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A Different Degree of Wealth

Why Your Social Security and Pension Choices Matter

As you approach retirement, the prospect of balancing your post-work budget with income from your retirement savings can be daunting. Key sources of income for retirees typically include Social Security and pension plans. In light of that, understanding how to manage these sources effectively is crucial for ensuring a financially secure retirement. This article will guide you through why your Social Security and pension choices matter and how to make informed decisions when the time arrives.

Understanding Your Income Sources

Retirees often rely on various types of income based on their working history. Pensions and Social Security are two prominent sources. Pensions are workplace retirement plans where employers contribute to a fund for employees. These plans, often referred to as defined-benefit plans, provide predetermined payments upon retirement. While private sector pensions are becoming rare, they remain common for state government employees.

Social Security, on the other hand, is a federal program funded through payroll taxes. It provides a government-guaranteed basic income, with benefits beginning as early as age 62. The amount of Social Security benefits varies based on your lifetime earnings and the age at which you start claiming benefits. Both pensions and Social Security aim to provide financial support during retirement, but they differ significantly in their structure and funding.

Key Considerations for Social Security

Choosing when to start receiving Social Security retirement benefits is a critical decision influenced by your lifestyle, financial situation, and goals. There are four primary options to consider:

1.      Continue Working and Claim Benefits

If you start claiming Social Security benefits before your full retirement age while continuing to work, your benefits will be reduced slightly each month before reaching full retirement age. Additionally, if your earnings exceed annual limits, your benefits will be further reduced. However, after reaching full retirement age, your benefits will be recalculated to account for any months without payment due to earnings. Delaying benefits past full retirement age results in increased monthly payments due to delayed retirement credits.

2.      Stop Working and Claim Benefits

Stopping work and claiming benefits before full retirement age also reduces your benefits slightly each month before reaching full retirement age. Moreover, additional earnings will not increase your benefits. Benefits are calculated based on your highest 35 years of earnings, so stopping work before reaching 35 years or having low-earning years can affect your benefit calculations. Delaying benefits past full retirement age results in delayed retirement credits and increased benefits.

3.      Continue Working and Not Claim Benefits

Continuing to work without claiming benefits increases your benefits for each month you delay receiving them until age 70. There is no incentive to delay past age 70. Continued work can also increase your benefits if current earnings replace lower-earning years. If you are not receiving benefits by age 65, you need to apply for Medicare three months before turning 65 to avoid late enrollment penalties.

4.      Stop Working and Not Claim Benefits

Stopping work without claiming benefits is feasible if you have other sources of income. Benefits will not increase from additional earnings, and the calculation is based on your highest 35 years of earnings. Delaying benefits increases monthly payments for each month delayed until age 70. If you are not receiving benefits by age 65, you need to apply for Medicare to avoid penalties.

Key Considerations for Pensions

Pensions, typically defined-benefit plans, provide a predictable income stream in retirement. However, choosing the right payout option is essential for maximizing your financial security.

1.      Annuity Distribution

An annuity distribution offers fixed, regular payments, providing certainty and a steady income similar to pre-retirement wages. There are three common forms:

  • Single-Life Annuity: Payments end upon your death.
  • Period-Certain Payouts: Payments continue to a beneficiary if you die within a set period.
  • Joint and Survivor Payouts: Payments continue for the lifetimes of you and a beneficiary.

 

While annuity payments are fixed and taxable, it’s important to remember that they can lose value during periods of high inflation.

2.      Lump Sum Distribution

A lump sum distribution provides control over your money, allowing you to invest it, move it to another retirement account, or cash it out. This option requires careful budgeting and management since there are no regular payouts, and investment returns are not guaranteed. You can roll the funds into an IRA or 401(k) to defer taxes and potentially grow investments. Depositing them into a bank account incurs immediate taxes and penalties if you’re under age 59½.

3.      Timing and Amount

The timing and amount of your pension payout depend on your actual retirement date, typically around age 65. Early retirement may reduce benefits, while later retirement may increase them. Payout calculations are based on service length, salary, and age. It’s crucial to check with your human resources department for specifics on your plan’s eligibility and payout calculations.

