Monday, October 26, 2009

10%+ Guaranteed Government Bonds

Okay, I’ve exaggerated a little. It isn’t government bonds, it is Social Security. Yes, Social Security pays over 10%, except this year (it only pays 8%), and might even be tax-free.

How can you get in on these goodies? Simple. Delay taking your Social Security. Don’t run for the door; I’m serious. Let me explain.

Here is how it works: From your normal retirement age to age 70, you get an 8% annual boost in your benefits on top of normal COLA (cost of living adjustment) increase. Once you lock in the higher benefits, your surviving spouse also gets the additional benefit.

You want to collect benefits now? No problem (if you are married). You can collect Social Security benefits based on your spouse’s benefit now, and collect your own benefit later. Granted, you only get half the benefit amount, but look at the total advantage. Each spouse collects half of each other’s benefit until ago 70 and then collects their own higher benefit. Get a little now and a ton later.

Maybe you already collect Social Security. Boy, do I have a trick for you. You can collect at any age and later pay it back, qualifying for the much higher benefit. You get interest-free use of the money. The problem is to come up with all the money. Not everyone can do this. If you paid tax on any repaid Social Security, you qualify for a refund. Run the numbers, folks. It really works. (If you live at least five or so years.)

And remember, I said it might be tax-free. Under the current tax code, singles under $25,000 of MAGI (modified adjusted gross income) and marrieds under $32,000 get all their social security tax-free. No matter what, 15% is tax-free, regardless of income. Many states don’t tax some or all of Social Security.

Want to read another article on this, click here.

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