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Investing

How Much Social Security Can You Count on in Retirement?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Determining just how much you can count on from Social Security benefits is an important part of planning for your retirement.

According to the Social Security Administration, the average monthly benefit for retirees is $1,461 as of January 2019. Without additional retirement income, that is hardly sufficient for most retirees, and Medicare payments and taxes could further deplete that amount.

The good news is that all beneficiaries can learn their projected benefit amount before they retire, and use that estimate to plan accordingly. When you choose to take your Social Security benefits can also affect how large they are.

Here’s what you need to know about your Social Security benefits.

How your Social Security benefits are determined

The size of your Social Security benefits depends on two factors: your work history and when you take your benefits.

Work history and your Social Security benefits

Workers who earn income and pay taxes toward Social Security earn “credits” through the Social Security program. As of 2019, workers earn one credit for every $1,360 earned, up to a cap of four credits each year. Once you earn forty total credits (that is, you’ve worked and paid Social Security taxes for about 10 years), you are eligible to receive Social Security benefits based upon your work record.

However, even though you only need 10 years worth of work to qualify for benefits, the Social Security Administration calculates your benefits based upon your 35 highest earning years. If you have worked fewer than 35 years, your benefit calculation uses zeroes to create the average for your calculation. For instance, if you only worked 25 years, the Social Security Administration would average those 25 years of earnings with 10 years of $0, lowering your total average earnings and monthly benefit amount.

This means one of the best ways to increase your Social Security benefit amount is to continue working until you have at least 35 years of income under your belt. Even if you have 35 years (or more) or work experience, if you are at the top of your lifetime earnings before you retire, putting off retirement for one or more years can replace lower-earning years in your calculation and increase your monthly benefit.

The importance of timing your Social Security benefits

The calculated monthly benefit based upon your work history is called your primary insurance amount (PIA). This is the amount of money you will get each month if you retire as of your full retirement age, which is between age 65 and 67, depending on what year you were born.

However, you’re not required to take your Social Security benefits at your full retirement age. You may choose to receive benefits as early as age 62 or as late as age 70. But when you choose to take your benefits affects how much you will receive. Starting with your PIA, Social Security will reduce or increase your benefit depending on whether you take it before your after your full retirement age.

Specifically, taking your benefits prior to reaching your full retirement age will reduce your monthly benefit by approximately 0.4% for each month between the date you take your benefits and your full retirement age. That means taking your benefits as of age 62 would reduce those monthly benefits by as much as 25% to 30%, depending on your full retirement age.

However, waiting to take your benefits means you are eligible for delayed retirement credits. These add as much as 8% to your PIA for each year that you wait, up until age 70. That means that waiting to take your benefits as long as you can gives you the highest possible Social Security monthly benefit.

Don’t forget about Medicare and taxes

While the initial size of your benefit depends on your work history and timing, you do need to be ready to see some money taken from your monthly Social Security check. Both Medicare Part B premiums and income taxes could take a bite out of your monthly benefit.

Medicare premiums

Medicare Part B charges a monthly premium to all beneficiaries. Medicare beneficiaries with incomes below $85,000 (or $170,000 for married couples) pay $135.50 per month in 2019. The vast majority of beneficiaries see that premium amount deducted from their monthly Social Security benefit check. Considering that the average monthly benefit for retirees in 2019 is $1,461, this premium cost could be a painful loss of nearly 10% of monthly Social Security income.

Taxes

Many retirees are surprised to learn that their Social Security benefits may be subject to income tax. Unless your retirement income falls below a certain threshold, you can expect to pay taxes on anywhere from 50% to 85% of your Social Security benefits. (Remember: Paying taxes on 50% to 85% of your benefits does not mean Uncle Sam is coming for half of your benefit check. It just means up to 50% to 85% of your benefits may be subject to taxation at your marginal tax rate).

To determine if and how much your benefits will be taxed, Social Security calculates what’s known as your provisional income. This is calculated by adding together:

  • Half of your Social Security benefits, plus
  • All of your other income, including tax-exempt interest.

Your provisional income is then compared to base amounts. A provisional income lower than $25,000 for singles and $32,000 for married couples means no taxes on Social Security benefits. An income between $25,000 and $34,000 for singles and between $32,000 and $44,000 for couples means that up to 50% of Social Security benefits will be subject to tax. And income over $34,000 for singles and $44,000 for couples means up to 85% of benefits may be taxable.

