides to use the lump sum to pay off some high interest-bearing loan, it may make sense. However, if John has been waiting until age 70 to start taking benefits, it shows that he is disciplined and likely doesn’t have much debt. If he invests the lump sum well, he could end up with more money than if he had taken the higher monthly benefit. If John is married and is the higher-earning spouse, it may make more sense to decline the lump-sum benefit in order to maximize his monthly benefit so that whichever spouse survives has the highest possible monthly benefit for life. The right choice also depends on your and your spouse’s (if you are married) longevity. If you are single and suddenly diagnosed with a terminal illness you may want to take the lump sum and the smaller benefit. The lump sum could go to an heir, while the monthly benefit will end at the beneficiary’s death. If you are married and facing a terminal illness, then the decision to take the Social Security lump sum benefit becomes a bit tougher to analyze. A higher-earning spouse faced with a suddenly shortened life expectancy may want to reject the lump sum. The reason is the survivor benefit will equal 100% of the higher earner’s benefit at his or her death. If the surviving spouse has a long life expectancy, the boosted survivor benefit can more than make up for declining the lump sum.

Let Us Help You with Your Social Security Benefit Questions and Planning

At Intelligent Investing, we are a boutique wealth management firm serving high net worth individuals and families. We would be happy to have a complimentary meeting over a call or coffee to learn more about your family and your financial needs. We love organizing our clients’ financial junk drawers so that we can minimize financial stress to maximize lives. We’d love to do the same for you. If you’d like to become a client of Intelligent Investing, please click here to call or schedule a “discovery” meeting.

Don’t Be a Purse for Your Suitors

December 16, 2021 by Hans Blake, CFA, CPA

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On today’s Intelligent Money Minute, we’ll interview Kathleen Rehl on not being a financial purse for suitors. In an attempt to find new love, widows can fall prey to greedy suitors. Suitors who are more interested in a widow’s purse than them as a person. During this episode, Kathleen provides insight and tips on how to avoid being a purse to potential suitors.

At Intelligent Investing, we believe communication is important, and we strive to be a liaison between family members such as spouses, or parents and children. Kathleen mentioned how you don’t want to be financially scammed in a new relationship.

Some of our most popular blogs are the financial scam series we posted on our website. We talk about how to emotionally heal after being financially scammed, how to help others who have been financially scammed, and 11 ways to protect yourself from being financially scammed. You can find all of those on our blog page.

Please be sure to subscribe to our podcasts as we will be interviewing Kathleen on an upcoming podcast where she explains how to simply write a legacy letter to your family and friends. You will not want to miss it. You can purchase Kathleen’s book here.

Kathleen Rehl Bio

Kathleen M. Rehl, Ph.D., CFP®, CeFT® wrote the multi-award-winning book, Moving Forward on Your Own: A Financial Guidebook for Widows. Experiencing widowhood herself, Dr. Rehl empowers widows financially™ and inspires their advisors. Her work has been featured in the New York Times, Wall Street Journal, AARP Bulletin, CNBC, USA Today, U.S. News & World Report, Journal of Financial Service Professionals, Journal of Financial Planning, and other publications. Rehl owned a financial planning firm for 17 years before retiring to her “encore” career. She walks an hour daily, practices yoga, enjoys art and music festivals, writes poetry and makes art, loves her grandsons . . . and continues to evolve on her journey.

Tips for Dealing with Tragedy, Sadness, & Poor Health Over the Holidays.

December 9, 2021 by Hans Blake, CFA, CPA

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Despite Christmas being a cheerful time of year, many people find the holidays very depressing. Shelly experienced tragedy on Mother’s Day when her son Jonathan passed away. During this episode, Shelly Hamilton gives tips on how to deal with tragedy, sadness, and trials during the holidays. She highlights the value of speaking the truth to yourself to stay grounded and encouraged.

As Shelly mentioned, practicing self-talk and redirecting your negative thoughts to others and the blessings in your life can help as you deal with grief and the loss of loved ones. One of our core values at Intelligent Investing is Compassion, and as we work with other widows, I want to share some of our resources. You can visit investedwithyou.com, search our blogs by topic and find another blog titled “10 Tips for Caring for a Spouse or Parent who has become a child.” If you’d like to learn more about Intelligent Investing or would like to become a client, click here.

Shelly Hamilton recently published a book titled, “Always Only Good.” This book details Shelly’s journey of faith through her son Jonathan’s mental illness shortly after his death in 2013. You can purchase the book here.

If you haven’t subscribed to our podcasts, you can go to our podcast page and choose whichever method you want to download them. While you are there, you can go to our blog page and subscribe so you can get our latest Intelligent Insights directly in your inbox.