Making Informed Decisions

When considering your Social Security and pension options, ask yourself these key questions:

  • What options does your plan allow?
  • Do you prefer a steady monthly income or a lump sum to manage as you wish?
  • Do you want to provide for a surviving spouse after your passing?

 

Understanding your income sources, the implications of your choices, and the timing of your decisions will help you create a retirement budget that aligns with your needs and goals. By carefully evaluating your Social Security and pension options, you can make the right choices that ensure a financially secure and stress-free retirement.

If you have any questions, give us a call or read “Wealth on Purpose” by Bryan Ballentine.

Have a great weekend!




Sources: Located at the bottom of the article.


Golf Tip of the Week

How to hit Tiger Woods’ go-to stinger shot

This story first appeared in 2020, following a Golf Digest shoot with Tiger Woods. Four years later, Woods’ explanation of how he hits his knockdown “stinger” shot remains as insightful as it was when it was first published.

There’s one shot I hit that gets crowds more amped than any other: my stinger.

I developed this low-flying tee shot in the late ’90s to make sure I could compete in any condition. The stinger would give me an advantage on windy Open Championship days, when you really can’t control anything that flies too high.

It wasn’t an easy shot to master. I had to get stronger, particularly in my forearms, to be able to cut off the swing just after impact to hit this shot. After a ton of range work, I felt comfortable bringing it out in competition. And it’s been a trusty constant—with slight variations—throughout my career and all my swing changes.

Here’s something you might not know: I didn’t come up with the name “stinger.” This very magazine gets the credit.

Back in 2000, Golf Digest asked me to demonstrate the shot for an article. The photographer (Stephen Szurlej) was crouched about 10 yards in front of me and asked me to hit the stinger over his head. I don’t think he realized how low this ball comes off the face. He was on the ground, but I hit one that couldn’t have missed his head by more than a few inches.

The whizzing sound quickly prompted him to take the rest of the photos operating the shutter by remote. The first shot, with the ball still in the frame, ran in the magazine alongside the headline, “Tiger’s Super Stinger.” To my knowledge, that’s the first time anyone referred to it as a stinger—but the name stuck. 

It’s impossible to overstate how crucial it is to have a go-to ball off the tee—a shot you can trust to find the fairway when you really need to. I’ve always felt I have more control over a shot when I’m hitting down on it. That’s why, when I need to get one in play with the driver, I usually turn to a slappy cut. It might not go as far as a regular driver, but I can control it. I’ll switch to the stinger if it’s really firm and there’s nothing to carry, It’s just easier to keep something lower on line. You give up some distance, but the shot is so reliable. At the 2006 Open Championship, where I hit one driver all week, I used the stinger countless times and won by two shots.

Back in the late ’90s, I used a 2-iron almost exclusively to play this shot. Then the design of 3-woods improved, and I could flight it down with that club. Because I don’t hit a 2-iron or 3-wood as far as I used to, I now sometimes hit the stinger with a driver to pick up some extra yards.

My technique for this shot has changed slightly throughout the years, but many of the basic principles are the same, as you can see from the 2020 photos of me in the black shirt and the ones from that article in 2000. It’s good to know that after all this time, it’s still a reliable friend.

Backswing

I stand a little closer to the ball than normal. That allows me to cover it better, meaning a through-swing where my chest stays more on top of the ball. Remember, you don’t sweep this tee shot, you hit down on it a little. I play the ball farther back in my stance than usual, too, but not as much as I used to. Just enough to take some loft off the trajectory.

My main thought for the backswing is to keep my weight centered. Unlike a normal drive where you feel weight increasing in your back foot, the stinger feels like I’m staying more on my front side. That’s key for the attack angle.

Downswing

This might sound contradictory: You have to hit down on the ball . . . but not too much. If you’re really steep, you’ll put too much backspin on the ball, and it can balloon if there’s any kind of breeze in your face.

