2 Chicago Tribune|Business|Section 2|Monday, February 24, 2020
Q: I’m deciding at what age I’ll
claim Social Security benefits. How
does my life expectancy factor in?
A: First, the basics: You can start get-
ting benefits as early as age 62, but you’ll
receive up to 30% less in each check
than if you wait until your full retire-
ment age, which is 66 for those born
from 1943 to 1954 and gradually rises to
67 for those born in 1960 or later. For
each year after your full retirement age
that you wait to start benefits until the
age of 70, you’ll get an 8% boost in de-
layed-retirement credits.
Social Security actuaries aim to set
payouts so that if you die at the time
your life expectancy projects, you’ll
receive about the same total amount of
benefits no matter when you start claim-
ing them. If you are single and have
never been married, spousal and sur-
vivor benefits aren’t a concern, so your
decision about when to claim hinges on
how long you think you’ll live.
If you can afford to postpone taking
benefits and are deciding whether to
hold out to age 70, a key question is
whether you expect to live past 80. Re-
search shows that at about age 80, the
cumulative amount you’ve received in
benefits is approximately the same
whether you started benefits at age 62,
70 or somewhere in between.
As a rule of thumb, “If you’re singleand believe that your life expectancy is
less than 80, you should claim before 70.
If you think you’re going to live past 80,
wait until 70,” said Bill Meyer, CEO of
Social Security Solutions, which pro-
vides tools to help recipients determine
when to claim benefits.
A person who is eligible to receive
$2,000 a month at a full retirement age
of 66 and lives to 95 would receive
$198,000 more in total benefits if he or
she waited to claim at age 70 instead of
at 62.
You can enter your gender and birth
date at http://www.ssa.gov/oact/population to
get an estimate of how many more years
you may live at your current age as well
as at 62, your full retirement age and 70,
if you haven’t reached those ages yet. But
you should also account for your health,
your lifestyle and your parents’ longevity
(especially that of your mother) as you
gauge your potential life span.Lisa Gerstner is a contributing editor to
Kiplinger's Personal Finance magazine.
Send your questions and comments to
[email protected]. And for
more on this and similar money topics,
visit Kiplinger.com.Timing Social Security benefits
Weigh life expectancy
when making decision
By Lisa Gerstner
Kiplinger
OLEG FEDOTOV ARTMIM/DREAMSTIMESUCCESS
The latest word from the country’s largest
IRA and 401(k) plan provider Fidelity: Nei-
ther political machinations nor fear of a
global pandemic or warnings from seasoned
investment pros have taken a toll on the
record highs the stock market has seen in
recent days. Investors have also seen record
amounts in their retirement accounts at
year-end 2019.
In fact, the bull market has been coining
retirement-plan millionaires. On Fidelity’s
books, there are now 233,000 401(k) million-
aires and 208,000 IRA millionaires.
Even “average” investors have increased
their personal wealth dramatically. See how
you compare to the Fidelity statistics:
■The average 40l(k) balance rose to a
record $112,300, a 17% year-over-year in-
crease.
■The average IRA balance also rose to a
record $115,400, up 17% from a year ago.
■The average 403(b) plan balance was up
18% to $93,100.
Clearly, stock market participants have
done well since the Dow Jones Industrial
Average bottomed around 6,700 in the spring
of 2009. Those who weren’t scared off in the
panic, and kept contributing automatically,
found their regular monthly investment
amount purchased more fund shares at
lower prices. Then, as the market soared
over the next 11 years, their account values
grew dramatically.
That performance didn’t take investment
genius. Most of those accounts were invested
in index funds that tracked overall market
performance, or in stock funds that also
reflected overall market gains. And that’s the
way it is supposed to work — over the long
run.
I never tire of reminding investors that
over the long run — at least 20 years — a
diversified portfolio of large-company
American stocks, with dividends reinvested,
will come out ahead, even adjusted for infla-
tion. That’s the conclusion of the Ibbotson
market historians who analyzed every 20-
year period going back to 1926 and found no
losing 20-year period, if you include rein-
vested dividends (which account for about
40 percent of the total return).
So, if you have a lot of 20-year periods
ahead of you, the smart move is to keep con-
tributing to your retirement plan, stay diver-
sified, and have the discipline to ride out the
ups and downs that will surely come your
way.
But what if you’re close to retirement? It’s
never easy to maintain the discipline to keep
investing in a bear market. But it is especially
difficult — and very dangerous — to hold that
position if you’re on the edge of, or already
into, your retirement years.
The reason is simple. Time is no longer on
your side. You need retirement savings to
live. You will have to take required minimum
distributions (RMDs) from your retirement
accounts every year starting at age 72. Thus,
you might be forced to sell stocks at a time
when the market is making lows if you
haven’t set aside some money for withdraw-
als inside your retirement account.
If you’re at or near the stage of taking
RMDs, this is the time for risk management,
not market timing. No one knows when this
market will stage a bear retreat, or what
might trigger it.
Money is fuel for stocks. And there is
plenty of money-moving stock markets these
days. We’ve had a decade of global central
banks creating liquidity to keep their econo-
mies from stagnating. And much of that
liquidity has found its way into the U.S. stock
market. In recent weeks, China joined that
trend, creating ¥1.7 trillion ($243 billion in
U.S. dollars) to keep the Chinese economy
afloat as the coronavirus closed plants and
shut down commerce.
