The Basics of Required Minimum Distributions: 12 Things You Must Know About RMDs

After decades of squirreling away money in tax-advantaged retirement accounts, investors entering their 70s have to flip the script. Starting at age 72, Uncle Sam requires taxpayers to draw down their retirement account savings through annual required minimum distributions. Not only do you need to calculate how much must be withdrawn each year, you must pay the tax on the distributions.

There’s no time like the present to get up to speed on the RMD rules. Once you know the basic rules, you can use smart strategies to minimize taxable distributions and make the most of the money that you must withdraw.

Here are 12 things you should consider regarding required minimum withdrawals.

When You Must Start Taking RMDs

The SECURE Act changed when you must start taking RMDs. Under the 2019 legislation, if you turned 70 ½ in 2019, then you should have taken your first RMD by April 1, 2020. If you turned 70 ½ in 2020 or later, you should take your first RMD by April 1 of the year after you turn 72. All subsequent ones must be taken by December 31 of each year.

This generally applies to the original owner of a traditional IRA, SIMPLE IRA, SEP IRA or a retirement plan, such as a 401(k) or 403(b). Roth IRAs do not have RMDs.

The RMD is taxed as ordinary income, with a top tax rate of 37% for 2021 and 2022.

An account owner who delays the first RMD will have to take two distributions in one year. For instance, a taxpayer who turns 72 in March 2021 has until April 1, 2022, to take his first RMD. But he’ll have to take his second RMD by December 31, 2022.

Taking two RMDs in one year can have important tax implications. This could push you into a higher tax bracket, meaning a larger portion of your Social Security income could be subject to taxes, or you could also end up paying more for Medicare Part B or Part D.

To determine the best time to take your first RMD, compare your tax bills under two scenarios: taking the first RMD in the year you hit 72, and delaying until the following year and doubling up RMDs.

How to Calculate RMDs

To calculate your RMD, divide your year-end account balance from the previous year by the IRS life-expectancy factor based on your birthday in the current year. 

If you own multiple IRAs, you need to calculate the RMD for each account, but you can take the total RMD from just one IRA or any combination of IRAs. For instance, if you have an IRA that’s smaller than your total RMD, you can empty out the small IRA and take the remainder of the RMD from a larger IRA.

A retiree who owns 401(k)s at age 72 is subject to RMDs on those accounts, too. But unlike IRAs, if you own multiple 401(k)s, you must calculate and take each 401(k)’s RMD separately.

You can take your annual RMD in a lump sum or piecemeal, perhaps in monthly or quarterly payments. Delaying the RMD until year-end, however, gives your money more time to grow tax-deferred. Either way, be sure to withdraw the total amount by the deadline.

Penalties for Missing RMD Deadlines

What happens if you miss the deadline? You could get hit with one of Uncle Sam’s harshest penalties—50% of the shortfall. If you were supposed to take out $15,000 but only took $11,000, for example, you’d owe a $2,000 penalty plus income tax on the shortfall.

But this harshest of penalties may be forgiven—if you ask for relief—and the IRS is known to be relatively lenient in these situations. You can request relief by filing Form 5329, with a letter of explanation including the action you took to fix the mistake.

One way to avoid forgetting: Ask your IRA custodian to automatically withdraw RMDs.

Work Waiver for RMDs

There are a number of instances where you can reduce RMDs—or avoid them altogether. If you are still working beyond age 72 and don’t own 5% or more of the company, you can avoid taking RMDs from your current employer’s 401(k) until you retire.

However, you would still need to take RMDs from old 401(k)s you own. But there is a workaround for that. If your current employer’s 401(k) allows for money to be rolled into the plan, you could do that. Doing that means you won’t need to take an RMD from a 401(k) until you actually retire. (You would still need to take RMDs from any traditional IRAs.)

Rollover to a Roth Account to Avoid RMDs

For those who own Roth 401(k)s, there’s a no-brainer RMD solution: Roll the money into a Roth IRA, which has no RMDs for the original owner. Assuming you are 59½ or older and have owned at least one Roth IRA for at least five years, the money rolled to the Roth IRA can be tapped tax-free.

Another solution to avoid RMDs would be to convert traditional IRA money to a Roth IRA. You will owe tax on the conversion at your ordinary income tax rate. But lowering your traditional IRA balance reduces its future RMDs, and the money in the Roth IRA can stay put as long as you like.

Converting IRA money to a Roth is a great strategy to start early, but you can do conversions even after you turn 72, though you must take your RMD first. Then you can convert all or part of the remaining balance to a Roth IRA. You can smooth out the conversion tax bill by converting smaller amounts over a number of years.

This can help you prevent paying more in taxes in the future. For instance, while traditional IRA distributions count when calculating taxation of Social Security benefits and Medicare premium surcharges for high-income taxpayers, Roth IRA distributions do not. And if you need extra income unexpectedly, tapping your Roth won’t increase your taxable income.

Consider a Qualified Longevity Annuity Contract

A qualified longevity annuity contract, or QLAC, is an option to lower RMDs and defer the related taxes. You can carve out up to $130,000 or 25% of your retirement account balance, whichever is less, and invest that money in this special type of deferred income annuity. Compared with an immediate annuity, a QLAC requires a smaller upfront investment for larger payouts that start years later. The money invested in the QLAC is no longer included in the IRA balance and is not subject to RMDs. Payments from the QLAC will be taxable, but because it is longevity insurance, those payments won’t kick in until about age 85.

Another carve-out strategy applies to 401(k)s. If your 401(k) holds company stock, you could take advantage of a tax-saving opportunity known as net unrealized appreciation. You roll all the money out of the 401(k) to a traditional IRA, but move the employer stock to a taxable account. You will immediately pay ordinary income tax on the cost basis of the employer stock. You will also still have RMDs from the traditional IRA, but they will be lower since you removed the company stock from the mix. And any profit from selling the shares in the taxable account now qualifies for lower long-term capital-gains tax rates.

The Younger Spouse Rule

In the beginning of this story, we gave you the standard RMD calculation that most original owners will use—but original owners with younger spouses can trim their RMDs. If you are married to someone who is more than 10 years younger, divide your year-end account balance by the IRS life-expectancy factor at the intersection of your age and your spouse’s age in Table II of IRS Publication 590-B. 

Pro Rata Payout for RMDs

If you can’t reduce your RMD, you may be able to reduce the tax bill on the RMD—that is, if you have made and kept records of nondeductible contributions to your traditional IRA. In that case, a portion of the RMD can be considered as coming from those nondeductible contributions—and will therefore be tax-free.

Figure the ratio of your nondeductible contributions to your entire IRA balance. For example, if your IRA holds $200,000 with $20,000 of nondeductible contributions, 10% of a distribution from the IRA will be tax-free. Each time you take a distribution, you’ll need to recalculate the tax-free portion until all the nondeductible contributions have been accounted for.

Reinvest Your RMD

If you can’t reduce or avoid your RMD, look for ways to make the most of that required distribution. You can build the RMD into your cash flow as an income source. But if your expenses are covered with other sources, such as Social Security benefits and pension payouts, put those distributions to work for you.

While you can’t reinvest the RMD in a tax-advantaged retirement account, you can stash it in a deposit account or reinvest it in a taxable brokerage account. If your liquid cash cushion is sufficient, consider tax-efficient investing options, such as municipal bonds. Index funds don’t throw off a lot of capital gains and can help keep your future tax bills in check.

