If you’re not familiar with charitable IRA donations, for the past few years taxpayers age 70 ½ or older have been able to make direct transfers of up to $100,000 per year from their IRA to a charity.  By giving the money directly to charity (rather than receiving the distribution then later cutting a check to your favorite charity), taxpayers were able to exclude the IRA distribution from their income.

This was a great strategy for IRA owners who didn’t need the money from the required minimum distribution as they won’t have to pay a large tax bill for IRA withdrawals that they wouldn’t otherwise have taken (if not required to by the RMD rules).

The direct transfer strategy not only reduced their taxable income, but it also reduced their adjusted gross income, which resulted in many taxpayers having less of their Social Security income taxed; it also allowed taxpayers to qualify for credits and deductions that they would not have qualified for otherwise because their income was too high.

This IRA donation strategy was introduced in the Pension Protection Act of 2006 and was originally only intended to apply to the 2007 tax year.  It was later extended to include 2008 and 2009.  IRA owners who have taken advantage of this strategy were hoping that it would be extended for 2010, but for a while it didn’t look like it would happen.  Thankfully, Congress included a provision in the tax bill passed last week to extend the ability to donate IRAs directly to charity for not only 2010, but 2011 as well.

Since this bill was passed so late in the year, you may have already taken your 2010 RMD and written a check to your favorite charity.  You can still deduct your donation on Schedule A: Itemized Deductions (if you itemize your deductions).  However, please note that you can’t do both.  If you do a direct transfer to a charity from your IRA you will exclude the distribution from your income; if you write a check to a charity you will deduct it on Schedule A.

Thanks to Kay Bell at Bankrate.com for the update on RMD charitable donations in “How the New Tax Law Affects Your 2010 Taxes”.

Kristine McKinley is a fee-only financial planner located in Lee’s Summit, Missouri.  Kristine provides retirement planning, tax preparation and planning, investment reviews and comprehensive financial planning on a fee-only, as needed basis.  To schedule your complimentary introduction meeting, please contact Kristine at kristine@beacon-advisor.com.

“We had a responsibility to protect middle class families from a tax increase that would have hit their paychecks and harmed the recovery”

Nothing like waiting til the last minute…

Financial advisors have been preparing their clients for higher taxes as we waited for Congress to do something to stop the Bush era tax credits from expiring at the end of this year.

Given the slow recovery the economy is experiencing an increase in taxes that would have resulted had the Bush tax cuts not been extended would have been a tough blow, especially for the middle income class.

Congress finally passed a bill that would extend the Bush tax cuts, as well as introduce a few new ones.  The bill, called the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of 2010 is expected to be signed by President Obama later today.

Here are some of the highlights of the new tax bill:

• The current tax rates have been extended for two years.  They were scheduled to go up in 2011.  The 10% bracket was going to disappear, and most of the other tax brackets were going to go up, which would have been devastating to taxpayers in this economy.  Hopefully the economy will have grown and will be stable before tax rates do go up in 2013.
• The current capital gains and dividends rates have been extended through 2012.  This will give many people an opportunity to sell positions that have a gain before capital gain rates go up.
• The Alternative Minimum Tax (AMT) exemption will remain at the higher levels for two more years, giving relief to middle income taxpayers who would have to pay AMT without this band-aid.  I’m still looking for permanent AMT changes in the future.
• The new tax bill includes a payroll tax deduction for workers.  Workers will get a 2 percentage-point break on their payroll tax for one year. Instead of paying 6.2% on wages up to $106,800, they will only have to pay 4.2% in 2011.
• Unemployment benefits will be extended for another 13 months, giving people who have been unemployed for an extended time period more time to find another job (with unemployment rates still close to 10% this was to be expected).
• The estate tax has been reinstated for 2011, but the top tax rate will be 35% and the exemption amount will be $5 million per person and $10 million per couple.  Without this tax bill, the estate tax would have been reinstated at 55% with only a $1 million exemption.

These are just a few of the provisions included in the new tax bill.  The response to the new tax bill has been mixed.  Some economists say this bill will boost economic growth and create millions of jobs.  Others are calling this bill “weak stimulus”.  While I’m not sure how much this bill will boost the economy, I do believe that if the Bush tax cuts were allowed to expire the higher taxes that would have resulted would have been very difficult for taxpayers in this struggling economy.

