SIM Swap Scam – Existential Risk to Your Personal Info and Financial Assets

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“SIM swapping is a big deal, especially if you’re also actively involved in the cryptocurrency community—a great way for an attacker to make a little cash and mess up your life.”  Lifehacker

SIM swapping involves a hacker duping your cell provider (e.g., AT&T, Verizon, T-Mobile. etc. )into believing that you’re activating your SIM card on another device. In other words, they’re stealing your phone number and associating it with their SIM card.

If your SIM card has been activated on a new device, this could be signs that a scammer has pulled a SIM card swap to hijack your cell phone number.

How do scammers pull off a SIM card swap like this?

They may call your cell phone service provider and say your phone was lost or damaged, according to the Federal Trade Commission. Then they ask the provider to activate a new SIM card connected to your phone number on a new phone — a phone they own. If your provider believes the bogus story and activates the new SIM card, the scammer — not you — will get all your text messages, calls, and data on the new phone.

The scammer — who now has control of your number — could open new cellular accounts in your name or buy new phones using your information.

It’s a lot easier to set up defenses against a SIM swap attack right now than it is to deal with the fallout from one—one is a minor annoyance, the other will consume your week (or more).

Protect your accounts

Many digital accounts have settings that can help you take back your accounts if they’re ever stolen—but they need to be properly set up before the account is stolen in order to be of any help, acknowledges Lifehacker. These can include:

  • Creating a PIN number that is required for logins and password changes. This is especially important to set up with your cellular carrier, as it’s a great defense against SIM hijacking.
  • A suitable two-factor security method that relies on a physical device, like Google Authenticator or Authy, rather than SMS-based verification for logins. You can also spring for a hardware token to protect your accounts if you want to get really fancy.
  • Strong answers security recovery questions that aren’t tied to your personal information.
  • Unlinking your smartphone phone number from your accounts, where possible. (You could always use a free Google Voice number if you’re required to have one for your sensitive accounts.)
  • Using long, randomized, and unique passwords for each account.
  • Use an encrypted password manager.
  • Don’t use your favorite services (Google, Facebook, et cetera) to sign in to other services; all an attacker needs is to break into one to have access to a lot more of your digital life.

You should also make note of important account-related information that could be used to identify you as the rightful account holder, such as:

  • The month and year you created the account
  • Previous screen names on the account
  • Physical addresses associated with the account
  • Credit card numbers that have been used with the accounts or bank statements that can confirm you were the one who made purchases
  • Content created by the accounts, such as character names, if the account is for an online video game
  • Similarly, keeping a list of all your critical accounts will make reacting to a SIM swaps or similar ID theft easier,

References:

  1. https://lifehacker.com/how-to-prevent-and-respond-to-a-sim-swap-scam-1835627474

Small-Cap Stocks

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“Growth is greatest in the early stages of a company’s development.” Cabot Wealth

There is a common perception among investors that over the long term, small-cap stocks outperform large-cap stocks. In exchange for more risk, you get more reward.

As it turns out, this is mostly untrue, according to Seeking Alpha. The best small-cap stocks offer more explosive upside potential, but as a group they don’t really outperform large-cap stocks, subject to a few caveats.

The best possible investing scenario is to identify a top small-cap stock that will go on to become a large-cap stock over the coming years, and go up in value by 10x or 100x.

Unfortunately, for every massive winner that does that, there are multiple losers. Both Russell and Wilshire data show that small-cap stocks don’t really outperform as a group. They’re not bad, but over four decades they don’t really stand out either. Mid-cap stocks are a potential sweet spot, that investors can benefit from either by directly investing mid-cap fund or investing into an equal weight large-cap fund which tends to have a lot of overlap with the mid-cap space.

A 2017 study by Hendrik Bessembinder that analyzed virtually all U.S. public stocks over the past 90 years found that small-cap stocks have much higher performance variance. A smaller percentage of small-cap stocks provide positive long-term returns compared to the percentage of large-cap stocks that provide positive long-term returns. As a consequence, small stocks more frequently deliver returns that fail to match benchmarks.

Conversely, while the absolute best-performing small caps outperform the best-performing large caps over a given period, small caps as a group also have much higher rates of catastrophic loss.