Make an In-Kind Transfer of Your RMD

Remember that the RMD doesn’t have to be in cash. You can ask your IRA custodian to transfer shares to a taxable brokerage account. So you could move $10,000 worth of shares over to a brokerage account to satisfy a $10,000 RMD. Be sure the value of the shares on the date of the transfer covers the RMD amount. The date of transfer value serves as the shares’ cost basis in the taxable account.

The in-kind transfer strategy is particularly useful when the market is down. You avoid locking in a loss on an investment that may be suffering a temporary price decline. But the strategy is also useful when the market is in positive territory if you feel the investment will continue to grow in value in the future, or if it’s an investment that you just can’t bear to sell. In any case, if the investment falls in value while in the taxable account, you could harvest a tax loss.

Donate Your RMD to Charity

If you are charitably inclined, consider a qualified charitable distribution, or QCD. This move allows IRA owners age 70½ or older to transfer up to $100,000 directly to charity each year. The QCD can count as some or all of the owner’s RMD, and the QCD amount won’t show up in adjusted gross income.

The QCD is a particularly smart move for those who take the standard deduction and would miss out on writing off charitable contributions. But even itemizers can benefit from a QCD. Lower adjusted gross income makes it easier to take advantage of certain deductions, such as the write-off for medical expenses that exceed 7.5% of AGI in 2020. Because the QCD’s taxable amount is zero, the move can help any taxpayer mitigate tax on Social Security or surcharges on Medicare premiums.

Say your RMD is $20,000. You could transfer the whole $20,000 to charity and satisfy your RMD while adding $0 to your AGI. Or you could do a nontaxable QCD of $15,000 and then take a taxable $5,000 distribution to satisfy the RMD.

The first dollars out of an IRA are considered to be the RMD until that amount is met. If you want to do a QCD of $10,000 that will count toward a $20,000 RMD, be sure to make the QCD move before taking the full RMD out.

Of course, you can do QCDs in excess of your RMD up to that $100,000 limit per year.

Use Your RMD to Pay Your Taxes

You can also use your RMD to simplify tax payments. With the “RMD solution,” you can ask your IRA custodian to withhold enough money from your RMD to pay your entire tax bill on all your income sources for the year. That saves you the hassle of making quarterly estimated tax payments and can help you avoid underpayment penalties.

Because withholding is considered to be evenly paid throughout the year, this strategy works even if you wait to take your RMD in December. By waiting until later in the year to take the RMD, you’ll have a better estimate of your actual tax bill and can fine-tune how much to withhold to cover that bill.

Source: kiplinger.com

How I Made $2,000 in 1 Week by Writing an eBook

Hey everyone! Today, my fellow female finance blogger, Fiona Smith, is going to show you how she made $2,000 in 1 week by self-publishing an ebook on Gumroad. Fiona is the creator of The Millennial Money Woman, she’s been featured on Forbes, she’s a speaker at the national FinCon 2021 conference, and she’s a co-founder of a local non-profit charity, promoting financial literacy to underprivileged minorities. Today, Fiona will teach you how to potentially make a few extra $1,000 a month by writing an ebook. Take it away Fiona!

Hey guys and gals! How I Made $2,000 in 1 Week by Self-Publishing an eBook

How I Made $2,000 in 1 Week by Self-Publishing an eBook

My name is Fiona aka The Millennial Money Woman. I run my own personal finance blog and love helping others make more money and build long-term wealth.

If you had told me in early 2020 that I would soon make $2,000 in 1 week by self-publishing an ebook, I would have probably looked at you like you’re crazy!

I’ve always had an inner author and always thought about writing a book. I just never got around to it because, you know, life.

And for whatever reason, in the middle of the pandemic, I had the urge to write, publish, and sell an ebook about personal finance!

Here’s a bit of my personal story:

When I was young, I saw my grandparents lose everything they ever put into their small family business due to poor financial planning. 

From that day forward, I swore to myself that I would never go through the financial difficulties that my grandparents faced. 

I also swore to myself that I would try to help everyone I could to avoid making the same financial mistakes my grandparents once made. 

That’s why I committed myself to the path of learning about personal finance (I earned my Master’s Degree in Personal Financial Planning) to give others the tools that I wish I had growing up.

…And that’s ultimately how I came up with my ebook topic: How to Get Rich from Nothing.

My ebook doesn’t necessarily define “rich” as just having money.

In my ebook, “rich” also means:

  • Building a rich mindset
  • Developing rich relationships
  • Maintaining a rich outlook on life

…You get the point. 

And you know what?

Although I was admittedly a bit scared to write the book (because I was afraid that it would be a total flop), I decided to sit down one morning and put pen to paper. It was time I show the world what The Millennial Money Woman was made of. 

Now, 2 months after my first ever ebook release, I can happily tell you that in my first week of selling my ebook, I’ve made more than $2,000!

And in this article, I’m going to show you exactly how I did it.

Related content:

How to Make Money by Writing an eBook

The cool thing about writing ebooks is that there’s no secret code or formula to making money.

You can write an ebook that’s 5,000 words long or 100,000 words long. It could be a fiction novel or it could be an educational resource (like mine). It could be about the different types of dirt used on a golf course or it could be about how to start a blog.

Like I said, there’s no secret sauce.

The only key ingredient that holds true for any profitable passive income is to start! You won’t know your potential if you don’t give it a shot. 

As Wayne Gretzky famously once said, “you miss 100% of the shots you don’t take.”

So, here are some things you may want to keep in mind as you start writing your ebook:

  • Start with a topic where you have “expert” knowledge
  • Set mini-goals so that you finish the book on time
  • Write in simple, plain-English text
  • Proofread & re-edit often

This is the key to writing a successful ebook:

Write something that you’re passionate about – because you will spend a lot of time on your ebook (I took about 100+ hours from start to finish!). 

Imagine spending 100+ hours writing something that you don’t enjoy talking about!

That’s tragic – and such a waste of time. 

Set Mini-Goals

I would not have completed my ebook in 1 month if I had not set mini-goals.

Typically, it takes about 4 to 8 months for the average author to complete a book.

Because I’m trying to promote myself, my work, and my ebook in the shortest amount of time possible, I knew that time is of the essence, which is why I pushed to finish my ebook in just 1 month.

Imagine hearing yourself say, “I want to publish and sell my ebook in exactly 1 month from today.”

How would that make you feel?

Would you get heart palpitations? Would you feel anxious? Would you feel so overwhelmed that you wouldn’t know where to start?

Yep, that was me.

Here’s how I got over my paralysis and anxiety:

I broke my big goal (finishing a book in 1 month) into much smaller, more achievable goals. 

And, guess what? It worked.

Here’s what I did:

  • First, I figured out how many chapters my book would have (turns out I wanted 14 chapters)
  • Second, I determined what each chapter would cover
  • Third, I determined roughly how many words each chapter would have (turns out between 1,500 to 2,500)
  • Fourth, I determined how long it would take me to write each chapter (between 1 day to 2 days)
  • Fifth, I arranged for someone else to proofread my book once I finished the first draft
  • Sixth, I figured out a basic marketing strategy to promote my ebook on my Twitter account

After exactly 2 weeks (14 days for 14 chapters), I had someone re-read my first draft after which I [heavily] edited my ebook and re-read my book again for more edits. 