For more information on the new tax bill and how it will affect you, please visit Tax Cut Deal: How it Affects You at CNNMoney.com.

Why so much focus on Roth IRAs this year?  The rules that determine who can convert a traditional IRA to a Roth IRA have been changed which will allow more people to convert to Roth IRAs.  Before 2010, only people with modified adjusted gross incomes of less than $100,000 could convert.  Starting in 2010, this income limitation has been lifted, meaning most people are eligible to convert their traditional IRAs to Roth IRAs.

In addition to the income limitation being lifted, the IRS is allowing taxpayers who do a Roth IRA conversion in 2010 to spread their taxes out over two years.  So instead of paying it all on your 2010 tax return, you can pay half in 2011 and half in 2012.

This may seem like a no-brainer for people who want to do a Roth IRA conversion in 2010, but don’t leap before you look.  Just because you can do a Roth IRA conversion in 2010 doesn’t mean you should do a Roth IRA conversion in 2010.

Before you make a decision on whether to convert or not, here are some basics about traditional and Roth IRAs you should be aware of:

Traditional IRAs

• Money put into traditional IRAs is tax deductible (income limits apply if you are covered by an employer sponsored retirement plan)
• Withdrawals from traditional IRAs are taxed at your ordinary income tax rate, so if you are in the 15% tax bracket you’ll pay 15% on the amount withdrawn, if you’re in the 28% tax bracket you’ll pay 28% on any distributions, etc.
• Distributions must be taken from traditional IRAs once you reach age 70 1/2.

Roth IRAs

• Contributions to a Roth IRA are not tax deductible.
• Your ability to contribute to an IRA may be limited if your income is high.
• Qualified withdrawals (must be at least age 59 1/2 and have had the Roth for at least five years) are not subject to income tax.
• Roth IRAs are not subject to the required minimum distribution rule that traditional IRAs are.

As you can see, there are benefits and drawbacks to both types of IRAs, so how do you know which one is right for you?  Here are some general guidelines to help you determine whether a traditional or Roth IRA makes the most sense for you:

• If you expect to be in a higher tax bracket when you will need the money, then a Roth IRA probably makes more sense.
• If you think you will be in a lower tax bracket when you retire, then a traditional IRA may make more sense as you’ll get a tax break up front when your tax rate is higher.

So Should You Do a Roth IRA Conversion in 2010?

Many people are not able to contribute to Roth IRA accounts because their income is too high.  Thanks to the income limit for Roth conversions being lifted in 2010, taxpayers who didn’t have access to Roth accounts before can invest in them now by converting their traditional IRAs.

Because of the tax advantages of Roth IRAs, when you convert a traditional IRA to a Roth IRA, you have to pay taxes on the entire amount converted.  This can be a substantial tax bill depending on how much you convert and what tax bracket you are in.

Despite the fact that you have to pay taxes on the amount you convert, it may still make sense for some people to do a Roth IRA conversion in 2010.  You should consider converting to a Roth IRA if:

• You expect to be in the same or higher tax bracket when you retire (or when you will need the funds),
• You have a long time horizon for the funds that will be converted, and
• You have funds outside of the IRA to pay the tax resulting from the conversion.

While Roth IRA conversions won’t be right for everyone, some people will benefit from the new 2010 conversion rules.  The people who will benefit the most include people who have been unable to contribute to Roth IRAs due to income limits and people who expect to be in a higher tax bracket when they retire (or who are convinced that tax rates will continue to go up regardless of which bracket you are in).

A financial planner can help with a number of financial questions and goals, such as reviewing your investments to make sure they are appropriate to meet your goals, preparing a retirement projection to show you if you are on track to retire at your desired age or not, reviewing your tax returns to make sure you’re getting all of the tax benefits you are entitled to, or even a comprehensive financial plan which covers all aspects of your financial life.

There are many different types of financial advisors, and most are compensated differently and work differently than other advisors (there’s not a standard fee structure or even a standard service set when it comes to financial advisors), so it’s important to do your homework before you hire a financial professional.

Here are some questions you should ask when interviewing a financial planner:

• How long have you been providing financial advice?
• How are you compensated? Do you earn a commission for products your recommend (sell) or do you earn a fee based on your time?
• What are your qualifications? Do you have any licenses (CFP, CPA), or are you associated with any professional organizations (NAPFA, FPA, etc.)?
• Who are your typical clients? Do you have any clients similar to me?
• Do you have a specialty, i.e., tax planning, retirement planning, working with baby boomers?
• How often will you monitor my financial plan? Do you automatically monitor my investments or is it up to me to contact you when I need an update?
• How many clients do you have? Will I be working with you or an associate of yours?