Anytime you buy shares of a small, lessor-known company, there are a plethora of unknowns. Thus, it’s impossible to take the risk completely out of small-cap investing. But there are ways to minimize those risks without sacrificing potential profits.

The defining characteristics of small-cap stocks are that many are young, attractive investments and tend to be highly volatile. This volatility can be absolutely maddening for those who are new to small-cap investing (and even to those who aren’t).

Don’t let this volatility drive you away from small-cap stocks if you’re inclined to invest in them. Volatility comes and goes, and over the long-term small caps tend to beat the market.

FIVE SIMPLE RULES FOR SUCCESS WITH SMALL-CAP STOCKS

It’s important to set up a clearly established set of rules ahead of time, and stick to them. The simple rules that can increase your odds of success, especially during uncertain markets, are:

Rule #1: Commit To The Long Term: One of the more frequently quoted Warren Buffett quips is, “If you aren’t thinking about owning a stock for 10 years, don’t even think about owning it for 10 minutes.”

You don’t need to own every small-cap stock you buy for the next decade. But you do need to look out at least a year or two if you expect to have significant success.

There are select examples of investors making money trading in and out of small caps in the short term. But very few can do it week in and week out, year after year. All the studies say the same thing; your odds of making money go up the longer you stick with small-cap stocks.

A study from Ibbotson, a financial research firm owned by Morningstar, found that investors have a 70% chance of making money with small-cap stocks if they stay invested for one year. That probability goes up to 82% after three years, 86% after five years and 98% after 10 years. The percentages aren’t all that different for large caps.

Rule #2: Dollar Cost Average Your Cost Basis: Small-cap stocks can be irrational in the short term. That’s why you never do anything too drastic. Don’t go all in on an individual stock on a big pullback, or a big breakout. Instead, average into a position by buying shares at different prices and on different days. The strategy helps to reduce the risk of buying a full position in a stock at an unlucky time, which is bound to happen occasionally.

The period over which you average in should be dictated by your holding time horizon. If you’re investing for just a year or two, you’ll probably average in over a week or two, maybe a month. If you’re in it for three or more years, you can average in over a year, or more.

Rule #3: Take Partial Profits: If averaging in makes sense, then averaging out should too. Consider selling a quarter or a half position on the way up, and especially if a gain has surpassed 100%. This doesn’t have to mean giving up on the stock. It’s simply a risk-mitigation strategy. The original capital can be allocated to a lower-risk investment.

Also, it’s fine to average back into a position even if you sold shares at an earlier date. Sometimes, especially during corrections, investors are forced to dump some shares to protect their gains. Months later, the stock might be doing just fine. If the growth story is intact and the market is trending up there’s no reason you can’t build up your position again.

Rule #4: Use a Stop Loss: For small cap stocks, many advisors advocate a 15% to 30% stop loss for large caps. The reason is that you often see quality small caps drop 20% or so during market corrections. Often, these are the times to average down if and when the stock has stabilized, assuming the stock’s growth story is intact,.

That said, it can also be a time to sell a partial, or full, position to protect gains, or help avoid catastrophic losses. How close you are to your desired position size will usually determine if you’re averaging in, or out. The underlying reason for using stop losses is that the bigger the loss, the bigger the return you need to get back to break even (see table below). Don’t go below the red line!

Rule #5: If You’re Not Sure What To Do, Do Nothing: Just because the market is open doesn’t mean you need to participate in it. If you’ve had a streak of losses, or things just don’t feel right, take a break. Focus your attention on a few stocks you’d like to own eventually and read up on those so you’re ready to go when the stock’s margin of safety improves, and your confidence returns.

As Warren Buffett said, “I’ve had periods in my life when I’ve had a bundle of ideas come along, and I’ve had long dry spells. If I get an idea next week, I’ll do something. If not, I won’t do a damn thing.”

Investing in small-cap stocks is a good way to earn huge returns. Consequently, there are two major ways to outperform the market.

  • You can take advantage of short-term price dislocation versus a company’s intrinsic value, or
  • Use long-term compounding to achieve market outperformance.

References:

  1. https://seekingalpha.com/article/4287533-small-cap-performance-gap-doesnt-exist-why
  2. https://cabotwealth.com/category/daily/small-cap-stocks
  3. https://cabotwealth.com/daily/small-cap-stocks/small-cap-stock-warren-buffett/

Life Insurance

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If something were to happen to you today, is your family protected? 