After exactly 3 weeks, I had a preliminary draft completed with a cover image that I created using Canva (see below).

After exactly 4 weeks, I had finalized my ebook, written 3 drafts, and had accomplished my pre-marketing strategy. 

Was I successful?

My goal, at the official launch, was to sell exactly 1 ebook (I set my sights low). 

By the end of week 1, I had made over $2,000 on ebook sales. I honestly couldn’t believe it – I was literally earning money in my sleep. 

All of this was made possible because I decided to break down this 1 huge goal of selling my ebook in 1 month into tiny little mini-goals.

After each mini-goal was accomplished, I moved on to the next step.

I created a structure for myself (and I work very well with a structure) so that I could stay in line with my overarching goal while not overwhelming myself without knowing where to start.

Don’t Reinvent the Wheel

I’ve published over 100 blog posts in the past 12 months on my website.

My blog posts are typically 3,000 to 6,000 words each, so they’re lengthy, they’re well-researched, and they offer lots of visual graphics about finance.

So, as I started writing my ebook, which is about finance, I had an idea…

If you already run a blog or have content written about the same or similar topic you’re planning to write about in your ebook – consider repurposing your old text!

Why reinvent the wheel if you already took the time previously to write about the same/similar topic?

Believe it or not (and I’m living proof), people who value your content and thoughts will pay money for an ebook with similar information that they can find on your blog, website, etc. for free. 

Why?

Because an ebook is typically a thoughtful curation of your finest work – carefully selected in an order that is often easier to read than on a blog or website, for example. 

Of course, you wouldn’t want to have your ebook be exactly the same as your previous content – your audience will notice that you didn’t put effort into the ebook.

And if your audience notices you didn’t put in effort, they can leave their remarks via ebook reviews or lower-star ratings (which will hurt your sales and your reputation). 

Put in the work, edit the text, and make sure that the content you provide makes sense, adds value, and flows.

Your eBook Marketing Strategy

Guys and gals – I cannot say it enough: Your network is key.

How do you expect to sell your ebook if you don’t have anyone to sell it to?

Here are some things you’ll probably want:

  • A social media following
  • A website following (potentially)
  • Ambassadors to help promote your book
  • An email or e-newsletter with a wide reach

I’m not saying you need 10,000’s of followers on social media to make a profit on your ebook. In fact, you can see profitable numbers if you “just” have a few hundred followers. 

That’s because the quality of your audience matters – not the quantity.

Would you rather have 10,000 unengaged followers or 1,000 high-quality, engaged followers – who would buy your book if you push a marketing campaign their way?

I know which option I’d take.

A good marketing strategy honestly should start before you start selling your ebook. 

I started promoting my ebook the day I started writing my ebook!

Why?

Because I wanted to see if my audience was even interested in buying my ebook – I didn’t want to spend 100+ hours on my ebook if I was only going to generate $100 in sales.

Here’s what I did:

I made sure I slipped into the inboxes of all of the important “influencers” in my niche (finance) – both on and off of Twitter – and asked them their candid, honest opinion:

Would they be willing to spend $15 on another finance book?

The only caveat is that this finance book was structured as a 14-week program, with actionable advice, written in simple English without technical jargon, and offered advice from a Millennial for Millennials.

And you know what?

I had a lot of positive feedback and a lot of constructive feedback. I used that constructive feedback to improve the overall format and outline of my ebook. 

Don’t ever shy away from constructive feedback. It will make you better.

Here’s how I started my ebook marketing strategy:

  • Market ebook before it is officially published to garner interest
  • Promote your ebook 1x to 2x times per day on your social media account
  • Send invitations to your niche influencers to read & review your ebook for free
  • Ask the top influencers of your niche to share your ebook link on its official launch day

And this is what my launch tweet looked like:

Another marketing strategy is to offer your book on a pre-order basis.

You’re basically selling a product that doesn’t exist yet – and you’re still making money!

If you receive 0 interest, you can cancel your project, save yourself some time, and give everyone a refund that has purchased your pre-order. 

If your pre-orders come in hot, then you better make sure you can deliver what you promised your audience. 

Your Earning Potential

I get a lot of questions about how much money you could expect to earn with an ebook.

And the answer is this: It completely depends.

Honestly, it depends on a lot of things like:

  • Your niche
  • Your expertise
  • Your audience
  • Your popularity

When I wrote my first ebook, I was honestly a nobody – and I was writing about a topic that has been talked about so many times before.

In other words, my niche was pretty saturated.

But here’s how I differentiated myself: 

My value proposition was that I would write my personal finance book in an easy-to-read, visually effective, and story-like manner. 

I also didn’t just talk about money in the form of numbers.

I included many anecdotes, stories, and my past experiences (with my millionaire mentor) in the hopes that my readers would pick up the same valuable information that I did from my mentor.

Once my book was ready to publish, I used the publishing and sales platform known as Gumroad.

Gumroad is an online platform that offers either free accounts or premium accounts for new users (if you’re serious about making sales on Gumroad, then the premium account – although more expensive initially – is worth the price). 

I’ve published my book using the premium Gumroad account, and haven’t looked back since.

So how much can you earn by selling an ebook?

You can earn between $50 to $5,000+ per month.

How much you earn is completely up to you. 

It also largely depends on how often you market your ebook (marketing it too many times is spammy and marketing it too little won’t give you the sales). 

I promoted my ebook between 1x to 2x per day. 

That’s it. 

Just make sure that whichever platform you use to promote your new ebook (Twitter, Facebook, Instagram, your website, your newsletter, etc.), you are authentic and genuine.

You don’t want to come across as pushy or aggressive, because that could cost you your followers (and likely reputation). 

You should also be aware of this:

Typically speaking, your ebook will earn you the most money at the beginning of your launch – that’s because you’ve [hopefully] promoted the ebook in the weeks and days coming up to its official launch. 

As the weeks turn into months after your ebook launch, chances are the demand (aka your profits) of your ebook will wane.

That’s totally normal and expected.

You can always bring back the original hype about your ebook by doing things like this:

  • Go on a podcast and promote your ebook
  • Add a new section or chapter to your ebook
  • Give away something for free with your ebook
  • Promote a notice that your ebook prices will increase soon

There are savvy ways to reignite the hype of your ebook. 

Or – you could simply write a new ebook!

Why Writing Ebooks is an Awesome Side Hustle

Writing (and selling!) ebooks is honestly one of the best side hustles. 

Why?

Because you can literally make money while you sleep. 

I’ve never earned money in my sleep before (aside from maybe my stock market investments), and I’ll never forget the first time I awoke to a Gumroad email on my phone that gave off a loud “ping!,” notifying me that I had just made a sale. 

I wasn’t even working!

And I made money. 

Ok, so I made $15, which in the grand scheme of things, isn’t a lot of money.

But for me, passively earning $15 from my first sale shattered a glass ceiling. 

I finally realized the power of earning passive income – and how passive income could literally change your life forever.

How?

Earning money passively – like by selling an ebook – is one of the very few ways (aside from maybe being a business owner) that can help you escape the daily grind of the 9 to 5 job. 

