MTM Mailbag: ⚡️ I've Started Drawing on Social Security, Is That a Bad Move

Every week during the More Than Money show on AM 750 WSB we open up the week's mailbag to answer your questions in the "Lightning Round." Today we’re discussing when to tap into Social Security, the best way to eliminate credit card debt, itemizing healthcare tax deductions and more.

NOTE: We answer each specific case situations in more detail through email, but I always like to share some general feedback.

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My producer recently took a jab at me and said I don’t move through the questions like lightning during the lightning round, but I’m a work in progress and want to give you guys the best answers!

I hope you all find some valuable takeaways in today’s post to apply to your own circumstances. As always, thanks to everyone who sent in questions! 

Here. We. Go.

QUESTION 1 - Don asks: I’ll be 66 and a half and started drawing on my Social Security even though I don’t intend to retire right now. Is this a bad move? If so, how will it impact me in the future?

If you’re 66 and a half right now, you’re past what the government has arbitrarily set as full retirement age. Meaning this is the time you can turn on Social Security, but not have it jeopardize your benefits if you’re still working.

You can activate Social Security as early as age 62, but if you’re still working when you turn it on, you’re penalized and your benefit drops based on your income. It’s almost never a good idea to turn on Social Security before full retirement age.

For each year you wait to turn on Social Security after full retirement age, you get about an eight percent bump in benefits. Depending on your situation, it makes more sense to activate Social Security and get that extra income or it’s wiser to delay benefit claim.

QUESTION 2 - Melissa asks: How should I approach credit card debt?

Before you put every dollar you have towards your credit card debt, you need pay the minimums on your cards and get your emergency fund (worth three months of expenses) ready. Make sure you have enough in your fund that allows you to pay for an emergency without having to swipe the card again.

Break the cycle of reaching for the credit card to bridge you between big purchases and emergencies.

Employ the snowball method— look at your credit cards and arrange them in descending order of interest rates. Start with the highest rate and aggressively pay off the card while paying minimums on the other cards. Next, move on to the card with the next highest interest rate and repeat.

QUESTION 3 - DJ asks: I’ve had serious health challenges the last few years. Last year I was able to deduct any out-of-pocket expenses greater than ten percent of my annual salary. I’m told that changed this year, but I’m finding it difficult to confirm if that’s true. I’m trying to determine if I’ll move forward with a procedure that will cost $19,000 out-of-pocket. I could wait till next year, but the $19,000 could pull my out-of-pocket way over ten percent this year. My question is: can I claim those expenses again this year? Is there any tax benefit like last year?

There was so much debate over the tax overhaul of late 2017. The threshold was actually dropped and for 2017 - 2018, you can actually deduct any medical expenses that are qualified over 7.5 percent of your income. The key is that you have to itemize to do that.

I would recommend you sit down with a tax professional and look at your numbers based on income. I can also help and refer to you to a CPA to get you on your way.

QUESTION 4 - Sonda asks: I would like to begin purchasing a stock share for my 11 grandchildren for birthday and Christmas gifts, but I don’t know where or how to purchase. Also, I don’t know how to choose the best stock.

One thing that is very common now is for a grandparent to contribute to a 529 plan, which is a college or education savings plan.

The downside:

Let’s say you give each of your grandchildren $100 towards a 529 every year to save for college, but some of them don’t go to college. To collect on that money, those grandchildren will be hit with a penalty for withdrawing that money. Unless you’re giving a large sum of money, they’ll be able to use the 529 in some way for education purposes.

Your second option:

Open a Roth IRA— a tax free retirement account— for your grandkids. You probably won’t be able to open it, but your children could assist with that. Your grandkids have to have “earned income” and for a kid, that could be babysitting or after-school job money.

As for choosing a stock, call us and we’ll help you put your money in a diversified account. That way the pressure of selecting the “perfect” stock is off of your shoulders.

That's All For This week!

Every week during the More Than Money show on AM 750 WSB we open up the week's mailbag and answer your questions in the "Lightning Round." MOST of these come from the site, but we aren't afraid to throw in texts, DM's and great things we hear from in-person meetings.

Have a question? Let us help.