Life insurance is a relatively low cost way to ensure that your family will have financial security if you or the primary earner should die prematurely. Furthermore, life insurance is often necessary financially because it provides peace of mind—not just for you, but for your whole family.

Conventional wisdom dictates that you don’t need life insurance if no one else depends on your income. While mostly true, there are many reasons why you should obtain life insurance if no one depends on your income.

  • Insurability and low premiums. Buying a policy both locks in lower premiums and guarantees insurability later in life. An existing insurance policy guarantees the ability to purchase additional insurance with no medical underwriting or physical exams. 
  • Cash Value Growth. Whole Life insurance policy provides attractive cash value growth. Access this cash value at any time using a policy loan. Or, if you cancel the policy, you get a return of all or a majority of the premiums paid, or the cash value – whichever is greater.
  • Funeral and burial expenses. From a practical perspective, in addition to the emotional devastation, parents also face significant expenses in the event of a child’s death. According to the Natural Funeral Directors Association, the median cost of a funeral with burial exceeds $7,000. Purchasing insurance for children alleviates the significant financial burden for a family coping with a tragic loss. 

Not only do rising prices make life increasingly expensive, but, as life’s circumstances change – you marry, buy a house, have children, and perhaps need to care for others – you have greater responsibilities and a need for better financial protection.

Key Takeaways

There are several excellent reasons to obtain insurance coverage for you and your family.

  • You can lock in low premiums while they are young and healthy.
  • You can lock in eligibility for other services while they have an active policy.
  • Permanent insurance provides a store of cash value that safely grows at a high crediting rate, which can be used to help fund future expenses like college tuition.
  • In the event of loss, a policy can cover the ever growing expenses of funerals and burials and protect your savings.

References:

  1. https://www.aafmaa.com/learning-hub/blog/post/2792/why-insure-your-child-or-grandchild-through-aafmaa
  2. https://www.aafmaa.com/learning-hub/blog/post/2810/your-life-will-change-so-the-way-you-protect-loved-ones-should-too

What is a Trust Fund

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“Regardless of your income, estate planning is a vital part of your financial plan. Planning ahead can give you greater control, privacy, and security of your legacy.” Fidelity

A trust is an estate planning tool that anyone can use to ensure their assets are passed down as they wish, to friends, family or a charity. It is a legal entity that that allows a third party, or trustee, to hold assets until an intended recipient or beneficiary is able to receive them.

Trusts can be arranged in many ways and can greatly expands your options when it comes to managing your financial assets, whether you’re trying to shield your wealth from taxes or pass it on to your children or grandchildren.

To understand how a trust fund works, it helps to understand the following three terms:

  • Grantor. This is the person who transfers assets to a trust fund. That would be you, if you’re the one looking to start a trust.
  • Beneficiary. The person who is given the legal right to assets in a trust fund is a beneficiary. That might be your loved ones or a favorite charity.
  • Trustee. The decisionmaker responsible for ensuring the assets in the trust fund are appropriately distributed is called the trustee.

Trusts can hold assets like real property (such as heirlooms or jewelry), real estate, stocks, bonds or even businesses.

Since trusts usually avoid probate, your beneficiaries may gain access to the trust’s financial assets more quickly than they might to assets that are transferred using a will. Additionally, if it is an irrevocable trust, it may not be considered part of the taxable estate, so fewer taxes may be due upon your death.

Assets in a trust may also be able to pass outside of probate, saving time, court fees, and potentially reducing estate taxes as well.

Other benefits of trusts include:

  • Control of your wealth. You can specify the terms of a trust precisely, controlling when and to whom distributions may be made. You may also, for example, set up a revocable trust so that the trust assets remain accessible to you during your lifetime while designating to whom the remaining assets will pass thereafter, even when there are complex situations such as children from more than one marriage.
  • Protection of your legacy. A properly constructed trust can help protect your estate from your heirs’ creditors or from beneficiaries who may not be adept at money management.
  • Privacy and probate savings. Probate is a matter of public record; a trust may allow assets to pass outside of probate and remain private, in addition to possibly reducing the amount lost to court fees and taxes in the process.