If your goal is to have the freedom to choose whether you want to work or spend time with your family on any given day, then passive income from ebooks could be a great start.

Your side hustle income could literally help you earn your way to early retirement.

The money that you make with passive income can help you:

  • Save more
  • Invest more
  • Pay off debt
  • Build wealth

The possibilities are endless. 

You just have to recognize the opportunity.

Closing Thoughts

If you want to earn some side income, but don’t know how, then you should seriously consider writing and selling an ebook. 

Speaking from personal experience, an ebook is one of the best side hustle incomes you can earn. I mean, who doesn’t want to earn an extra $2,000 per week?

I sure could use an extra $2,000!

The beauty of ebooks is that the process can be 100% free – you don’t have to hire an editor, an advertising agency to promote your ebook, or a publishing company. 

So aside from the opportunity cost of spending your time writing the book, you’re basically looking at a 100% profit!

Hopefully you’re not like me, where I took 4+ years to realize my vision and pursue what I love (writing and helping Millennials understand personal finance). Instead, if you are an expert in a certain area – I don’t care if it’s dog training or cookie baking – you should consider writing an ebook and using your network to promote your work. 

Don’t wait for tomorrow if you can do it today.

Your bank accounts will thank me later. 

For those of you who are wondering which ebook I wrote, mine is called How to Get Rich from Nothing. The book is designed to help you “get rich” not just financially but also “get rich” through your network, your mindset, your spirit, and your future goals.

Are you interested in writing a book? What questions do you have for Fiona on this topic?

Related Posts

<!–
–>

Source: makingsenseofcents.com

Here’s How to Negotiate a House Price, Even in a Seller’s Market

When you’re in the market to buy a house, the fun part is browsing listings and touring places in person, imagining yourself in your new abode.

The intimidating part: the negotiation. Especially in the current seller’s market.

According to a report from Freddie Mac, the housing shortage has recently increased by 52% from 2.5 million in 2018, to 3.8 million in 2020. Translation? There aren’t nearly enough houses, making the current market sway very strongly in the seller’s favor.

Despite this unsettling news, everything in real estate is still relatively negotiable, and the back-and-forth can work in your favor. But there are a few general ground rules you’ll want to keep in mind.

We’re here to demystify the process and explain how you can best negotiate the price on your future home, even in a sellers market.

When Does the Negotiation Start?

Some real estate agents like to say the negotiation process starts when you go “under contract” with a seller — in other words,you’ve made an offer and they’ve accepted it.

But it’s worth considering your negotiation power even before then, as in the very first time you see the home in person.

“Realistically, anything the buyer doesn’t like can be a negotiating point,” says Peter Farsai, senior partner at California Top Brokers Inc. This can include repairs that need to be done, what appliances or furniture may come with the home, and any facets of the property that may need to be fixed up or completed.

For example, if a house has an unfinished guest suite, this might not be considered a “repair” but is still a worthy point of negotiation. Since completing this space would require your time and funds in the future, it might be worth running those costs by your real estate agent (or even asking a builder to provide an estimate) and then asking the seller to come down in price to accommodate them.

Any concrete estimates you can provide a seller will ultimately be better than spitballing, so consider making an upfront investment to get those estimates if you’re serious about a home that will need major repairs.

How Does the Negotiation Work?

If negotiation starts the first time you see the house, it’s important to note that it doesn’t end until you actually close on the property.

Take the Pre-Closing Paperwork Seriously

Closing usually occurs 45 days after you sign the contract, and in between a whole lot happens to protect the buyer and make sure you’re fully informed on your investment.

That means that from the time the seller accepts your offer, you typically have over a month to review the home and its documentation and go through the necessary steps to make sure the house doesn’t have any hidden problems and is worth the price you’re paying.

Be thorough here. The paperwork is exhausting, but well worth the read.

Schedule the Inspection ASAP — and Don’t Be Shy

One key step in this process? Getting a home inspection. Home inspectors check out all the systems of your house, plus all the nooks and crannies.

Once you go under contract, schedule a home inspection ASAP, as this — more than anything — will alert you to anything major that needs to be discussed and negotiated with the seller.

Don’t be shy about bringing these issues up, even if you’re buying in a sellers market.

Once problems are found (and documented) by a home inspector, the seller has a legal obligation to address them. Meaning, those problems will follow them as homeowners, no matter who they decide to sell to.

Even if your deal falls through, that documentation should theoretically be passed on to the next buyer. In other words, the seller has every incentive to address the problem with you, and you definitely shouldn’t accept faulty terms or a bad deal on a fixer-upper house, no matter how much you love it.

A row of houses sit on a hill with a mountain behind it.
Chris Zuppa/The Penny Hoarder

It’s Not Just About Price: What Else Can You Ask For?

Beyond what the home inspector finds, or anything obvious (such as unfinished construction projects), there are a lot of small things you might want to try and negotiate as well.

Keep in mind that small details may not actually affect the value of the home. Rather than negotiating on price (especially if you have a money-motivated seller), you might just be asking a seller to include (or remove) something from the property.

“The most important factors impacting the value of a home is the location in which it is found, its livable square footage, and the size and usability of the land on which it sits,” says real estate attorney Rajeh A. Saadeh.

“Other factors, such as the presence and size of garages, whether the basement and attic are finished, water damage, old carpeting, old appliances, and even creaking floors all impact value because it can affect whether a buyer is willing to purchase a property with these conditions.”

If you love the furniture in a home you’re viewing, you might even ask the seller if they’d be willing to include it. If there’s old carpeting that smells like mold, this could be something you negotiate to have removed before closing.

Keep in mind that negotiation isn’t just about your findings and perceptions of the property. A lot depends on the seller.

Understanding Your Market (and Seller)

Negotiating is a lot like playing cards, and it’s helpful to know a bit about the cards your seller is holding.

Get a sense of why your seller is moving and how motivated they are to sell. If your seller is already settled somewhere else and is renting out the home for extra income, they may be less likely to deal with many buyer contingencies — aka your requests.

Pro Tip

When sellers really need to get rid of a place either for financial or logistical reasons, they’ll likely be more willing to go along with whatever needs to be done to close the deal.

Another thing to keep in mind when negotiating: the market you’re in, and whom it favors.

“It’s basically a supply and demand situation,” says real estate developer Bill Samuel. “Right now, almost every market is at record low inventory levels, making it very much a seller’s market.”

Depending on what other offers the seller knows they can get, they may be more or less willing to negotiate the finer details with you. And in the current market that’s almost certainly true.

Work with your real estate agent to strike the right balance between getting the best possible deal and also keeping your seller happy. This last bit will go a long way in ensuring the deal actually closes, and that the negotiation process remains amicable for both of you.

Is This the Home of Your Dreams?

Finally, ask yourself how much you love the home. Does it check enough boxes? How much more money will you need to pour into it after closing, and can you afford to do that?

Seller’s markets are tricky times to buy, mainly because they can create panic among buyers. Unless you have a very urgent reason to get into a new home, don’t fall into this trap. Weigh the pros and cons of your investment, and decide in advance how much you’re actually willing to negotiate to secure your dream home.

Contributor Larissa Runkle specializes in finance, real estate and lifestyle topics. She is a regular contributor to The Penny Hoarder.  

<!–

–>



Source: thepennyhoarder.com

Should I Invest if I Still Have Debt?