While asking friends, family and business associates for referrals for financial planners is a good idea, you should do your own due diligence as well. Read up on the different types of financial advisors (stick with reputable financial publications and websites such as the Wall Street Journal, Kiplinger’s Magazine, etc.) before you start your search. Once you know what type of advisor you want to work with, you should interview several potential advisors to determine which one will best suit your needs, personality and goals.

Beacon Financial Advisors is one of several financial advisors in Kansas City who offers hourly, fee-only financial advice. For objective, unbiased advice on your investments, retirement, taxes and more, please contact us to setup a complimentary introduction meeting today.

RMDs Suspended

The Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) suspended required minimum distributions (RMDs) for 2009.  If you’re not familiar with RMDs, these are distributions that you are required to take from your traditional IRA and employer sponsored plans (401Ks) beginning at age 70 ½.

This is a one-time suspension of RMDs, effective for 2009 only.  This suspension was created in response to the sharp declines in the stock market, with the purpose of allowing individuals to keep the funds invested in their IRAs instead of being forced to take distributions when the market, and thus their account values, were significantly down.

Many people took their RMD in 2009 either because they weren’t aware of the change, or they had their RMD setup for automatic withdrawals and they failed to modify withdrawal instructions with their broker or financial institution.

Reversing Unwanted RMDs

Thankfully, the 60-day rollover rule allowed many people to reverse unwanted RMDs, if caught in time.  The 60-day rollover allows taxpayers to roll funds received (from RMDs or other IRA distributions) back into an IRA or other qualified plan within 60 days to avoid the tax bill from the original distribution.

Unfortunately, many people missed the opportunity to do a 60-day rollover either because they didn’t know they could, or they weren’t aware that they didn’t have to take their RMD until after the 60 days had passed.

Relief For Taxpayers Who Missed the 60-Day Rollover Period

As a result, the IRS issued Notice 2009-82 which provides relief to people who missed the 60-day rollover window, allowing them to roll unwanted RMDs back into their IRAs, but only through November 30, 2009.  This relief is retroactive (the notice wasn’t issued until September 24, 2009), so people who took RMDs as early as January can use this exception to return the funds back to their IRA account.

This relief may not help everyone who took unwanted RMDs however.  The following people will not benefit from this exception to the 60-day rollover rule:

• IRA owners who took more than one distribution from their IRA in 2009.  The 60-day rollover only allows you to roll one distribution back into your IRA per year, so people who took their RMD in monthly or quarterly installments will only be able to roll one of those distributions back into their IRA.
• IRA beneficiaries: the suspension of 2009 RMDs applies to both IRA owners and beneficiaries, but the 60-day rollover rule (and the exception created by Notice 2009-82) only applies to IRA owners.  So if you inherited an IRA (and you are not the spouse of the IRA owner), and you took an RMD distribution in 2009, you can not roll that distribution back into the IRA.

How to Rollover the Funds

So far we’ve talked about rolling any unwanted RMDs back into your IRA account, but that’s not your only option.  Regardless of where the RMD came from, you have three options for rolling them back over, including:

• Rolling the funds back into an IRA (does not have to be the same IRA you took the distribution out of)
• Converting the funds into a Roth IRA (income limits apply for 2009), or
• Rolling the funds into a qualified plan (not all qualified plans accept rollovers)

Who Should Rollover RMDs Back Into Their IRAs?

Rolling unwanted RMDs back into your IRA may not be the best option for everyone.  People who want tax deferral or who want to convert traditional IRAs to Roth IRAs in 2010 should consider rolling any unwanted RMDs back into their IRAs, along with those who want to use their IRAs for charitable contributions.

However, people who rely on their RMDs to meet living expenses, or those who believe that taxes are going up (and expect to be in a higher tax bracket later) should not roll their RMDs back into their IRA.  In addition, if you’ve already done a 60-day rollover this year, you can’t do another rollover.

Bottom line, consult with your tax advisor to determine if you would benefit from rolling any unwanted RMDs back into your IRA.  But hurry, the deadline for completing rollovers (unless you are within the 60-day period) ends on November 30^th.