There are several basic types of trusts

  • Marital or “A” trust – Designed to provide benefits to a surviving spouse; generally included in the taxable estate of the surviving spouse
  • Bypass or “B” trust – Also known as credit shelter trust, established to bypass the surviving spouse’s estate in order to make full use of any federal estate tax exemption for each spouse
  • Testamentary trust – Outlined in a will and created through the will after the death, with funds subject to probate and transfer taxes; often continues to be subject to probate court supervision thereafter

Revocable vs. irrevocable

The major distinction between trust is whether they are revocable or irrevocable.

Revocable trust: Also known as a living trust, a revocable trust can help assets pass outside of probate, yet allows you to retain control of the assets during your (the grantor’s) lifetime. A living trust is a legal document that states who you want to manage and distribute your assets if you’re unable to do so, and who receives them when you pass away. Having one helps communicate your wishes so your loved ones aren’t left guessing or dealing with the courts. It is flexible and can be dissolved at any time, should your circumstances or intentions change. A revocable trust typically becomes irrevocable upon the death of the grantor.

You can name yourself trustee (or co-trustee) and retain ownership and control over the trust, its terms and assets during your lifetime, but make provisions for a successor trustee to manage them in the event of your incapacity or death.

Although a revocable trust may help avoid probate, it is usually still subject to estate taxes. It also means that during your lifetime, it is treated like any other asset you own.

Irrevocable trust. An irrevocable trust typically transfers your assets out of your (the grantor’s) estate and potentially out of the reach of estate taxes and probate, but cannot be altered by the grantor after it has been executed. Therefore, once you establish the trust, you will lose control over the assets and you cannot change any terms or decide to dissolve the trust.

An irrevocable trust is generally preferred over a revocable trust if your primary aim is to reduce the amount subject to estate taxes by effectively removing the trust assets from your estate. Also, since the assets have been transferred to the trust, you are relieved of the tax liability on the income generated by the trust assets (although distributions will typically have income tax consequences). It may also be protected in the event of a legal judgment against you.

Deciding on a trust
State laws vary significantly in the area of trusts and should be considered before making any decisions about a trust. Consult your attorney for details.

As mentioned above, by creating a trust, you can:

  • Determine where your assets go and when your beneficiaries have access to them.
  • Save your beneficiaries (your children, for example) from paying estate taxes and court fees.
  • Protect your assets from creditors that your beneficiaries may have, or from loss through divorce settlements.
  • Direct where remaining assets should go in the event of a beneficiary’s death. This can be helpful in a family that includes second marriages and step-children.
  • Avoid a lengthy probate court process.

This last point is a crucial one, as trusts also allow you to pass on assets quickly and privately. In contrast, settling an estate through a traditional will may trigger the probate court process — in which a judge, not your children or other beneficiaries, has final say on who gets what. Not only that, the probate process can drag on for months or even years and may even become a public spectacle as well.

With a trust, much of that delay can be avoided, and the entire process is private, saving your beneficiaries from unwanted scrutiny or solicitation.

References:

  1. https://www.fidelity.com/life-events/estate-planning/trusts
  2. https://www.legalzoom.com/sem/ep/living-trust.html
  3. https://www.forbes.com/advisor/investing/trust-fund

61% of Americans Paid No Federal Income Tax in 2020 | CNBC

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By Robert Frank, CNBC Wealth Reporter and a leading authority on the American wealthy

“The hardest thing in the world to understand is the income tax.” Albert Einstein

  • More than 100 million U.S. households, or 61% of all taxpayers, paid no federal income taxes last year, according to a report from the Tax Policy Center.
  • The pandemic and federal stimulus led to a huge spike in the number of Americans who either owed no federal income tax or received tax credits from the government.
  • The main reasons for the spike — high unemployment, large stimulus checks and generous tax credit programs.

More than 100 million U.S. households, or 61% of all taxpayers, paid no federal income taxes last year, according to a new report.

According to the Urban-Brookings Tax Policy Center, 107 million households owed no income taxes in 2020, up from 76 million — or 44% of all taxpayers — in 2019. The main reasons for the spike — high unemployment, large stimulus checks and generous tax credit programs — will largely expire after 2022, so the share of nontaxpayers will fall next year.

“The COVID-19 pandemic and the policy response to it led to an extraordinary increase in the number of American households that owed no federal individual income tax in 2020”, writes Howard Gleckman, Senior Fellow at the Urban-Brookings Tax Policy Center.