As you start to establish yourself financially, you may come to a crossroads: should you pay off debt or invest in your future? It can be confusing to know what to do in this situation, especially if you have multiple financial goals you’re saving toward.

The first step is to look at the numbers, then to consider your preferences. There is no one “right” answer to this question. Let’s start by taking a look at the numbers around major financial milestones like your student loan, buying a home, and saving for retirement.

Let’s say your student loan is $75,000. Buying a new home might cost $350,000, and you might plan to need $2,000,000 for a comfortable retirement. Everyone’s numbers will look a bit different, so feel free to take some time to calculate yours.

Once you’ve put your estimated numbers on a page, what jumps out at you? It’s hard not to notice that retirement is quite a bit more expensive than the others. This isn’t too much of a surprise if you consider what retirement is: living for decades with no salary.

While you might be tempted to put all your extra income immediately into your retirement fund, it’s not necessarily the winning decision when it comes to whether to pay off loans or invest. Let’s look deeper.

How Important is Paying Off Your Student Loans?

If you’re like the average student, you’ve borrowed $30,000 or more to pursue a bachelor’s degree . If you went on to graduate school, your student loan debt may be even higher.

Most federal student loans have a repayment period of 10 to 30 years. You may opt to make the minimum payment each month for the duration of your loan repayment plan, or you might decide to pay yours off early.

One benefit to paying off a student loan early is that you reduce your debt to income ratio (that’s how much debt you have compared to how much income you have). This might raise your credit score and help you qualify for other financial solutions.

Or, you might decide to continue paying your student loan while investing in other areas of your life, like retirement or buying a home.

Know Your Student Loan Interest Rates

Before you can decide whether to pay off student loans or save for other things, look at what you’re paying in interest for your student loans. If the rate you locked in when you took out your loan is higher than current rates, you might consider refinancing. If you have multiple student loans, you could potentially consolidate and refinance them for a lower interest rate.

Of course, it’s important to keep in mind that refinancing federal student loans means you’re no longer eligible for federal benefits and protections, like income-driven repayment or loan forgiveness programs, so it makes sense to weigh the potential benefits and risks of refinancing before taking the plunge.

Comparing interest rates is an exercise in opportunity cost. Any decision to pursue one goal means you’re missing out on something else, but ideally, we look to minimize opportunity costs when assessing financial trade-offs. In this instance, the opportunity cost is leaving potential investment earnings on the table.

Let’s say you recently refinanced your student loan from 5% to 3.5%. Given the competitive rate on your newly refinanced student loan, you could consider continuing to make the monthly payment on your loan and allocating the extra cash flow elsewhere — like investing for retirement or buying a home.

Remember, we want to think about interest rates in terms of opportunity cost. What would it look like if you paid off your loan early? Your student loan costs you 3.5% annually, and that’s what you’ll “save” if you accelerate your payoff by $500 per month.

Once you paid off the loan early, you could invest your money in an asset class — such as the stock market — with the potential to earn a rate of return that’s higher than 3.5%. Historically, the stock market has returned an average of 10%. This investing can be done within a retirement account, whether a 401(k) or an IRA.

That said, stock market returns are erratic, and the annualized return figures you often hear quoted are just that — an average. Investing is risky, and there is always a chance that returns over the next five, 10, or 20 years will not outpace the interest that you are currently making on your student loan payment.

No one, not even a financial planner, has a crystal ball and can see into the future. This is why we also need to take into account your personal preferences.

If you feel like you are truly missing out on investing in an IRA or saving for a home, then investing in those things might be the right path for you. If your student debt makes you feel burdened and miserable, you could focus on that instead.

Paying Off Student Loans vs. Investing

“So, should I pay off student loans or invest,” you ask.

The answer is…it’s complicated.

Student loans often come with low interest rates, which means you’re not paying a huge amount of extra money over the years (like you would with a credit card, for example). So it’s low-cost debt. That means that if you want to invest in other areas of your life, such as saving for retirement or to buy a house, you may be able to do both.

Contributing to a Retirement Account

Many Americans are vastly under-saving for retirement, and with so many employers offering a 401(k) matching program, not contributing is like throwing money down the drain.

There is no standard for match programs — they can range from meager to generous. Between your contributions and your employer’s, it is often recommended that you save between 15% and 20% of your salary for retirement. You can do this by contributing the full allowable amount to your 401(k), which is $19,500 in 2021.

If you don’t have access to a 401(k) — perhaps you’re self-employed — you can save for retirement with other investment accounts like an online IRA or a brokerage account. No matter which account you use, you might want to consider putting that money to work with a long-term investment strategy. For example, you might choose to deploy a strategy of low-cost mutual funds that invests in stocks and bonds.

Buying a Home

Financial planners don’t all agree on whether a home is a good investment. That is not to say that a home is not a good financial goal; if it’s a priority to you, then it’s great. This is simply a commentary on whether a home produces a good return on investment.

Although a house may not have as high an investment return as other asset classes, such as the stock market, a house provides something that a stock or bond cannot — immediate utility. You cannot sleep and eat inside a stock or a bond.

While home values do typically grow over time, you must also take into consideration the costs of buying and owning a home, such as the interest paid on the mortgage, property taxes, and repairs and maintenance. That said, homeownership can be rewarding, and can pay major dividends down the line. One big benefit is having no monthly housing expenses (like rent or a mortgage) in retirement.

The Takeaway

There is no hard and fast rule when it comes to investing while juggling debt. Undoubtedly, the biggest ticket item you’ll need to invest for is retirement — but whether you invest in retirement before or after paying down debt depends on your personal preferences and situation.

One thing to remember: Financial tradeoff decisions don’t always have to be all-or-nothing. You might choose to split the difference by putting a little here and a little there. For example, you might contribute $300 per month to your 401(k) and $200 to a high-yield savings account for your down payment for a house, all while paying off student loans.

With SoFi Invest®, you can invest in traditional and Roth IRAs, crypto, or ETFs, with hands-on active investing or automated investing. The choice is yours — based on your personal situation, goals, and preferences.

Find out how to invest for your future with SoFi Invest.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . SoFi Invest refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Cryptocurrency is offered by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, please visit www.sofi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform. Information related to lending products contained herein should not be construed as an offer or pre-qualification for any loan product offered by SoFi Lending Corp and/or its affiliates.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Student Loan Refinance
IF YOU ARE LOOKING TO REFINANCE FEDERAL STUDENT LOANS PLEASE BE AWARE OF RECENT LEGISLATIVE CHANGES THAT HAVE SUSPENDED ALL FEDERAL STUDENT LOAN PAYMENTS AND WAIVED INTEREST CHARGES ON FEDERALLY HELD LOANS UNTIL THE END OF JANUARY 2022 DUE TO COVID-19. PLEASE CAREFULLY CONSIDER THESE CHANGES BEFORE REFINANCING FEDERALLY HELD LOANS WITH SOFI, SINCE IN DOING SO YOU WILL NO LONGER QUALIFY FOR THE FEDERAL LOAN PAYMENT SUSPENSION, INTEREST WAIVER, OR ANY OTHER CURRENT OR FUTURE BENEFITS APPLICABLE TO FEDERAL LOANS. CLICK HERE FOR MORE INFORMATION.
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.
Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at [email protected] Please read the prospectus carefully prior to investing. Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
WM17116B

Source: sofi.com

Social Security Basics: 12 Things You Must Know About Claiming and Maximizing Your Social Security Benefits

For many Americans, Social Security benefits are the bedrock of retirement income so maximizing this stream of income is critical.