Determining your personal eligibility for Social Security

Thankfully, the Social Security Administration has fully embraced the digital age and it provides a number of easy-to-use applications, calculators and information portals through its website SSA.gov. Among the most useful for both current workers and retirees are:

  • Benefits calculators: These calculators will help you estimate everything from the size of your benefits to your life expectancy to how early or late retirement will affect your benefits.
  • My Social Security account: Every taxpayer can sign up for “My Social Security account” which can give you a personalized and detailed look at your earnings record, anticipated benefits and other information.

Other ways to save for retirement

Social Security benefits alone likely cannot provide for a secure retirement, let alone a retirement that allows you to live the life you want. That’s why it’s important to also set aside money for retirement.

Contributing to a workplace retirement account such a 401(k) can give you a tax break now and income in retirement. If you don’t have access to a work-sponsored retirement account, a traditional IRA can give you some of the same benefits as a 401(k). Finally, you may also want to invest some money in a Roth IRA while you are working because the money comes out tax-free in retirement and will not trigger taxes on your Social Security benefits.

The bottom line

The amount you will receive from Social Security will depend on your work history and when you take your benefits. Though you can increase your benefits by working at least 35 years and waiting as long as possible to take them, the monthly Social Security payout is often not enough to live on, especially considering the potential reductions for Medicare premiums and taxes.

To provide yourself with the most financially secure retirement, you need to understand what to expect from Social Security and set aside money now.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Emily Guy Birken
Emily Guy Birken |

Emily Guy Birken is a writer at MagnifyMoney. You can email Emily here

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Investing

J.P. Morgan You Invest Review 2019

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Chances are you’ve heard of J.P. Morgan Chase. It’s one of the major players in the financial space, and it’s long had a brokerage arm in addition to providing global banking services. Now, though, J.P. Morgan is getting into the online brokerage space with You Invest.

You Invest is an online trading platform that allows you to buy and sell individual stocks and exchange-traded funds (ETFs) without the need for a human broker. This review will look at what’s offered and provide you with the information you need to decide if it’s right for you.

You Invest offers a way for you to seamlessly connect your Chase bank account to your brokerage account. Additionally, you end up with access to plenty of educational materials and the ability to understand your total portfolio.

J.P. Morgan You Invest
Visit J.P. MorganSecuredon J.P. Morgan You Invest’s secure site
The bottom line: You Invest offers a fairly standard online brokerage experience with the perks of low-cost trading fees and a wealth of investor education.

  • Pay just $2.95 per trade after receiving 100 free trades.
  • Enjoy a large selection of investments, including stocks, bonds, mutual funds and ETFs.
  • Manage investments according to goals with the Portfolio Builder tool.

Who should consider You Invest

You Invest is ideal for beginning investors, especially those looking for education and assistance building a portfolio that will help them reach their goals. Intermediate and advanced investors also can benefit, but the educational tools and resources are especially helpful for novice investors.

Additionally, it connects to your other Chase accounts, making it easy for you to move money from your bank account to your brokerage account and vice versa. If you already bank with Chase, using You Invest to manage your portfolio might not be a bad choice.

While $2.95 per trade is a low cost, this product might not be the best choice for active traders. For traders who can keep their trade volume low, this can be an excellent brokerage since you receive 100 free trades in the first year after an account is opened — with the opportunity to qualify for more free trades in subsequent years.

J.P. Morgan You Invest fees and features

Current promotions

Up to 100 free trades

Stock trading fees
  • $2.95 per trade
  • $0 per trade for Chase Private Client, Chase Sapphire Banking, J.P. Morgan Private Bank and J.P. Morgan Securities clients
Amount minimum to open account
  • $0
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $75 full account transfer fee
  • $75 partial account transfer fee
  • $0 inactivity fee
Commission-free ETFs offered
Offers automated portfolio/robo-advisor
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
Ease of use
Mobile appiOS, Android
Customer supportPhone, Chat, 5,100 branch locations
Research resources
  • SEC filings
  • Mutual fund reports
  • Earnings press releases
  • Earnings call recordings

Strengths of You Invest

The educational tools and insights provided by You Invest are where this offering shines. They help you find the right mutual funds and stocks, and get you to understand your investing needs.