The share of Americans who pay zero income taxes is expected to stay high, at around 57% this year (2021), according to the Tax Policy Center.

“Congress can raise taxes because it can persuade a sizable fraction of the populace that somebody else will pay.” Milton Friedman

In contrast, the top 20% of taxpayers by income paid 78% of federal income taxes in 2020, according to the Tax Policy Center, up from 68% in 2019. The top 1% of taxpayers paid 28% of taxes in 2020, up from 25% in 2019.

In 2021, Congress increased the size of the child tax credit, the earned income tax credit, and the child and the dependent care tax credit — all of which erased the federal taxes owed for millions of American families.

Twenty million workers lost their jobs. Many were low-wage workers who were paying very little income tax before the pandemic hit. Effectively, no household making less than $28,000 will pay any federal taxes this year due to the credits and tax changes, according to the Tax Policy Center. Among middle-income households, about 43% will pay no federal income tax.

Federal income taxes do not include payroll taxes. The Tax Policy Center estimates that only 20% of households paid neither federal income taxes nor payroll taxes. And “nearly everyone” paid some other form of taxes, including state and local sales taxes, excise taxes, property taxes and state income taxes, according to the report.

“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” Winston Churchill

“There is a dichotomy between how capital is taxed in this country and how labor is taxed. That seems wrong to me, to have these two sources of wealth that are taxed so differently”, according to Billionaire philanthropist John Arnold.

References:

  1. https://www.msn.com/en-us/money/markets/61-25-of-americans-paid-no-federal-income-taxes-in-2020-tax-policy-center-says/ar-AANt4dJ?ocid=uxbndlbing
  2. https://www.taxpolicycenter.org/taxvox/covid-19-pandemic-drove-huge-temporary-increase-households-did-not-pay-federal-income-tax

Philip A. Fisher’s Keys to Successful Investing

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“The need for patience [is necessary] if big profits are to be made from investment. Put another way, it is often easier to tell what will happen to the price of a stock than how much time will elapse before it happens. The other is the inherently deceptive nature of the stock market. Doing what everybody else is doing at the moment, and therefore what you have an almost irresistible urge to do, is often the wrong thing to do at all.” Philip A. Fisher

Legendary investor Philip Fisher was willing to pay more for a stock he felt it had high growth-potential regardless of the fact that it might not be an undervalued company according to value-investing standards. However, Fisher warned against the purchase of promotional companies and falling for the usually manipulated tone of the financial statements.

Philip Fisher is among the most influential investors of all time. His investment principles, introduced six decades ago, are studied and applied by today’s finance professionals. He recorded these principles in Common Stocks and Uncommon Profits, a book considered by investors as a must read when it was first published in 1958.

According to Philip Fisher, investigation was the key to successful investing. And, he used a variety of means to research and deeply analyze a company.

Fisher’s approach to growth stock investing was something he called ‘scuttlebutt’. ‘Scuttlebutt’ is the process of going beyond the financial statements or company disclosures and investigating the internal and external stakeholders of the company to get in-depth information and wider perspective on the business to realize growth potential.

Philip Fisher’s 15-point approach essentially attempts to determine whether a company is in a position to continue to grow sales for several years, has an innovative and visionary management, strong profit margins, effective sales organization and high-quality management. Fisher also argued against over-diversifying and, in his heyday, tended to hold only about 30 stocks.

Fisher recommends investors rigorously analyze and ask probing questions of a company regarding:

  • Long-term sales growth potential,
  • Competitive edge (moat),
  • High management capability and Vision,
  • Effective research and development undertaken by the company,
  • Strong profit margins, and
  • Internal company relations;
  • The findings and answers from these questions can help an investor find the right growth stock to keep for the long-run.
  • In short, Fisher believed that…“Such a study indicates that the greatest investment reward comes to those who by good luck or good sense find the occasional company that over the years can grow in sales and profits far more than industry as a whole. It further shows that when we believe we have found such a company we had better stick with it for a long period of time. It gives us a strong hint that such companies need not necessarily be young and small. Instead, regardless of size, what really counts is a management having both a determination to attain further important growth and an ability to bring its plans to completion.”
  • https://twitter.com/cashay/status/1280577451962359811

    • References:

    1. https://www.valuewalk.com/philip-fisher-resource-page/
    2. https://www.forbes.com/2009/02/23/philip-fisher-growth-personal-finance_philip_fisher.html
    3. https://www.investopaper.com/news/best-philip-fischer-quotes

    Owning a Stock of a Good Company

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    “It’s always okay to own a stock of a good company for the long term that has a strong balance sheet, growing revenue and earnings, increasing free cash flow and efficient management.”