People who have already exhausted their unemployment benefits can reapply for additional benefits under this bill.

The bill still has to get through the House and then must be signed by the President, but it is not expected to change much before the final passing.  This is expected to be the last extension for unemployment benefits.

Data shows that one out of three unemployed people have been unemployed for more than six months.  Normal unemployment benefits run for 26 weeks, so this bill is intended to help those who have suffered extended unemployment periods.

On the bright side, the number of people filing for unemployment benefits declined last week, indicating that we might be at the peak of the unemployment for this recession.  Currently the national unemployment rate is 8.9%; it was expected to climb to over 10% before the labor market started recovering.  Hopefully the decline in new unemployment claims indicates an earlier than expected recovery in the labor market.

If your parents are at least 62 years of age and have significant equity in their home, a reverse mortgage can turn that equity into tax-free cash without forcing them to move or make a monthly payment.

If it’s right for them, it’s a worthwhile financial tool. If not, they could make some serious mistakes with their financial future.

A reverse mortgage gets its name because of the way it works. Instead of the borrower making payments to the lender, the lender releases equity to the borrower in a number of forms:

• A lump sum cash payment;
• A monthly cash payment;
• A line of credit (which tends to be the most popular option);
• Some combination of the above.

When the owner dies or moves away, the house can be sold, the loan paid off and any leftover equity value can go to the living owner or the designated heirs.  Heirs don’t have to sell the house. They can either pay off the reverse mortgage with their own funds or refinance the outstanding loan balance within six months with the option of two 90-day extensions that must be applied for.

There are three basic types of reverse mortgages:

• Single-purpose reverse mortgages, which are offered by some state and local government agencies and nonprofit organizations;
• Home Equity Conversion Mortgages (HECMs) are federally insured reversed mortgages backed by the U. S. Department of Housing and Urban Development (HUD);
• Proprietary reverse mortgages are private loans that are backed by the companies that develop them.

The size of a reverse mortgage is determined by the borrower’s age, the interest rate and the home’s value. The older a borrower, the more they can borrow, but the amounts are capped by the maximum FHA loan limit for each city and county.

Reverse mortgages have traditionally been chosen by older Americans who can’t cover everyday living expenses or who otherwise need cash for such things as long-term care premiums, home healthcare services, home improvements or to pay off their current mortgage or credit card greater than their income can support. More recently, though, they’ve become popular with individuals who see them as a better alternative to home equity lines. Some use the proceeds to supplement monthly income, buy a car, fund travel and second homes and evaluate with the help of a financial adviser if reverse mortgage funds can be used to restructure estate taxes.

Elderly borrowers will have to consult with a financial advisor before they’re granted this loan – that’s one of the requirements. They should consider a Certified Financial Planner ™ professional to do this because reverse mortgages can be complex and risky. This step can be completed within the first few days of the process. The basic loan closing now takes place in about 30-40 days from the date of application. Generally the only out-of-pocket cost is an appraisal fee ranging from $300- $500.

Here are other things to consider:

Cost can be substantial: Reverse mortgages are generally more expensive than traditional mortgages in terms of origination fees, closing costs and other charges. The basic FHA-backed HECM loan finances these fees into the initial loan balance, and they can run between $12,000-$18,000. The loans are based on anticipated home value appreciation of 4 percent a year, so if the housing market is healthy, those costs are generally recovered in a short period of time. But if the housing market sours, it will definitely take longer to recoup those fees.

They’ll need to make sure they’re not endangering their Federal retirement benefits: The basic FHA HECM is designed as tax-free income to the senior receiving their Social Security income. However, if their total liquid assets exceed allowable limits under federal guidelines, they might endanger your benefits. This is another critical reason to work with a financial adviser on this decision.

Rates can be higher: Reverse mortgages have rates that are typically higher than those charged on conventional mortgages. Interest is charged on the outstanding balance and added to the amount they owe each month.  Again, check the total annual loan cost.

Their mortgage can be called: The homeowner or estate always retains title to the home, but if they fail to pay your property taxes, adequately maintain their home, pay their insurance premiums, or change their primary residence, the lender can declare the mortgage due or reduce the amount of monthly cash advances to pay those overdue amounts.