  • Low trading fees: To start, you get 100 free trades from You Invest. After you use your allotment, trades cost only $2.95. Among online brokers that charge trading fees, this is one of the lowest. If you’re not an active trader, you might be able to avoid paying fees fairly easily. You can get more free trades each year if you use certain Chase banking products, such as Premier Plus Checking.
  • Educational resources: You Invest offers a number of helpful articles about investing, strategy and more. It’s possible for you to learn the basics and then apply them to your portfolio.
  • Portfolio Builder: If you have at least $2,500 in your account, you can take advantage of this tool designed to help you choose the right investments for your portfolio. You’ll receive guidance on putting together a portfolio based on your answers to questions designed to gauge your risk tolerance, investment goals and time horizon.
  • Powerful screening tools: You can use these tools to set parameters and then find assets that fit your requirements. A list of options appears, and when you’re looking at Mutual funds , You Invest also includes Morningstar ratings and analysis of where they might fit into your portfolio.

Drawbacks of You Invest

A review of You Invest wouldn’t be complete without a look at some of the downsides. In many ways, You Invest is a typical online brokerage option. Other than some of the educational and portfolio building tools, there’s not a lot to distinguish this from other brokers.

  • No standalone app: Rather than offering a standalone app, you access You Invest through J.P. Morgan Mobile. Until you get used to it, it can be somewhat disconcerting to navigate to your trading app within the regular app.
  • Limited account types: There are only two account options with You Invest: taxable and IRA. You can get a Joint taxable account as well as an individual account, and there is a Roth option with the IRA. However, if you’re hoping for a custodial account or 529, you won’t find it with You Invest.
  • No managed portfolios: Right now, you won’t find managed portfolios, but they are supposed to be coming in 2019. So if you’re more of a hands-off investor, you might want to wait until there are more options available.
Fees
$2.95 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

Up to 100 free trades

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

Get up to $600 when you open and fund an account within 60 calendar days of account opening, depending on deposited amount.

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

Cash bonuses are available for new accounts. Bonuses start at $50 if you deposit or transfer $10,000+.

Is You Invest safe?

Any investment comes with the risk of loss. However, You Invest is insured by the SIPC for up to $500,000. Additionally, J.P. Morgan is a member of FINRA. As a result, you’re reasonably protected — especially when you consider that this is a company with more than $1 trillion in assets under management. It’s not likely to fail.

Just make sure you understand your own risk tolerance before you invest. While insurance protects you from failure, you’re not protected from market losses.

Final thoughts

You Invest can be a great option for middle-of-the-road investors who want a little more flexibility in their portfolios but still need some guidance. There are a number of assets to choose from, and the educational tools and resources allow you to build a portfolio based on your long-term goals and expectations.

Depending on your goals, there might be other products that work for you. For those more interested in a hands-off approach, Betterment might be a more suitable choice. You also can make trades for less with a service like Robinhood. However, you might not get the same level of educational tools with Robinhood, and Betterment won’t let you personalize your portfolio to the same degree.

If you want a low-cost, personalized way to invest — learning as you go — and if you’re already a Chase customer, opening a You Invest account might be a good way to move forward.

Open a J.P. Morgan You Invest accountSecured
on J.P. Morgan You Invest’s secure website

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Miranda Marquit
Miranda Marquit |

Miranda Marquit is a writer at MagnifyMoney. You can email Miranda here

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Investing

How to Make Money in Stocks

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Putting money in the market is well-worn financial advice for a reason: Investing in stocks is one of the best steps you can take toward building wealth.But how, exactly, is that wealth built? How is money earned by purchasing stock market holdings, and what can you do to maximize the gains you make from your own portfolio?

How to make money in stocks: 5 best practices

The way the stock market works — and works for you — is as simple as a high school economics class. It’s all about supply and demand, and the way those factors affect value.

Investors purchase market assets like stocks (shares of companies), which increase in value when the company does well. As the company in question makes financial progress, more investors want a piece of the action, and they’re willing to pay more for an individual share.

That means that the share you paid for has now increased in price, thanks to higher demand — which in turn means you can earn something when it comes time to sell it. (Of course, it’s also possible for stocks and other market holdings to decrease in value, which is why there’s no such thing as a risk-free investment.)

Along with the profit you can make by selling stocks, you can also earn shareholder dividends, or portions of the company’s earnings. Cash dividends are usually paid on a quarterly basis, but you might also earn dividends in the form of additional shares of stock.