Another thing to remember is, from the top of the swing, you have to start getting your left side out of the way quickly, because you’re closer to the ball than normal. I’ve always snapped my left knee straight on the downswing, which you’ll see when you turn the page. That snap helps clear the space for the club to move freely through.

Impact

Everything feels stacked on the same vertical plane as the club approaches the ground. My lower body is clearing out, but my chest is still on top of the ball. That’s what “covering it” looks like. Also, notice how my hands are nearly over the top of the ball in this same photo, but the clubhead lags way behind. It stays that way until the last millisecond, then it catches up and compresses the ball from a delofted position.

Although my pants were a little baggy back in 2000, I can assure you that my left leg was snapped as straight at impact as it appears here.

Finish

The club stays quite low to the ground after impact. That’s evidence I wasn’t too steep into the impact zone.

Another key to the stinger is cutting off the follow-through as quickly as possible. I feel like I’m stopping my hands immediately after impact, even though these photos show momentum has taken my arms and the club well past that point. It takes good forearm strength to control the club like this, but it’s necessary. The lower I want the ball to fly, the faster I’ll stop the swing. To recap: Stand closer, cover the ball, and cut off the finish. That’s how you sting it.




Tip adapted from golfdigest.comi


Recipe of the Week

Homemade Funnel Cakes

8 Large Funnel Cakes

Ingredients

Funnel Cakes

  • Canola oil, for deep-frying
  • 2 1/4 cups milk
  • 1 teaspoon pure vanilla extract
  • 3 large eggs
  • 4 cups all-purpose flour (see Cook’s Note)
  • 1 cup packed light brown sugar
  • 1 tablespoon baking powder
  • 1/2 teaspoon kosher salt

Toppings

  • 1/2 cup confectioners’ sugar
  • 1/2 teaspoon ground cinnamon
  • Sweetened whipped cream, for serving

Instructions

  • For the funnel cakes: Add enough oil to a large Dutch oven or heavy-bottomed pot to come 2 inches up the sides of the pot. Heat the oil over medium-high heat until it registers 360 degrees F on a deep-frying thermometer. Line a baking sheet with a metal cooling rack or a few layers of paper towels.
  • Meanwhile, whisk together the milk, vanilla and eggs in a large measuring cup.  
  • Sift together the flour, brown sugar, baking powder and salt into a medium bowl using a mesh strainer (to break up any lumps in the brown sugar). Stir the egg mixture into the flour mixture just until smooth and combined. 
  • When the oil is up to temperature, use your finger to cover the hole in the bottom of a 1- to 2-cup funnel (with at least a 1/2-inch hole) and fill it to the top with about 3/4 cup of the batter. Position the funnel over the pot of hot oil and remove your finger to release the batter. Let the batter flow into the oil in thick squiggles, moving the funnel within a contained circular shape about 8 inches in diameter. Fry on the first side until golden brown, 1 1/2 to 2 minutes, then use a spider or tongs to carefully flip to the second side and fry for an additional 1 1/2 to 2 minutes. Remove to the wire rack or paper towels and let drain and cool slightly. Repeat with the remaining batter.
  • For topping: Dust the funnel cakes generously with the confectioners’ sugar, sprinkle with cinnamon and dollop with whipped cream before serving warm. 

 

 

 

Recipe adapted from Delish.comii


Travel Tip of the Week

What to Do When an Airline Loses Your Luggage

  

It’s every traveler’s worst nightmare — you show up to the baggage belt and wait for your suitcase to arrive. As each person picks up their luggage, you have the sinking feeling that yours won’t appear. Once all bags are off the plane and yours is nowhere to be found, what should you do? I spoke with the Department of Transportation (DOT) to develop this guide on what to do when an airline loses your luggage.

Unfortunately, this is a relatively common occurrence. My suitcase has been lost before, and countless others have had the same experience. Although the numbers are trending lower than the same time last year, hundreds of thousands of bags still get mishandled in transit for one reason or another. The most important thing to do if your suitcase gets lost is to stay calm. More often than not, it will be found and returned to you. If it doesn’t, you can receive compensation for your lost items up to a maximum liability determined by the DOT. Here are the steps you need to take when an airline loses your luggage.