The family needs to talk. If your parents’ house is their major asset, getting involved in a reverse mortgage may not leave much to the next generation – if it appreciates, there may be some difference that the kids can have. That’s why that in addition to discussing a reverse mortgage with a financial adviser, parents and their adult children need to talk with their family.

August 2009 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Kristine McKinley, a local member of FPA.

If you are retired and receiving Social Security benefits, you know that your benefits are increased each year to help you keep up with inflation.  This is called a cost of living adjustment, or COLA.  The COLA is announced in October of each year and is based on the CPI-W (the Consumer Price Index for Urban Wage Earners and Clerical Workers) from the 3rd quarter of the previous year to the 3rd quarter of the current year.  Changes announced in October go into effect in January of the next year.

In 2009, retirees saw their benefits increase by 5.8%, due mainly to the high cost of gas during 2008.  This was much higher than normal, with the average increase being around 2.8%.  Unfortunately, the Congressional Budget Office (CBO) is estimating that there will be no increase in Social Security benefits for the years 2010 through 2012.

The reason that there may not be any COLAs for the next few years is a law that says that no further COLAs may be given until the CPI-W exceeds the level on which the previous adjustment was based.  Since gas prices have gone back down, the CPI-W has also decreased and is not expected to get back to the level it was at (when the 2009 COLA was announced) until the year 2011.

If you’re already receiving Social Security, you probably are also aware that Medicare Part B premiums have also been rising.  Thankfully, there is good news for the majority of retirees who have their premiums deducted from their Social Security checks.  There is a “hold harmless” provision that says that Social Security retirement benefits will not decrease as a result of an increase in the Part B premium.  So even if Social Security benefits stay the same and Part B premiums increase, your Social Security check will not go down.

However, the “hold harmless” provision does not apply to new Social Security recipients, Medicare participants who are not yet receiving Social Security benefits and high income people.  If you are unfortunate enough to fall into any of these groups, you’ll pay higher premiums to make up for the participants who are covered under the “hold harmless” rules.  This may seem unfair, but this scenario (where Social Security does not receive a COLA but Medicare premiums are rising) was never expected to happen, because it was never expected that Social Security would not receive a cost of living adjustment since they were made automatic in 1975.

The reason high income earners will see higher Medicare premiums is due to the Medicare Modernization Act, which will be completely phased-in this year.  This act basically says that high income beneficiaries will pay a larger portion of the cost of Medicare, based on their income.  While this act is not the focus of this article, the combination of the Medicare Modernization Act with no COLAs for Social Security retirement benefits could mean smaller Social Security checks for people above certain income levels for the next few years.

Bottom line, if you’re collecting Social Security you’re going to learn the true meaning of “fixed income” over the next few years.  To prepare you should keep a close eye on your spending, and if you’re a high income earner you should be aware of tax and financial planning strategies that could cause a spike in income and thus a spike in your Medicare costs.  These strategies need to be carefully planned and coordinated so that your increase in Medicare costs don’t outweigh the benefits of the planning strategies.

Financial Advisors in Kansas City – Beacon Financial Advisors is a fee-only financial planning firm located in Lee’s Summit, serving the greater Kansas City area.  Services provided include retirement planning, investment advice, tax planning and comprehensive financial planning.

Summer’s actually a good time to do this task because there’s still enough time to correct lapses in savings, spending or tax planning. Here’s what most people should cover:

Retirement savings:
Given the state of the economy, it’s not a bad time to review your retirement funds and your current investment allocation. If you are on schedule to max out your contributions to your company retirement plan this year, great. But don’t forget to check your existing IRAs and other retirement accounts to see if you’ll have enough cash on hand to contribute the maximum in each account by their respective deadlines next year.

Taxes:
If you got a sizable refund in April or found it necessary to empty savings to pay Uncle Sam, it’s definitely time to reassess what you’ll owe at tax time next year.  Also, if you think you’ll have some losing stocks in your taxable investment accounts, keep an eye on those in case you’ll need to offset gains in your portfolio at the end of the year.

Spending:
Either on your computer or on paper, take the time to figure out where you’re money’s going.  A look at the last six months of spending may reveal opportunities to reduce spending and redirect money toward more necessary goals. Also, take a look at such things as gym memberships, magazines that are piled up and coffee expenses. If you’re not using these things, you can probably live without them. Doing this exercise can identify a surprisingly large amount that’s unaccounted for that can be redirected to debt payment, savings and investments.