The rules for claiming Social Security benefits can be complex, but this guide will help you successfully navigate the details. Educating yourself can ensure that you claim the maximum amount to which you are entitled.

Here are 12 essential details you need to know.

Know Your Social Security ‘Full Retirement Age’

First things first: Determine your Social Security full retirement age. For people born between 1943 and 1954, full retirement age is 66. If your birthday falls between 1955 and 1959, it gradually climbs to 67. If you are born in 1960 or later, your full retirement age is 67.

You can claim your Social Security benefits a few years before or after your full retirement age, and your monthly benefit amount will vary as a result. More on that in a moment.

How Your Social Security Benefits Are Earned

To be eligible for Social Security benefits in retirement, you must earn at least 40 “credits” throughout your career. You can earn as many as four credits each year, so it takes 10 years of work to qualify for Social Security.

In 2021, you must earn $1,470 to get one Social Security work credit and $5,880 to get the maximum four credits for the year.

How Your Social Security Benefits Are Calculated

Your Social Security benefits are based on the 35 calendar years in which your income was the highest. If you have fewer than 35 years of earnings, each year with no earnings will be entered as zero. You can increase your Social Security benefit at any time (even via part-time work during retirement) by replacing a zero or low-income year with a higher-income year.

There is a maximum Social Security benefit amount you can receive, though it depends on the age you retire. For someone at full retirement age in 2021, the maximum monthly benefit is $3,113. For someone filing at age 70, the maximum monthly amount is $3,895.

To estimate your benefits, use the Social Security’s online Retirement Estimator.

There’s an Annual Social Security Cost-of-Living Adjustment (COLA)

One of the best features of Social Security benefits is that the government adjusts the benefits each year based on inflation. This is called a cost-of-living adjustment, or COLA, and helps your payments keep up with increasing living expenses. The Social Security COLA is quite valuable; it’s the equivalent of buying inflation protection on a private annuity, which can get expensive.

Because the COLA is calculated based on changes in a federal consumer price index, the size of the COLA depends largely on broad inflation levels determined by the government. In 2021, Social Security beneficiaries saw a 1.3% COLA in their monthly Social Security benefits. 

The Kiplinger Letter predicted in September that the COLA for 2022 could be 6%, which would be the largest adjustment since 1982. The final COLA for 2022 will be announced on Oct. 13. 

Here’s what COLAs have been in other recent years:

  • 2009: 5.8%
  • 2010: 0%
  • 2011: 0%
  • 2012: 3.6%
  • 2013: 1.7%
  • 2014: 1.5%
  • 2015: 1.7%
  • 2016: 0%
  • 2017: 0.3%
  • 2018: 2%
  • 2019: 2.8%
  • 2020: 1.6%
  • 2021: 1.3%

Your Monthly Social Security Benefits Increase the Longer You Wait to Claim

You can collect Social Security benefits as soon as you turn 62, but taking benefits before your full retirement age means a permanent reduction in your payments — of as much as 25% to 30%, depending on your full retirement age.

If you wait until you hit full retirement age to claim Social Security benefits, you’ll receive 100% of your earned benefits. But you can also get a big bonus by waiting to claim your Social Security benefits at age 70 — your monthly Social Security benefit will grow by 8% a year until then. Any cost-of-living adjustments will be included, too, so you don’t forgo those by waiting.

Waiting to claim your Social Security benefits can help your heirs as well. By waiting to take her benefit, a high-earning wife, for example, can ensure that her low-earning husband will receive a much higher survivor benefit in the event she dies before him. That extra income of up to 32% could make a big difference.

There’s a Social Security Spousal Benefit

Marriage brings couples an advantage when it comes to Social Security. One spouse can take what’s called a spousal benefit, worth up to 50% of the other spouse’s Social Security benefit. For example, if your monthly Social Security benefit is worth $2,000 but your spouse’s own benefit is only worth $500, your spouse can collect a spousal benefit worth $1,000 — bringing in $500 more in income per month. (Note: The higher-earning spouse must apply for his or her own Social Security benefit first.)

Just as the benefit based on your own work history is reduced if you claim it early, the same is true for a spousal benefit. That 50% figure is the maximum amount that only a spouse who is at least full retirement age is eligible for. Taking the spousal benefit early at, say, age 62, reduces the amount to as little as 32.5% of the higher earner’s benefit. If you take your own benefit early and then later switch to a spousal benefit, your spousal benefit will still be reduced.

Another spousal-benefit tactic: In some cases, a spouse who is delaying his or her own benefit but still wants to bring some Social Security income into the household can restrict their application to a spousal benefit only. To use this strategy, the spouse restricting his or her application must be at full retirement age and he or she must have been born on or before January 1, 1954. So the lower-earning spouse, say the wife, applies for benefits on her own record. The husband then applies for a spousal benefit only, and he receives half of his wife’s benefit while his own benefit continues to grow. When he’s 70, he can switch to his own, higher benefit. 

Children Can Also Collect Social Security Benefits

Minor children of Social Security beneficiaries can be eligible for benefits. Children up to age 18 (or up to age 19 if they are full-time students who haven’t graduated from high school) and disabled children older than 18 may be able to receive up to half of a parent’s Social Security benefit. The disability must have occurred before the age of 22. The adult child can continue collecting the benefit even after the parent has died, as long as the disability prevents them from working. 

There Are Social Security Survivor Benefits for Spouses and Children

If your spouse dies before you, you can take a Social Security survivor benefit. However, that won’t be in addition to your own benefit. You must choose one or the other. If you are at full retirement age, that benefit is worth 100% of what your spouse was receiving at the time of his or her death (or 100% of what your spouse would have been eligible to receive if he or she hadn’t yet taken benefits).

A widow or widower can start taking a survivor benefit at age 60. However, the payment will be reduced because it’s taken before full retirement age. If you remarry before age 60, you are not eligible for a survivor benefit. If you remarry after age 60, you may be eligible for a survivor benefit based on your former spouse’s earnings.

Eligible children who are under age 18 (up to age 19 if attending high school full time) or were disabled before age 22 can also receive a Social Security survivor benefit. It would be worth up to 75% of the deceased’s benefit.

You Can Claim Social Security Benefits Earned by Your Ex-Spouse

Just because you’re divorced doesn’t mean you’ve lost the ability to get a Social Security benefit based on your former spouse’s earnings. You can receive a benefit based on his or her record instead of a benefit based on your own work record if you were married at least 10 years, you are 62 or older, and you are single.

Like a regular spousal benefit, you can get up to 50% of an ex-spouse’s benefit — less if you claim before full retirement age. And the beauty of it is that your ex never needs to know because you apply for the benefit directly through the Social Security Administration. Taking a benefit on your ex-spouse’s record has no effect on his or her benefit or the benefit of your ex’s new spouse. And unlike a regular spousal benefit, if your ex qualifies for benefits but has yet to apply, you can still start collecting Social Security based on the ex’s record, though you must have been divorced for at least two years.