7 Steps to Take When an Airline Loses Your Luggage

  1. Confirm your luggage is actually lost.

“Generally, when a checked bag does not arrive at its destination, airlines are responsible for locating the bag,” says the DOT. “Airlines have tracking systems in place to try to identify the bag’s location. Some airlines now offer applications for cell phones, tablets, and other electronic devices, which provide passengers with data on the location of their baggage.”

I’ve waited over an hour at the carousel to receive my bag before, so don’t automatically assume it’s lost. Sometimes, it just takes a long time due to staffing issues or the airport’s size. It might also end up at a different carousel than you thought. When this happens, having an AirTag or other tracking device in your suitcase is helpful so you can quickly determine the location. If you’ve waited and checked other carousels and still can’t find your bag, you can talk to the airline.

  1. File a missing baggage report.

You will need to locate the baggage desk for the airline that operated your final flight and let them know that your bag is missing. The baggage desk is typically beside the carousels, so it should be easy to find. Show the agent the bag tag you received when you checked your bag. They might be able to locate your bag in the system. If not, you’ll need to fill out a missing baggage report.

When you fill out your missing baggage report, you’ll be asked about any identifying information about your bag: the brand, color, size, any identifying marks, approximate weight, etc. You’ll also need to put your contact information, local address, and information about your flight. The more identifying information, the better. So, if you don’t already, make sure you have something notable on your bag to help identify it, whether that’s a brightly colored ribbon, stickers, or a strong bag tag.

“Passengers should file a baggage claim with their airline as soon as possible and stay in close communication with the airline after filing a claim and during the baggage location process,” explains the DOT. Make sure you keep your case reference number so you can look up the status of your case online after you leave the airport.

  1. Determine what the airline will cover.

Most airlines have policies for lost or delayed baggage. This will vary between airlines, so ask the representative what will be covered for essential expenses until they locate your bag. They might not proactively give you this information, so it’s crucial to ask. (I didn’t realize the airline had policies for expense reimbursements on delayed baggage, so I paid out of pocket for my essentials when my bag was lost.) Once you know what they will cover, you can go shopping. Keep all of your receipts so you can submit the request for reimbursement. This isn’t the time to go on a full shopping spree, but you can typically buy things you deem essential while waiting for your luggage.

  1. Understand the difference between lost and delayed baggage.

Another lesson I had to learn the hard way is that there’s a difference between lost baggage and delayed baggage. “Most airlines will declare a bag lost between five and 14 days after the flight, but this can vary from one airline to another,” says the DOT. “Once an airline determines that a bag is lost, the airline is responsible for compensating the passenger for the bag’s contents – subject to depreciation and maximum liability limits.”

“Delayed baggage” means that it has been found and will be delivered to you within a few days. If your bag is delayed, make sure they drop it off at your local address. You shouldn’t have to go back to the airport or pay for it to be delivered. “Lost baggage” means it’s genuinely lost and cannot be found.

  1. Contact your credit card company.

If you booked your flight using a travel credit card, you should contact your credit card issuer as soon as possible. Several credit cards, like the Chase Sapphire Reserve, offer baggage delay insurance, which might cover up to $100 a day for five days if your suitcase has been delayed. Understanding the difference between lost and delayed baggage is crucial here.

My airline-branded credit card covered lost baggage, so I went out and spent a few hundred dollars on clothes and toiletries to cover me for the first few days. Once my bag was found and returned to me, it was considered delayed baggage, which the card doesn’t cover. This meant I was on the hook for the money I spent and would not get reimbursed. Although they sound very similar, and my bag certainly felt lost before I got it back, this distinction meant I lost hundreds of dollars.

  1. Keep tracking your bag.

This goes without saying, but keep an eye on your bag and the status of your claim by using the reference number given to you when you filled out the missing baggage report. Stay in constant communication with the airline to receive the most up-to-date information about your suitcase. Ideally, it’s quickly found and returned to you, but if not, you need to know the next steps to receive a refund.