    Peter Lynch based his success to investing principles on owning stocks of a good company. His overall strategy, based on a few core concepts, is surprisingly simple. A few of the most salient points are:

    • Invest in what you know. Be very wary of complex investment stories and instead, prefer stocks that are readily understandable. With consumer spending driving two-thirds of the U.S. economy, products and services desired by most consumers would be good investments.
    • Invest in companies with strong foundations. Companies with certain traits make them easier to buy and hold for the long run. On the business side, look for competitive advantages, such as high barriers to entry or efficient scale. Also, you should prefer stocks that have solid cash balances and conservative debt-to-equity ratios. “It’s hard to go backward if you have no debt,” Lynch once said.
    • Focus on value. Invest in value stocks that trade at cheap valuations based on their price-to-earnings (P/E) ratio. But, also considered growth as part of the equation and thus don’t automatically reject a high-P/E stock at a reasonable price if it had a high growth rate. Covet strong companies that are undervalued because they operate in out-of-favor industries.

    Lynch is famous for introducing price/earnings-to-growth (PEG), which factors growth into value. He also used a dividend-adjusted PEG ratio, since cash from dividends is part of the total-return equation.

    Here are important financial ratios that are recommended that you utilize in your financial analysis of a company:

    1. Stock price
    2. Market cap
    3. Price to book value ratio
    4. Earnings per share
    5. Price to earnings ratio
    6. Net profit margin
    7. Debt to equity ratio
    8. Return on equity
    9. Dividend payout ratio
    10. Free cash flows
    11. Cash on hand balance
    12. Dividend yield

    Lynch writes in his book, One Up on Wall Street: “In general, a P/E that’s half the growth rate is very positive, and one that’s twice the growth rate is very negative.”

    Furthermore, Peter Lynch liked:

    • Strong players in out-of-favor industries and decent valuation
    • Companies that generate recurring revenues and provide essential services;
    • Businesses with a solid financial position and generate above-average profit margins.
    • A solid, growing performer with relatively low net debt.

    Research, patience and discipline

    Overall, Lynch’s strategy looks for stocks trading at a reasonable price relative to earnings growth that also possess strong balance sheets. In short, nobody is born a great investor. Research, patience and discipline are what will eventually transform a novice investor into a seasoned stock picker.

    References:

    1. https://www.kiplinger.com/slideshow/investing/t052-s001-10-stock-picks-with-peter-lynch-qualities/index.html
    2. https://www.fool.com/investing/2020/12/02/5-investing-tips-from-peter-lynch/

    T-Mobile Data Breach – Was Your Digital Data Compromised

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    T-Mobile confirmed that its customers’ data had been accessed without authorization in a breach that may impact more than 100 million of its users.

    According to an underground forum post, the data for sale includes social security numbers, phone numbers, names, physical addresses, IMEI numbers, and driver licenses information.

    T-Mobile is conducting an extensive analysis alongside digital forensic experts to understand the severity of the breach, and they’re coordinating with law enforcement.

    This is the third time in recent years that a data breach has hit the wireless carrier.

    Have You Been Pwned

    Have you been affected by a past or recent data breach? Fortunately, you can minimize your chances of getting “pwned” in the future by using https://haveibeenpwned.com/, a free tool created by Troy Hunt, a Microsoft Regional Director and Most Valuable Professional awardee for Developer Security.

    The word “pwned” has origins in video game culture and is a derivation of the word “owned”, due to the proximity of the “o” and “p” keys. It’s typically used to imply that someone has been controlled or compromised, for example “I was pwned in the Adobe data breach”.

    The “Have I Been Pwned” (HIBP) site can reveal whether your log-in credentials, financial data, or other details have been stolen or leaked online, and send email alerts about new data breaches.

    Consumer Reports

    To tighten up your digital security, it’s important to know which of your accounts have been affected. That’s a task you can accomplish at the free site “Have I Been Pwned”, a resource that is widely recommended by security experts and by Consumers Reports. (The term “pwn” is hacker jargon for compromising or taking control of a computer or an application.)

