Q: I'm 67, working full time from my home. My wife is 65 and also works full time. We need financial advice to help us project what our situation will be next year, when my wife starts collecting Social Security while continuing to work. I'm postponing taking Social Security, letting my benefits increase at 8% a year because that will be our retirement income. We earn about $75,000 a year without Social Security and we're trying to lower our tax liability. --PS via email
A: It sounds as if you need a one-time consultation with a Certified Financial Planner who charges an hourly fee for advice.
Admittedly, it takes time to find such an adviser; but it's not as difficult as it was a decade ago.
Of course, the vast majority of people who call themselves financial advisers still earn commissions for selling investments; and selling products is their primary job. A much smaller group of fee-only financial advisers could better be described as wealth managers: They offer comprehensive personal finance advice and investment management to clients who typically have at least $1 million to invest.
But there is one well-known and well-established provider of the kind of service you want: the Garrett Planning Network (GNP) a nationwide network of independent, fee-only financial planners who specialize in serving middle-class clients on an as-needed basis.
Go to the GNP site, type in your zip code, and you'll get the names, contact and biographical information of its network advisers in your area.
When you call likely candidates, they'll ask you to fill out a questionnaire and make an appointment for a free 30 to 45 minute `get acquainted' meeting. This meeting (which could be over the phone) gives you a chance to explain what you're looking for, ask what it will cost, and get a sense of what the adviser is like.
(To help you prepare for those preliminary conversations, the GNP site provides the questions GNP founder Sheryl Garrett thinks everyone should ask before hiring a financial planner, plus a free online copy of Chapter 20 from The Personal Finance Workbook for Dummies: 'Finding and Hiring the Right Advisor'. You'll find a link to both here.)
You should know that CFP is a professional designation, not a government license. (There's still no government license required to call yourself a financial planner!) But CFPs are professionals who have passed a comprehensive two-day exam and agreed to follow a written code of ethics and maintain a minimum level of continuing education.
A couple of thoughts you may want to consider:
When your wife files for Social Security next year, you should apply for a spousal benefit based on her record. Since you’re over 66, you can file for a spousal benefit without having to apply for your own benefit at the same time. (See my AARP Bulletin article about this and other little-known Social Security strategies.)
You’ll qualify for the maximum spousal benefit: 50% of the amount your wife receives. At 70, you can switch to your own benefit -- and as you say, in the meantime it will grow 8% a year (not counting any annual inflation adjustments).
It sounds as if you may be self-employed. If that's the case, you might want to ask the adviser if it makes sense to reduce your tax liability by contributing to a SEP IRA.
The 2011 maximum SEP IRA contribution is $49,000 or 20% of your net self-employment income, whichever is smaller. Obviously, you’re not going to put in that much – but every dollar you put into the account reduces your taxable income. And since you’re over 59 and a half, you can tap the IRA without incurring an early withdrawal penalty anytime you want.
Creating a SEP-IRA is as easy as setting up a regular IRA. You can do it at any mutual fund company, bank or insurer.
Please send your questions to Lynn@LynnBrennersFamilyFinance.com. I'm sorry I can't respond personally to every email. Questions are only addressed online.
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