Shelly Hamilton Bio

Shelly Hamilton, the daughter of Frank Garlock, married Ron Hamilton aka “Patch the Pirate” in 1975. They have managed Majesty Music and written sacred music for children and adults since they joined the ministry in 1978. Shelly currently ministers at Majesty Music as pianist, composer, arranger, and recording producer. In 2013, their son killed himself after years of struggle with mental health issues. The family’s public struggle and acknowledgement of mental health issues has reached people around the world. Most recently her family faces a new challenge: Ron Hamilton’s early onset of dementia. Her insight and music will encourage anyone facing the challenges of life.

In January 2018 Majesty Music announced their third generation of leadership. After years of waiting for God’s timing, Ron and Shelly transitioned the ministry over to their son-in-law Representative Adam Morgan and his wife, Ron and Shelly’s daughter, Megan.

What Widows Should Look For In a Trusted Financial Advisor

November 18, 2021 by Hans Blake, CFA, CPA

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On today’s Intelligent Money Minute, we’ll interview Kathleen Rehl on what widows should look for in a trusted financial advisor. Unfortunately, many financial wolves in sheeps clothing prey upon new widows. During a time of loss, widows may seek advice, counsel, and refuge in the wrong places bring about financial catastrophe. On the flip side, a widow may have a financial advisor who’s sincere, but doesn’t seek to connect on an emotional level. During this episode, Kathleen gives key factors of what to look for in a trusted financial advisor.

We would love to help you organize your financial junk drawers and help you organize your widowhood timeline and help you sort through the decisions that need to be made immediately, in the short-term and in the long-term. Keep in mind that at Intelligent Investing, we do not sell any products such as annuities or insurance products. As fiduciaries we want to do what is in our clients’ best interests at all times. We’d love to let you learn more about our firm to see if we’d be a good fit to work together. To schedule a complimentary call or coffee click here.

Kathleen Rehl Bio

Widows Are Still Hot! Trends in Widowhood

November 4, 2021 by Hans Blake, CFA, CPA

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On today’s Intelligent Money Minute, we’ll interview Kathleen Rehl on trends in widowhood. The yearly census shows that, on average, one million women become widowed. During this episode, Kathleen defines her proprietary word Wid-Ex and how it impacts widowhood life. Wid-Ex will affect millions of women in the upcoming years and can have long lasting implications.

As Kathleen mentioned, there are more widows as a result of COVID-19, and widowhood is being talked about more as widows are being featured more and more in our entertainment. Kathleen also introduced us to a concept she terms, “Wid-Ex” where a widow can find herself grieving when an ex-husband passes away.

Kathleen Rehl Bio

5 Steps to Leaving a Legacy Letter

October 28, 2021 by Hans Blake, CFA, CPA

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Reading Time: < 1 minute

On today’s Intelligent Money Minute, we’ll interview Kathleen Rehl on 5 steps to leaving a legacy letter. Kathleen says, “you can give loved ones a far more precious treasure that’s a legacy of who you are.” The task of leaving a lasting written memoir may seem daunting. During this episode, Kathleen breaks down each step of writing a legacy letter so anyone can do it.

As Kathleen mentioned, the five steps to writing a legacy letter are

Who (who are you writing it for)
Gratitude or thank you statement
Life Lessons (Three things life has taught you)
Values (What matters most to you) and
A closing statement/quote/poem

To get a link where you can see this legacy letter template and see it in action, click here.

Kathleen Rehl Bio

Why Should I Leave a Legacy Letter?

October 14, 2021 by Hans Blake, CFA, CPA

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On today’s Intelligent Money Minute, we’ll interview Kathleen Rehl on why you should leave a legacy letter. It’s wise to have your final will and testament in order, but your possessions aren’t the most valuable gift for family and friends. Kathleen says, “you can give loved ones a far more precious treasure that’s a legacy of who you are.” During this episode, Kathleen talks about the priceless value of leaving your family and friends a legacy letter.

Your family will likely read and re-read a legacy letter should something happen to you. As Kathleen said, your family will likely pull out and look at a legacy letter that you have written more often then they will pull out your final will and testament. We also talked about our core values which spell out the word, CLIENT. If you’d like to know more about Intelligent Investing’s core values, please visit here.

Kathleen Rehl Bio

Living in a Glass House Pt.2

September 23, 2021 by Hans Blake, CFA, CPA

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Reading Time: 2 minutes

On this episode of Intelligent Money Minute, we’ll be interviewing Shelly Hamilton on living in a glass house. During this episode, Shelly is joined by her son-in-law and daughter, Adam and Megan Morgan. A glass house is a term used for more those whose lives are more public than the average person. They talk about the hurdles, challenges, and experiences of living in a glass house. Shelly stresses the value of staying true to their faith and values whether people are watching or not.

One of Intelligent Investing’s core values is Truth. We believe that speaking the truth in love is so vital…especially when it comes to talking within families. We strive to unite families with financial communication, and if you are going to be transferring your business in the near future (especially to another family member), we’d love to start having a conversation with you. We can help be the liaison between family members, and we can help you plan for the many aspects of transferring a business.