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Publication: Investor's Notebook
IN DOUBT ABOUT SOCIAL SECURITY BENEFITS?

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       Investor's Insight - September 22, 2006           
          "A Digest of Investment Opinion From the 
             World's Leading Financial Advisers"


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IN DOUBT ABOUT SOCIAL SECURITY BENEFITS? VISIT THE WEB SITE
by Scott Burns

Q: In a recent column, a reader's question mentioned that 
part of his income was a Social Security check, as well 
as some part-time income of $36,000 per year. I am also 
receiving Social Security and was told by the Social 
Security Administration that I could not earn more than 
$14,000 in any one year while receiving Social Security. 
Does this amount change depending on the income amount 
one retired at? -- D.F., Dallas

A: No, the amount doesn't change depending on the income
you retired with. If you retire early -- before what 
Social Security deems your "full retirement age" -- two 
things happen. First, your benefit entitlement is re-
duced from what it would be if you did not retire early. 
For those born in 1940, for instance, full retirement 
age is 65 years and 6 months. A person born in 1940 who 
retired at age 62 would receive monthly benefits about 
22.5 percent lower than if he waited to 65 years and 6
months.

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Here is the URL to the Social Security Web site page with 
information on the full retirement age: 
www.ssa.gov/pubs/10035

The second thing that happens for early retirees is that 
their benefits can be further reduced if they continue 
working and earn too much money. They can have unlimited 
income from investments, but excessive wage income will 
reduce their benefits. The formula allows you to earn 
$12,000 a year before your benefits are reduced. Once you 
earn $12,000, your benefits are reduced by $1 for every 
$2 you earn over the limit. A more liberal limit applies 
in the year (and that year only) you reach full retirement 
age.

To learn more, visit The Social Security Web site and read 
"How Work Affects Benefits" at www.ssa.gov/pubs/10069

Once you reach full retirement age, there is no limit on 
how much you can earn in wages -- your benefits will never 
be reduced, except by taxes if your total income exceeds 
certain limits.

Q: My husband and I are retired, ages 70 and 67, and in 
fair health. We married five years ago, and he moved into 
my house, which I own mortgage-free. We would like to buy 
a larger house in a better neighborhood. My house is worth 
$100,000. I am not sure how much we should spend on another 
house.

We have a combined monthly income of $5,900. We also have 
investments of $400,000 and $45,000 in cash. We would pay 
cash for the new house after selling mine.

If he dies first, however, I do not get any of his retire-
ment income. I would have my Social Security ($890 a month) 
and dividends from his portfolio (about $1,800 a month) to 
live on. We have no debts. What do you suggest?
-- B.T., by e-mail

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A: The future may be less hazardous than you think. 

Two can't live as cheaply as one, but there are some 
"economies" to being a couple. Most research suggests that 
your expenses will decline by about 30 percent if you are 
widowed in the future. That would narrow the income gap 
you are anticipating.

In addition, when one spouse dies, the surviving spouse 
gets the larger of their Social Security benefits. So if 
your husband is receiving Social Security and his benefits 
are $1,400 a month, your benefits would be $1,400 a month 
as a widow, not $890 a month. That would also narrow the 
income gap.

Finally, if your husband is eligible for life insurance, 
you can narrow the gap further by taking out a life in-
surance policy. The premiums will reduce your current 
income, but they will also provide a future fund that will 
offset some or all of the income lost at his death.

None of that answers your basic question: How much can you 
spend for a new house? The answer, however, is simple: 
Unless you plan to move if you are widowed, you should pay 
no more than you'll be able to afford as a single person.

You can discuss this issue or any other topic in the new 
Investor's Insight forum. Check it out here...

 
Investor's Insight Forum

(Investor's Insight reflects the opinions of experts. It does 
not recommend any specific investments, and no endorsement is 
implied or should be inferred. For more information, contact 
the individual firms cited).

COPYRIGHT 2006 UNIVERSAL PRESS SYNDICATE

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