Note: Ex-spouses can also take a survivor benefit if their ex died after the divorce, and, like any survivor benefit, it will be worth up to 100% of what the ex-spouse received. If you remarry after age 60, you are still eligible for the survivor benefit.

A claiming strategy if you’re divorced: Exes at full retirement age who were born on January 1, 1954, or earlier can apply to restrict their application to a spousal benefit while letting their own benefit grow.

You Can Undo a Social Security Benefits Claiming Decision

There aren’t many times in life you can take a mulligan. But Social Security offers you the chance for a do-over. Let’s say you claimed your benefit, but regretted the decision and wished you had waited. Within the first 12 months of claiming Social Security benefits, you can withdraw the application. You will need to pay back all the benefits you received, including any spousal benefits based on your record. But you can later restart your Social Security benefits at the higher amount you’ll earn by waiting.

Early claimers have another opportunity for a do-over: They can choose to suspend their Social Security benefit at full retirement age. Say you took your benefit at age 62. Once you turn full retirement age, you can suspend your benefit. You don’t have to pay back what you have received, and your benefit will earn delayed retirement credits of 8% a year. Wait to restart your benefit at age 70, and your monthly payment will get up to a 32% boost — which could erase much of the reduction from claiming early.

Your May Have to Pay Taxes on Social Security Benefits

Most people know that you pay tax into the Social Security Trust Fund throughout your career, but some retirees don’t realize that you also have to pay tax on your Social Security benefits once you start taking them. Benefits lost their tax-free status in 1984, and the income thresholds for triggering tax on benefits haven’t been increased since then.

It doesn’t take a lot of income for your Social Security benefits to be taxed. For example, a married couple with a combined income of more than $32,000 may have to pay income tax on up to 50% of their Social Security benefits. Higher earners may have to pay income tax on up to 85% of their benefits.

You may also have to pay state income taxes on your Social Security benefits. See our list of the 13 States That Tax Social Security Benefits.

Beware the Social Security Earnings Test

Bringing in too much money in earned income can cost you if you continue to work after claiming Social Security benefits early. With what is commonly known as the Social Security earnings test for annual income, you will forfeit $1 in benefits for every $2 you make over the earnings limit, which in 2021 is $18,960. Once you are past full retirement age, the earnings test no longer applies, and you can make as much money as you want with no impact on benefits.

Any Social Security benefits forfeited to the earnings test are not lost forever. At your full retirement age, the Social Security Administration will recalculate your benefits to take into account benefits lost to the test. For example, if you claim benefits at 62 and over the next four years lose one full year’s worth of benefits to the earnings test, at a full retirement age of 66 your benefits will be recomputed — and increased — as if you had taken benefits three years early, instead of four. That basically means the lifetime reduction in benefits would be 20% rather than 25%.

Source: kiplinger.com

5 Reasons to Claim Social Security ASAP

Happy senior couple
Monkey Business Images / Shutterstock.com

Many people believe that claiming Social Security benefits as early as possible — which generally is age 62 — is inherently bad, since claiming before your full retirement age means smaller monthly payments.

However, the reality is that everyone’s circumstances are different. For some retirees, it makes sense to start claiming benefits as soon as possible.

Following are several situations in which you should not put off claiming your Social Security retirement benefits.

1. You have a short life expectancy

The amount of your monthly Social Security retirement benefit payment is based on a formula that’s meant to be actuarially neutral. That basically means you should receive the same total amount of benefits over your lifetime regardless of the age at which you start claiming them.

In other words, if you claim earlier than your full retirement age as determined by the Social Security Administration, you will receive smaller monthly payments over a longer period of time. If you delay claiming until you’re older, you’ll be getting larger payments over what is likely to be a shorter period of time.

If you expect to have a short life expectancy, it might make more sense to start taking the smaller monthly benefit as soon as you can.

Money Talks News founder Stacy Johnson details one such situation in “2-Minute Money Manager: Should I Wait to Take Social Security?” He writes:

“A few years ago, one of my best friends asked if he should take his pension early, and I said, ‘Hell, yes.’ Why? Because he wasn’t in great shape, health-wise. Both of his parents died young, his siblings died young, and he really needed the money. So, my advice to him was, ‘Take it as soon as you can get it.’ He died one year later.”

2. You need the money

You also might need the money immediately to stay on top of your living expenses.

“You’d be surprised at the number of people who end up retiring before they want to,” says Devin Carroll, founder of the blog Social Security Intelligence. “There are lots of reasons — including being laid off or dealing with health issues — that you have to stop working.”

However, remember that the age at which you claim determines the size of your monthly benefit going forward. In other words, the longer you can postpone claiming, the bigger the benefit you’ll get each month after you do claim.

So, if that sounds good to you, first explore other ways that you could bring in extra income, enabling you to postpone claiming. For example, check out articles like “21 Ways Retirees Can Bring in Extra Money in 2021.”

3. You’ve got kids at home

“Increasingly, people are reaching age 62 and still have minor children at home,” notes Carroll.

When that’s the case, claiming your Social Security benefits early makes sense in that it generally enables you to apply for additional benefits to help you care for minor children. That’s because you must apply for your retirement benefits before you can apply for benefits related to dependents.

4. A higher-earning spouse has health problems

It’s kind of morbid, but when deciding whether to start taking Social Security benefits at age 62, you also need to think about when your spouse might die — and how much he or she makes in comparison with you.

One situation to consider is when the higher-earning spouse has medical problems, says Carroll.

That’s because, after a spouse dies, you may become eligible for survivor benefits (also called widow’s or widower’s benefits) based on the spouse’s Social Security. And if your spouse has a short life expectancy, and you know your survivor benefits would be more than your own full retirement benefit, there may be no reason for you to wait for your full retirement benefit.

To learn more about this subject, check out “Social Security Q&A: How Do Spousal Benefits Work?”

5. A lower-earning spouse is older than you

Maybe your spouse earned much less than you during your working years.

“Their own benefit is going to be lower than yours,” says Carroll. “In fact, their benefit might even be lower than the spousal benefit they’d receive based on your earnings.”

However, as with benefits issued based on your own work history, your partner can only claim a spousal benefit based on your work history after you file for your own retirement benefits.

Add up the cumulative benefits, suggests Carroll. You might discover that your total monthly income is better when you file for your benefit early and your older spouse elects to take the spousal benefit.

A final word: Work with an expert

Before making decisions, though, be sure to work out the math and compare your options. Social Security rules are complex and situations vary.

Also, consider reviewing your situation with a Social Security Administration representative or a knowledgeable retirement planning professional.

At the least, you could obtain a custom analysis of your claiming options from a specialized company like Social Security Choices.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

12 Ways Retirees Can Earn Passive Income

A senior black man uses a smartphone
wavebreakmedia / Shutterstock.com

These days, “retired” doesn’t always mean “not working.”

According to a study of U.S. retirees from the nonprofit Transamerica Center for Retirement Studies (TCRS), “nine percent … are currently working for pay, including five percent who are employed part-time, two percent who are employed full-time, and two percent who are self-employed.”

More than half — 56% — of those surveyed said their top reason to keep working was “wanting the income.” The good news: You might be able to make some extra dollars via passive income — money that comes in without you doing much work, or any work at all.