Emergency fund:
Most financial experts encourage you to have between three and six months of living expenses in an emergency fund.  If you don’t have that minimum, go back to your spending review and see where you can start socking money away.  In addition, with credit being tight and jobs being unstable, it might be a good idea to increase your emergency fund even more – six to twelve months of living expenses is becoming the standard rule of thumb in this economy.

College savings:
If you are saving for your child’s education or your own, check to see if you’re on track with the goals you made for the year. It’s also a good idea to read the latest news on financial aid since schools change their financial aid policies annually.  Even if your kid’s still in grade school, it’s a good idea to learn as much about college financial aid while you’ve got plenty of time to learn.

Special goals:
If your car is suddenly looking like it will need to be replaced or if this might be the last year for your furnace, see if you can direct more money into a reserve fund to cover replacement costs or at least a heavy down payment. If there’s a vacation you want to take by the end of the year or a special household purchase you want to make, focus on the cash you’ll set aside to make that happen.  Of course, if you have credit card debt rolling over from one month to the other, maybe that should be your initial focus.

Credit:
If you haven’t set a schedule for receiving your three credit reports throughout the year, do it now. You have the right to get all three of your credit reports – from Experian, TransUnion and Equifax – once a year for free. You can do so by ordering them at www.annualcreditreport.com. By staggering receipt each of your credit reports at different points in the year, you’ll get a continuous picture of how your credit picture looks. Also, you’ll have the opportunity to focus on possible errors in a single report, which will give the other two credit agencies time to update their files.

This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided by Kristine McKinley, a local member of FPA.

Financial Advisors in Kansas City – Beacon Financial Advisors is a fee-only financial planning firm located in Lee’s Summit, serving the greater Kansas City area.  Services provided include retirement planning, investment advice, tax planning and comprehensive financial planning.

Will Social Security be there for me when it’s my time to collect benefits?

For a long time the media has been telling us that Social Security is going bust. Millions of Americans depend on Social Security to fund all or part of their retirement, so this is a huge concern in our country. So do we really need to worry about Social Security going under before we start collecting our retirement benefits?

The 2009 Social Security Trustees Report anticipates that Social Security benefits paid to retirees will exceed Social Security taxes paid in by workers (and earnings on the funds in the trust) beginning in 2016.  In addition, the trust fund could be exhausted by 2037.  Once the trust fund is gone, benefits will still be paid out, but the taxes collected from people still working will only be enough to cover 76% of the benefits promised.

We will probably see several reforms in the future, including a higher retirement age, decreased benefits for future retirees, etc.  Social Security may not look the same as it does now for future generations, but it’s too important to our country to let it fail.

How much can I expect to receive?

An important part of planning for retirement is knowing what resources you will have to help cover living expenses once you retire. For some people Social Security is their only retirement income; for others it’s a small part of their retirement, as they will have pensions and investment income in addition to Social Security. Whatever your situation is, you need to have a good understanding of how much income you will receive from all sources so you can adequately plan for your retirement years.

How much Social Security you receive will depend on several things, such as when you retire, how many years you worked and how much you earned, among other factors.

Generally, your benefits are calculated by applying a formula to your top 35 years of earnings, indexed for inflation. Once your benefit is calculated, it is reduced by up to 25% for people who retire before their full retirement age, and increased by 8% per year for people who wait until after their full retirement age to start collecting benefits. To estimate your benefits, you can use the retirement benefit calculators at the IRS website.

When should I sign up for Social Security?

Probably the most commonly asked question is “when should I sign up for Social Security”? By now, you’re aware that you will receive lower benefits if you apply for Social Security before your full retirement age. The question is, are you better off applying early and receiving benefits for more years, or will you benefit more if you wait until age 66 or later to apply?

How can I get the maximum benefits?

Your parents and grandparents probably never wondered how they could maximize their Social Security benefits, but you should. Because it’s an income stream for life, and because it is increased each year for inflation, Social Security is much more valuable than most people realize. There is nothing wrong with using the Social Security rules to your advantage.

Will my Social Security retirement benefits be enough to live on?
Social Security was never meant to fund 100% of your retirement. It was designed to supplement other income streams (pensions and annuities) as well as your retirement savings.  So you should not expect Social Security to be enough to cover all of your living expenses in retirement. On average, Social Security constitutes about 40% of their income.