    Consumer Reports has been steering people to Have I Been Pwned for years, and the site has gradually become more robust, adding features and expanding its records of compromised data.

    Data breaches are rampant and many people don’t appreciate the scale or frequency with which they occurred, according to HIBP. By aggregating the data helps victims learn of compromises of their accounts, but also highlights the severity of the risks of online attacks on today’s internet.

    Reference:

    1. https://www.macrumors.com/2021/08/16/t-mobile-data-breach
    2. https://www.consumerreports.org/data-theft/how-to-use-have-i-been-pwned-data-breach-a6598286668
    3. https://haveibeenpwned.com/

    You and Claiming Your Social Security Benefits

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    “Choosing what age to start collecting Social Security retirement benefits and which type of benefit to claim are extremely challenging and difficult.”

    Social Security is a program managed by the federal government (Social Security Administration). The program works by using taxes paid into a trust fund to provide Social Security benefits to people who are eligible. It provides you with a source of income when you retire or if you can’t work due to a disability. It can also support your legal dependents (spouse, children, or parents) with benefits in the event of your death.

    Understanding your Social Security benefits and when to claim those benefits can be challenging and complicated. “There are 2,728 rules in the Social Security handbook,” said Laurence Kotlikoff, Boston University economics professor and Social Security expert. “And then there’s literally hundreds of thousands of rules about those 2,728 rules. It’s the most complicated system I think mankind has ever developed.”

    As a result of the program’s complexity, most Americans do not have a good understanding of Social Security, according to a Nationwide Retirement Institute® 2021 Social Security Survey. Moreover, many people don’t know what they don’t know:

    • Social Security is a “pay as you go” program; most of the Social Security taxes paid by today’s workers go straight to the benefit checks for today’s current retirees.
    • Only 16% know what age they are eligible for full Social Security benefits. For those born in 1960 or later, full retirement age is 67.
    • 45% believe Social Security benefits will go up automatically when reaching retirement age after filing early. Filing early locks in a permanent reduction in Social Security benefits.
    • Half of U.S. adults (54%) don’t know what percentage of their income will be replaced by Social Security. It depends on lifetime earnings, but for middle-income individuals the replacement rate is usually around 40%.
    • 55% believe or don’t know Social Security benefits are tax free. They are for low-income taxpayers, but for most people up to 50% of benefits are taxable.
    Source: Nationwide Retirement Institute® 2021 Social Security Survey

    How much you will receive from Social Security when you retire depends on how much you’ve earned and how long you have worked under the Social Security system. Your retirement benefit will be calculated by the Social Security Administration (SSA) based on your average lifetime earnings, but only your highest 35 years of earnings will count and only the years that you paid Social Security taxes.

    The amount you receive will also be affected by whether you start collecting benefits early (you’ll get less), whether you collect benefits late (you’ll get more), whether you work after you retire, whether other family members receive benefits based on your earnings record, whether you collect certain other government benefits, and whether the cost of living rises.

    It’s important to understand that Social Security is designed to provide a safety net of income for the retired, the disabled, and survivors of deceased insured workers. And, a key consideration for when you claim Social Security benefits is to maximize your income for a retirement that could last longer than 30 years.

    The contributions you and your employers make during your working years provide:

    1. Current retirees and other Social Security recipients with payments
    2. A guaranteed lifetime income benefit when you reach retirement

    Your base benefit or primary insurance amount (PIA) is calculated according to your “full retirement age,” or FRA, and your FRA is determined by your date of birth. If you claim Social Security benefits any time before your FRA, you lock in a permanent reduction in monthly income. Claiming at 62 translates to a reduced monthly income of 25% to 32%, relative to your FRA monthly benefit. That means you may receive less monthly retirement income, every year, for potentially several decades.

    By waiting until age 70, you can lock in increased monthly benefits. If your FRA is 67, your monthly income would increase 24% by waiting. The facts are:

    • Age 62 is the earliest you can claim your benefit
    • Waiting to claim Social Security after age 62 results roughly in 8% increase in monthly income per year for each year you delay claiming (up to age 70).
    • If your FRA is 66, your monthly income would increase 32% by waiting.
    • If your FRA is 66 years and 10 months (if you turned 62 in 2021), your monthly income would increase 29.2% by waiting.

