No U Hauls to Heaven


I’ve recently had several consultations where the primary objective of my clients was to maximize the amount their beneficiaries will receive upon their demise, thus wanting to claim Social Security ASAP and leave more money to their heirs!  The question then arises is this the best strategy for not only their heirs but also for themselves?  My personal belief is that you should take care of yourself and your spouse (1st and foremost) and if there is anything left at your death, that can be left to one’s heirs.

Don’t put the cart in front of the horse!

Biggest Risk in Retirement is not dying too soon, it is living too long!  People are greatly under-estimating their joint life expectancy.  If a husband and wife are both 65 years of age, there is better than a 50/50 chance that one of them will live into their mid 90’s.  That is also the average and how many people believe they are average?  As I’ve written many times, ”that whatever your check is at age 62 it is DOUBLE at age 70”, but the real issue is that due to the compounding affect the difference in monthly checks starting at age 70 is significant.  As an example, at age 90 there is a $3,000 per month difference for a high earner (when factoring in a modest COLA of 2%, between a person who claims at 62 vs 70).

One of the main questions I always ask prior to running an analysis for an individual around age 60 is the age or their parents?  In well over half of my client cases they have parents still alive who are in their late 80’s or early 90’s, that tells me that life expectancy runs in the family and the higher earnings spouse should delay claiming until age 70!

Granted postponing Social Security until 70 means one might have to work a couple of extra years or start drawing down on other assets to create a bridge to 70.  However, in the long run they won’t have to draw down as much from other assets, since the income from Social Security is much greater which could lead to a greater inheritance for their heirs.

Word for the 2021 – Unpredictable

With non-existent interest rates, with a stock market at record levels and extremely volatile, with the Federal Debt exceeding $25 Trillion and with a new administration, it is fair to say that tax brackets will be going up in the not too distant future.  There is even talk on the Democrat side of the aisle to eliminate the step up in basis at the time of death!  All of these are reasons why one might draw down on qualified assets at this time vs. waiting until 72 and dealing with RMD issues.

As we move into December this is a great opportunity especially with COVID affecting so many American’s finances to explore one’s taxable income in 2020 and the possibility that one might be in a lower tax bracket and take this opportunity to draw down on qualified plans.   As an example, since 9/11, I’ve lost several corporate jobs due to downsizing and reorganizations, but I took them as opportunities to convert IRA’s to Roth IRA’s while I was in lower bracket!

Look at the house

2/3 of most American’s net worth is in their homes!  A house is an expense, it pays no dividends or interest.  How does one capture and use the equity in one’s home?  One might say, they can get a home equity loan (HELCO), but not so fast.  I tried getting one last year on my home and I was declined since I was told I did not have enough income to warrant the line of credit.  They didn’t take into consideration there was no mortgage, they didn’t take into consideration my credit score was over 800, or other investment assets  far surpassed the amount of the line of credit, they looked solely at my earned income in 2019!  Besides a HELOC is a recourse loan and has to be paid back.  A better option (if you intend to stay in the home for at least 5 years, you and spouse are at least 62 years of age and you have significant equity in your home > 50%) might be to use a HECM.  A Home Equity Conversion Mortgage (often referred to as a Reverse Mortgage) it is a way to tap into the equity of the home (use it as a source for retirement income, a standby / growing line of credit or a way to eliminate monthly mortgage payments) as an integral part of a financial retirement plan.   There are a lot of moving parts to setting up a HECM, and it is not appropriate for many individuals, but I’d be happy to discuss it with your if you’re interested in learning more on how they work.

Income = Freedom

My main concern when consulting with individuals and their Social Security benefits is to protect both spouses and to maximize their spendable income for the rest of their lives!  It is my personal belief that if there are funds available when they both die, they can be distributed to their children, grandchildren and charities.  As I told my kids, I put you each through college and gave you each a car at graduation, you are now on your own.  Granted I am a financial backstop should issues arise, which they assuredly will, but I want them to navigate and accept responsibility for their lives!

No more participation awards.


If you have any questions, never hesitate reaching out!

Happy Thanksgiving,

Dave Zander, CFP®
260-615-0078
dzander@Back9Pro.com