Micro-mechanics of how stocks earn money aside, you likely won’t see serious growth without heeding some basic market principles and best practices. Here’s how to ensure your portfolio will do as much work for you as possible.

1. Take advantage of time

Although it’s possible to make money on the stock market in the short term, the real earning potential comes from the compound interest you earn on long-term holdings. As your assets increase in value, the total amount of money in your account grows, making room for even more capital gains. That’s how stock market earnings increase over time exponentially.

But in order to best take advantage of that exponential growth, you need to start building your portfolio as early as possible. Ideally, you’ll want to start investing as soon as you’re earning an income — perhaps by taking advantage of a company-sponsored 401(k) plan.

To see exactly how much time can affect your nest egg, let’s look at an example. Say you stashed $1,000 in your retirement account at age 20, with plans to hang up your working hat at age 70. Even if you put nothing else into the account, you’d have over $18,000 to look forward to after 50 years of growth, assuming a relatively modest 6% interest rate. But if you waited until you were 60 to make that initial deposit, you’d earn less than $800 through compound interest — which is why it’s so much harder to save for retirement if you don’t start early. Plus, all that extra cash comes at no additional effort on your part. It just requires time — so go ahead and get started!

2. Continue to invest regularly

Time is an important component of your overall portfolio growth. But even decades of compounding returns can only do so much if you don’t continue to save.

Let’s go back to our retirement example above. Only this time, instead of making a $1,000 deposit and forgetting about it, let’s say you contributed $1,000 a year — which comes out to less than $20 per week.

If you started making those annual contributions at age 20, you’d have saved about $325,000 by the time you celebrated your 70th birthday. Even if you waited until 60 to start saving, you’d wind up with about $15,000 — a far cry from the measly $1,800 you’d take out if you only made the initial deposit.

Making regular contributions doesn’t have to take much effort; you can easily automate the process through your 401(k) or brokerage account, depositing a set amount each week or pay period.

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

500 free trades with a qualifying net deposit of $100,000

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$0
Promotion

Get up to $600 when you open and fund an account within 60 calendar days of account opening, depending on deposited amount.

Fees
$0.00 per trade

Per Trade Stock Trading Fee

Account Minimum
$500
Promotion
New accounts with a deposit of at least $5,000, may be eligible for a cash bonus, which can range from $100 to $2,500 depending on the amount deposited.

3. Set it and forget it — mostly

If you’re looking to see healthy returns on your stock market investments, just remember — you’re playing the long game.

For one thing, short-term trading lacks the tax benefits you can glean from holding onto your investments for longer. If you sell a stock before owning it for a full year, you’ll pay a higher tax rate than you would on long-term capital gains — that is, stocks you’ve held for more than a year.

While there are certain situations that do call for taking a look at your holdings, for the most part, even serious market dips reverse themselves in time. In fact, these bearish blips are regular, expected events, according to Malik S. Lee, CFP® and founder of Atlanta-based Felton & Peel Wealth Management.

So-called market corrections are healthy, he said. “It shows that the market is alive and well.” And even taking major recessions into account, the market’s performance has had an overall upward trend over the past hundred years.

4. Maintain a diverse portfolio

All investing carries risk; it’s possible for some of the companies you invest in to underperform or even fold entirely. But if you diversify your portfolio, you’ll be safeguarded against losing all of your assets when investments don’t go as planned.

By ensuring you’re invested in many different types of securities, you’ll be better prepared to weather stock market corrections. It’s unlikely that all industries and companies will suffer equally or succeed at the same level, so you can hedge your bets by buying some of everything.

5. Consider hiring professional help

Although the internet makes it relatively easy to create a well-researched DIY stock portfolio, if you’re still hesitant to put your money in the market, hiring an investment advisor can help. Even though the use of a professional can’t mitigate all risk of losses, you might feel more comfortable knowing you have an expert in your corner.

How the stock market can grow your wealth

Given the right combination of time, contribution regularity and a little bit of luck, the stock market has the potential to turn even a modest savings into an appreciable nest egg.

Ready to get started investing for yourself? Check out the following MagnifyMoney articles:

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Jamie Cattanach
Jamie Cattanach |

Jamie Cattanach is a writer at MagnifyMoney. You can email Jamie here