Passive income is often synonymous with a large upfront investment, such as buying rental properties or dividend-producing stocks. But the following passive-income strategies can bring in extra bucks without investing a bunch of money or time.

1. Rent out a room in your home

Got an empty nest? Someone may be willing to pay to roost there.

You can advertise your spare space on your own or list it on a vacation rental website such as:

Yes, it takes some work: You might have to keep the room tidy and wash a load of sheets and towels once the guests depart. But in some parts of the country, you can earn enough money in just a few days to cover a mortgage payment, as we detail in “Do This a Few Days Each Month and Watch Your Mortgage Disappear.”

If you’re the gregarious type, you can have fun talking up your town or even showing visitors around. If not, advertise it as a “Here’s your key, we won’t bother you” arrangement. Some people simply want an inexpensive place to sleep and don’t care about sitting around chatting with the host.

2. Rent out your vehicle or gear

Your spare bedroom is just one of many things you could rent to others to bring in extra money.

Use your imagination. Maybe you have a ladder, stroller, surfboard, bicycle, boat, camera equipment or a great selection of power tools.

Peer-to-peer rental sites like the following will help you find folks who occasionally need such things but don’t want to own them:

Whatever you’re renting, keep in mind that ordinary insurance might not cover the commercial use of your property. An insurance rider may cover some items, but you may need a separate policy, so consult your insurance agent.

3. Become a peer-to-peer lender

What is peer-to-peer lending? In short, P2P lending sites such as Prosper accept loan applications from borrowers. Investors like you can put some of your money toward loans to those borrowers. When loans get paid back, so do you — with interest.

Overall, P2P investments “can provide solid returns that are really hard to beat,” according to Clark.com, the website of financial guru Clark Howard.

As with any loan, however, there’s the possibility of default. You may not earn anything or may even lose money.

Sound too complicated? Maybe this simpler form of P2P is for you: Worthy sells 36-month bonds for $10 each. The money that comes in is loaned to U.S. businesses, with lenders who have purchased these bonds getting a 5% annual rate of interest on their investment.

To learn more about Worthy bonds, check out “How to Earn 80 Times More on Your Savings.”

4. Get rewards for credit card spending

If you’re going to shop with plastic, make sure you’re rewarded.

The form that the reward takes is up to you. Some people covet airline miles. Others take their rewards as cash or a credit against their monthly statement.

The number of rewards credit cards — and their pros and cons — can be a little dizzying. For an easy way to compare your options, stop by our Solutions Center and check out travel rewards cards or cash-back cards in the Money Talks News credit card search tool.

5. Use cash-back apps

An app called Ibotta lets you earn cash rebates on purchases from retailers, restaurants or movie theaters.

Or you can do your online shopping through cash-back portals like:

These websites enable you to earn cash back on purchases from thousands of online retailers. To learn more about them, check out “3 Websites That Pay You for Shopping.”

6. Sell your photos

Smartphones have made decent photography possible for just about anyone. The next time you capture a killer sunset or an adorable kid-and-dog situation, don’t keep the image to yourself. Apps like Foap — which is available for Android and Apple devices — will help you sell it.

You can do even better if you have a good digital SLR camera, a tripod and other equipment. Stock photo companies like Shutterstock and iStockphoto, which favor high-definition, high-quality images, are venues for selling photos on just about any subject you can find.

7. Write an e-book

It’s possible to bring in cash without a high-powered book contract, thanks to self-publishing platforms.

Amazon’s Kindle Direct Publishing, for example, allows you to write, upload and sell your words fairly easily. My two personal finance books are for sale on Kindle, and they provide a steady stream of passive income.

I also sell PDFs of the books through my personal website. I use a payment platform called E-junkie to handle payments and deliver the book downloads — and this brings me more money per book than Amazon does, even when I offer readers a discount.

If you’re fond of a particular fiction genre, write the kind of stuff you’d like to read. Nonfiction sells, too: cookbooks, travel guides, history, memoirs and how-tos are a few examples. Or maybe you have a specific skill to teach — job-hunting or food preservation or raising chinchillas.

Pro tip: Fiverr.com is a good marketplace through which to find freelancers to hire for help with formatting, design and cover art.

8. Create an online course

If you’ve got useful knowledge, why not monetize it? Sites like Teachable and Thinkific will help you build a course that could change someone’s life, either professionally or personally.

Note that online courses are not limited to computer-based topics. A quick search turns up classes on:

  • Cake-making
  • Watercolors
  • Digital scrapbooking
  • Drone cinematography
  • Free-diving
  • Blacksmithing
  • Yoga
  • Parenting
  • Novel writing
  • Job hunting
  • Building a pet-care business

And that’s just for starters. Like writing an e-book, creating a course will take some work. But again: Once it’s up, the work is done.

9. Join rewards programs

Rewards sites like Swagbucks reward you with points for activities such as searching the internet, watching short videos and taking surveys. You can cash in your points for gift cards or PayPal cash.

Maybe you didn’t retire to spend hours taking surveys. But if you’re going to search the internet anyway, why not use Swagbucks’ search engine and earn some points?

To learn more about Swagbucks, check out “6 Ways to Score Free Gift Cards and Cash in 1 Place.”

10. Wrap your car with advertising

Turn your vehicle into a rolling billboard with companies like Carvertise. They’ll pay you for the privilege of putting removable advertising decals for a business on your automobile.

Writer Kat Tretina describes the process at Student Loan Hero. You can expect to earn $100 to $400 a month, depending on how much and where you drive, she says. Requirements include having a good driving record and a vehicle that has its factory paint job.

Pro tip: Car-advertising scams make the rounds regularly. Tretina offers these tips to avoid being victimized:

  • Legitimate companies don’t charge an application fee, and they’ll have a customer service phone line that lets you talk with a real person.
  • The car-wrapping cost should be covered by the company.
  • Take a hard pass on any company that doesn’t ask questions about your driving record, auto insurance, driving routes and type of vehicle.

11. Create an app

Maybe yours is one of those minds that says, “There should be an easier way to do (whatever) — and I think I know what it is!” If so, creating an app could bring in extra income.

It could also bring in zero dollars. But nothing ventured, nothing gained, right?

For example, personal finance writer Jackie Beck — who cleared $147,000 of debt — used her expertise to create an app called “Pay Off Debt.”

Not a coder? App-builder services exist. The WikiHow.com article “How to Create a Mobile App” tells how to get started. It’s a time-consuming process. But that’s one of the beauties of retirement: You set your own hours.

12. Become a package ‘receiver’

OK, this idea is unproven — so far. But it’s a solution whose time has come. The boom in online shopping has been a boon for thieves who find it easy to swipe packages left outside front doors before the intended recipients get home from work.

You might be able to do your part to thwart those lowdown thieves by marketing yourself as a “professional package receiver.”

Try this: Put the word out — through friends, social media, places of worship — that you are available to accept deliveries. If a package is for someone in your neighborhood, you could watch the shipping company’s tracking info and be at the home to take the package in. Or you could specify that packages be shipped to Original Recipient, c/o Professional Package Receiver — that’s you.

Before asking a fee of, for example, $1 per package, ask the person who wants to hire you what it’s worth to them. You might be surprised by a response like, “I’ll give you $5.” Decide, too, whether you’ll be charging per package or per order, and whether you’ll set a weight limit, such as no packages over 30 pounds.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com