    While the government does not have a specific account set aside just for you with your FICA contributions (the taxes for Social Security and Medicare paid by you and your employer), one of the most powerful features of Social Security is that it provides an inflation-protected guaranteed income stream in retirement, ensuring against the risk you’ll outlive your savings.

    Even if you live to 100 or more, you’ll continue to receive income every month. And, if you predecease your spouse, your spouse also receives survivor benefits until their death.

    “As of 2021, due to increased longevity and a decrease in the number of workers per beneficiary, and if changes are not made to the existing system, the Social Security Administration’s surplus fund will be depleted by 2034.”

    Social Security is primarily financed through a dedicated payroll tax. There are also two other sources that fund this pool of money:

    • Taxes on some recipients’ benefits
    • Interest earned on the pool of money (Surplus Fund)

    “As of 2021, due to increased longevity and a decrease in the number of workers per beneficiary, Social Security will have to tap the surplus fund to meet its obligations. And, if current projections are correct, Social Security will have enough reserves to pay out 100% of its promised benefits until approximately 2034”, according to The 2020 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds from the Social Security Administration.

    Although there is time for Congress to fix the problem, if changes are not made to the existing system, the surplus fund will be depleted by 2034. The original pool of money will still be funded by payroll taxes, benefit taxes and interest, but beneficiaries would begin receiving reduced benefits. Which means that benefits will remain fully payable until at least 2034, with 79% of benefits payable through 2093 and 73% of benefits payable thereafter. These estimates assume that the existing system remains unchanged.

    In general, you can cancel your Social Security claim if you do so within the first 12 months of receiving benefits. But, you must repay the full amount you’ve received, and the full amount a current spouse or family member received based on your benefit. Then, you’re eligible to claim again at a later date and will receive a larger monthly payment. Each individual can only cancel a claim once in their lifetime.

    “Social Security can add certainty and stability to a retirement income plan, especially given the surprises that may come at retirement.”

    Claiming Social Security is an important part of your retirement income plan, but it can be challenging to understand your options—and the implications to your savings. Social Security can form the bedrock of your retirement income plan. That’s because your benefits are inflation-protected and will last for the rest of your life in retirement.

    While it’s true that your monthly benefit checks will increase if you delay retirement until FRA, you’re not likely to get more money altogether by waiting. The whole reason early retirees get smaller checks while those who delay benefits get larger checks is so that the average person gets the exact same amount of money from Social Security during their lifetime.

    Most Americans claim their benefits at age 62 or just a few years later, according to SSA. That’s not always a mistake. If they have done a good job of analyzing their situation. Claiming at 62 would reduce your monthly checks, but you would have an additional four to five years of income before you reach full retirement age. Based on the Social Security Administration’s life expectancy tables and projected inflation rates, the lifetime expected total benefits are within a few hundred dollars of each other, regardless of when you claim.

    If you have a robust retirement fund and don’t necessarily need the extra money from Social Security, there’s no harm in claiming early, according to Motley Fool. Moreover, if you have reason to believe you may not live very long in retirement, you may want to claim earlier to make the most of your benefits.

    Bottomline, Social Security is part of the retirement plan for almost every American worker. It provides replacement income for qualified retirees and their families.

    Your decision about when to file for Social Security benefits will affect your income in retirement. However, if you’re worried about outliving your savings, delaying benefits might be one of the best retirement decisions you’ll ever make.

    References:

    1. https://www.usa.gov/about-social-security#item-213279
    2. https://nationwidefinancial.com/media/pdf/NFM-20936AO.pdf
    3. https://www.vystarinvestmentservices.com/Tools-Resources/Social-Security-Benefits
    4. https://www.fidelity.com/viewpoints/retirement/social-security-myths
    5. https://www.fool.com/retirement/2016/12/26/5-social-security-myths-debunked.aspx
    6. https://www.nationwide.com/lc/resources/investing-and-retirement/articles/social-security-survey-results
    7. https://www.fool.com/retirement/2020/10/25/turning-62-in-2021-this-social-security-move-could/
    8. https://www.marketwatch.com/story/how-to-get-good-help-with-claiming-social-securitywhen-and-how-you-claim-can-be-the-difference-between-a-decent-retirement-and-a-terrible-one-11625857686