Like water, money seeks its own level. And
it flows most easily into liquid markets that
are perceived to be safe and well-regulated.
When predicting when and how the mar-
kets will continue to trend, an old saying
comes to mind: “The bigger they are, the
harder they fall.” And that’s The Savage
Truth.Terry Savage is a registered investment
adviser and the author of four best-selling
books, including “The Savage Truth on
Money.” Terry responds to questions on her
blog at TerrySavage.com.Terry Savage
The Savage TruthIn high-flying
market, risk
abounds
It’s not too late to switch.
In a recent article in Investment
News, Mary Beth Franklin pointed out
that although the annual enrollment
season for Medicare enrollment ran
from Oct. 15 to Dec. 7, the 22 million
people enrolled in a Medicare Advan-
tage plan have until March 31 to change
plans.
Many people select a Medicare Ad-
vantage plan because of lower cost and
because many of these plans offer ben-
efits not offered by traditional Medicare,
such as vision and dental care and pre-
scription drug coverage. Those who
selected a Medicare Advantage plan
during open enrollment may switch to
another or return to original Medicare.
However, those wishing to do so must
carefully follow, in order, the required
steps.
One of the disadvantages of enrolling
in a Medicare Advantage plan is that if
you change your mind, there is no guar-
antee that you will be able to obtain a
Medigap policy at a later date. And even
if you can, the cost of a Medigap policy
may be higher than it would be for indi-
viduals who enroll in traditional Medi-
care when they first reach age 65.
When you apply for Medigap cov-
erage, you are subject to medical under-
writing. Traditional Part B medical cov-
erage covers only about 85% of associ-
ated costs. Accordingly, many, if not
most, traditional Medicare enrollees
elect a Medigap policy that covers the
15% of medical costs not covered by
traditional Medicare.
Accordingly, if you decide that you no
longer want to continue your enrollment
with your existing Medicare Advantage
plan, and prefer to use traditional Medi-
care instead, then you should apply for
Medigap coverage before you disenroll
in your plan. Only after you are approved
should you apply for Medicare Part D
(drug coverage) if you choose.
The problem in applying for Part D
coverage first is that you will auto-
matically be disenrolled from your Med-
icare Advantage plan. If you apply for
Part D before you are approved for
Medigap, then you could be facing a lack
of supplemental coverage for a year of
insurance with traditional Medicare. In
other words, you would incur the 15%
medical costs not covered by traditional
Medicare.
If you want to consider another Medi-
care Advantage Plan, you can consult the
Medicare Plan Finder (www.medi-
care.gov/find-a-plan/questions/home.asp) or contact your state’s Senior
Health Insurance Program (SHIP). I
volunteered for SHIP for many years. It
is a reputable organization, and there is
no cost for its services. Franklin also
recommends consulting a Medicare
insurance broker, such as Boomer Ben-
efits. These brokers are paid by the in-
surance companies, not you.
If you have already enrolled in tradi-
tional Medicare, you would not be able
to consider a Medicare Advantage plan
until 2021. Although there are some
advantages associated with Medicare
Advantage plans, there are disadvan-
tages as well.
A significant disadvantage is that the
doctors you prefer may not be available
to you without additional costs, and
specialists your doctors recommend may
not be available also without additional
cost. In addition, there would be regular
co-pays to doctors for services and spe-
cific procedures that would not be in-
curred if you selected traditional Medi-
care and an associated Medigap plan.
An excellent source for all aspects of
Medicare is a book I have recommended
in the past, “Get What’s Yours for Medi-
care: Maximize Your Coverage, Min-
imize Your Costs,” by Philip Moeller
(Simon and Schuster). Another impor-
tant source is “Medicare and You,” avail-
able from the federal Centers for Medi-
care & Medicaid Services, available at no
cost. It is updated each year.Elliot Raphaelson welcomes questions
and comments at [email protected].DREAMSTIMEChanging Medicare choice
Follow steps carefully
when making switch
Elliot Raphaelson
The Savings GameNo
How to say no
In the words of former British Prime Minister Tony Blair, “The art of leadership
is saying no, not yes.” Here are some ways to do that with your team:
SOURCE: Inc.Lay the foundation
Your employee will be much more likely to accept
a no from you when they believe you appreciate
and respect them. So be fair and kind from the
get-go, and be sure to treat people equally.Have a good reason
Yes, you’re the boss, but a “no” will go down
much easier if you have a good reason for doling
it out. Perhaps the request is against company
policy or it’s simply a bad move for your depart-
ment. Avoid the parental: Because I said so.But don’t go overboard
State your reason or reasons for denying the request
or idea in a polite but direct manner. Avoid apologiz-
ing excessively and belaboring the point; that can be
just as painful for the one hearing the bad news.Embrace your inner procrastinator
If you aren’t able to decide on the spot, feel free to put
off the decision until later. Use the space to consider
the best approach. Broach the topic again when
you're ready and deliver your judgment. Even if the
person is disappointed, he or she likely will be
pleased that you gave it some thought.