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Client Line August Homepage - Knowing Social Security Puzzle

When To File a Gift-Tax Return

Gifts of real estate, securities, and other property may have to be reported on a federal gift-tax return even if no gift tax is due. IRS auditors reportedly have been looking for nonfilers by reviewing government records of recent property transfers between family members in several states.

Under current law, you don't have to pay any gift tax until all the taxable gifts you've made during your lifetime exceed $5 million. But you still may have to file a return. Very generally, a return is required for any year in which your gifts to another person total more than the "gift-tax annual exclusion" in effect for that year ($13,000 for 2011).

There are exceptions to the filing requirement for certain spousal and charitable gifts. Also, no return is required if gifts are qualifying transfers for educational or medical expenses. If you have questions about your filing obligations, check with us.

Is it time to start thinking seriously about retirement? If it is, then it's time to start thinking about Social Security, too. When is the best time to sign up for benefits? Only you can decide.

Your Timetable

If you want, you can sign up for Social Security benefits at age 62. However, you'll receive less than your full benefit -- somewhere between 70% and 75% -- depending on when you were born. Wait until full retirement age (from 66 to 67 for those born after 1942) and you'll receive your full benefit. Sign up for benefits beyond full retirement age and your benefit will increase 8% a year until you reach age 70.

Amanda was born in 1950. If she signs up for Social Security:

  • At age 62, she'll get 75% of her benefit (the minimum amount)
  • At age 66, she'll get 100% of her benefit
  • At age 67, she'll get 108% of her benefit
  • At age 70, she'll get 132% of her benefit (the maximum amount)

Your Breakeven Point

If you don't need the money at age 62 or you're still working, waiting to draw Social Security may seem like the best choice. But it's not that simple. If you delay taking benefits, it will take some time to reach your breakeven point -- the point at which the higher payments will start giving you an overall dollar advantage. If you live beyond your breakeven point, waiting will have paid off (as measured by the total amount of Social Security you receive).

Your Health and More

Consider your health. If you're in good shape and have a family history of longevity, you might ultimately come out ahead by waiting to sign up for Social Security. If your health isn't the best, you may want to begin taking benefits as soon as you can.

Finally, look at your finances. If you're married, you'll want to coordinate your and your spouse's retirement strategies. If one or both of you will receive a pension, that could affect your decision about when to take Social Security. Factor in any retirement accounts and/or taxable savings or investment accounts you have as well.

Client Line

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