If your bag is considered lost and you are given a reimbursement, the maximums are set by the DOT. “For domestic flights, DOT regulation allows airlines to limit their liability for a lost, damaged, or delayed bag to $3,800,” explains the DOT. For international flights, that number goes down to about $1,700. While airlines are free to pay more than this maximum, they are not required to do so.

  1. Escalate when necessary.

If you aren’t getting anywhere with your contact at the airport, escalate things to a supervisor or another person at the airline. If all else fails, contact the DOT. “If a passenger experiences difficulty related to mishandled baggage or compensation for mishandled baggage, then that passenger should file a complaint with the airline,” says the DOT. “DOT requires airlines to acknowledge consumer complaints within 30 days of receiving them and to send consumers written responses addressing these complaints within 60 days of receiving them.”

How to Prevent Lost Luggage

The DOT provides extensive guidance on preventing lost luggage on its website. One of the most helpful suggestions is to plan ahead to avoid the more serious repercussions of lost luggage. This means you shouldn’t pack any small valuables or critical, irreplaceable, or fragile items in your checked bag. In the unlikely event that your bag does get lost, having these items in your carry-on prevents any major consequences.

Make sure to keep an AirTag or other tracking device in your suitcase. Always label your bag with your name and phone number on a baggage tag and the inside of the bag. If it does get lost, this will help identify your luggage so it gets back to you sooner.

Another great way to prevent lost luggage is to check in for your flight early. If you check in at the last minute, it can be more challenging for your bag to get on board, which might result in it getting lost. When the agent gives you your baggage claim stub, keep it until you have your bag in hand.

Finally, try to keep your itinerary as simple as possible. If you have multiple layovers, especially short ones, there’s more chance that something could happen. When my bag was lost, I flew from Mexico City to Vienna with two layovers — one in Atlanta and one in Amsterdam. My bag made it to Amsterdam but never got on the final flight to Vienna. Luckily, it was returned to me a few days later, but it was still a stressful process. Lesson learned: Try to avoid checking a bag on a route with multiple layovers.

Bottom Line

Lost or delayed luggage can be a stressful and frustrating experience, especially when you’re on vacation. If it does happen to you, follow these steps to ensure you get it back quickly, or at the very least, you receive compensation for the bag’s contents. Always keep your most valuable possessions with you, and never place anything you can’t live without in your checked bag. When I travel, I always keep my laptop, chargers, medications, and basic toiletries with me, just in case.




Tip adapted from travelandleisure.comiii 


Copyright (C) 2021.  Ballentine Capital Advisors.  All rights reserved.

Our mailing address is:  

Ballentine Capital Advisors
15 Halton Green Way
Greenville, SC 29607

Sources:

Retirement Plans: Pensions vs. Social Security

What you need to know about retiring with a pension & Social Security

Your Options: Working, Applying for Retirement Benefits, or Both?

What are the options for your pension payout?

Disclosure:

Ballentine Capital Advisors is a registered investment adviser. The advisory services of Ballentine Capital Advisors are not made available in any jurisdiction in which Ballentine Capital Advisors is not registered or is otherwise exempt from registration.

Please review Ballentine Capital Advisors Disclosure Brochure for a complete explanation of fees. Investing involves risks. Investments are not guaranteed and may lose value.

This material is prepared by Ballentine Capital Advisors for informational purposes only. It is not intended to serve as a substitute for personalized investment advice or as a recommendation or solicitation or any particular security, strategy, or investment product.

No representation is being made that any account will or is likely to achieve future profits or losses similar to those shown. You should not assume that investment decisions we make in the future will be profitable or equal the investment performance of the past. Past performance does not indicate future results.

Advisory services through Ballentine Capital Advisors, Inc.

i https://www.golfdigest.com/story/Tiger-Woods-is-going-to-teach-you-how-to-hit-his-majestic-stinger-shot
ii https://www.foodnetwork.com/recipes/food-network-kitchen/homemade-funnel-cakes-7436838
iii https://www.travelandleisure.com/what-to-do-when-an-airline-loses-your-luggage-8675686

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