Social Security Retirement Planning
“I’m just curious. How many people think we should delay Social Security as long as possible? A few folks. You’ve seen my talk before? How many think to take it as early as possible. A few folks. Okay.
And actually, the answer… there is not a single answer here. It is a personal decision like we heard earlier from Nick. But I just want to give you some insights into this. First of all, this is a chart which just shows the monthly benefits and this is just an example. We are looking at someone who is earning $75,000 in 2009 and had always been making this amount. This is for a single person and if you’re married, if both of you work, each of you will get a benefit that comes from these kinds of charts and then your household income is just the sum of the two.
If one of you didn’t work or works sporadically then there is a special spouse’s benefit, which I will get to in a second. But just look at this chart. Say you are born in 1950, if you retire at 62, the monthly benefit is $1,470. If you retire at 65 its $1,850. And this person their full retirement as Nick was talking earlier is 66 and so their monthly benefit would be $1,980. And finally if you wait till age 70 the monthly benefit is $2,660. So you can see that there is a pretty dramatic increase in the amount of your monthly benefit if you delay your retirement benefits.
This is the same chart but for a married worker where the spouse didn’t work, and this is just a sum of the workers benefit and the special spouses benefit. But it’s the same pattern, you know, if you delay your benefits then your benefits go up. And so I like this chart. You know, when you put up charts that show percent increases it’s hard to relate to a percent, but here monthly income we can relate to a dollar amount of monthly income. It makes it easier for us to decide what’s the right thing to do. Read more
When should I start planning for retirement?
This one’s so open ended as far as the question goes. I was talking to a young group at a company and it came up as far as retirement planning. Retirement planning should basically start the day you start working, because there are a lot of things that you can’t catch up on if you don’t start early. You start with a company that has a 401K plan, and if you don’t join that plan until you’re thinking… you know… maybe you’re 60 and you’re looking ahead for retirement, you’re not going to do much good saving for a couple of years. It’s when you save for decades that’s where you get the most benefit.
The Case For Not Privatizing Social Security
If there is one thing this most recent stock market crash has demonstrated it is the extreme danger retirement benefits would be in if we adopted a privatized Social Security system.
Proponents of a privatized system have argued for years that private accounts would be totally safe because they would be limited to blue chip stocks exclusively. The type of companies investors would call a sure bet for long term investments. Companies like Bear Sterns and Lehman Brothers. What could possibly go wrong if we invested our Social Security accounts in those types of companies?
Apparently everything could go wrong. Both Bear Sterns and Lehman Brothers, two of the largest financial companies on the planet, had a complete collapse. Can you imagine if people’s Social Security benefits were tied into those companies?
Think about the pressure this would put on the government to keep these types of companies afloat. The amount of expense to the taxpayer that would have to go into it would be tremendous. Not a pretty picture is it?
Unfortunately, the current situation is not much better either because the Social Security Trust Fund is already guaranteed by the government and ultimately the taxpayer. The way the system was set up, it has become a burden to just about everyone.
Therefore, Social Security should not be privatized, it should be abolished – in a safe and slow manner. Seniors should still get what they paid for and what they were promised, but we must stop being cruel to young workers who are forced against their will to pay into an antiquated system they might not agree with and that might not ever benefit them at all.
Abolish Social Security, pay outstanding benefits by raising taxes or printing money, and allow everyone else to invest their money as they see fit. If some people (rightly) believe stocks are too risky, they can buy government bonds instead, or real assets that preserve their value over the long term, like gold.
Social Security Retirement Age: Making The Right Choice
With prices ever increasing in the public market, and Social Security become more and more of a concern, it isn’t a surprise that many are choosing to opt for benefits at the youngest possible retirement age. But choosing to receive your checks at age 62 could be an extremely bad idea, especially if you are currently employed, and so some are deciding instead to defer their payment for the official retirement age.
Whether your official retirement age is 65 or 66, which will depend on when you were born, it is better to wait for that time rather then request your payments at a younger age. The reason is simple: if you decide not to defer your payments, you may end up paying the money back.
This is because anyone who is still earning a wage that is not directly related to an investment income from a healthy portfolio may not qualify for full Social Security as an untaxed income. This is also dependent upon the limitations placed annually on income levels. For example, this year the limit is $14,160. Every time you go over that amount by $2, you will lose $1 off of your checks. This adds up quickly, especially since most who are still working will receive much more then that.
This rule only applies for those who are not yet at their retirement age. Once you hit that point, you will be able to earn any level of income, and still receive full benefits from your Social Security fund. So don’t worry about losing the funds in the meantime, they will still be there. Deferring your checks is a positive move, not a negative one, and as long as you don’t wait too far past your retirement age, you should be just fine.
Consider saving benefits for age 65 – 70. You might be glad that you did.
Financial Planning for Retirees
There are a number of decisions that may or may not factor into your goals in life, but one key element to saving money is making sure you have enough to eventually retire. Unfortunately, many times people will forget to include one major point to retirement, and so find themselves in financial trouble years after giving up work: having enough to stay retired.
Because of this oversight, more and more of those over the age of 55 are going back to work, often getting minimum wage and taking long hours just to survive. To make sure this doesn’t happen to you, there are a few important things to keep in mind:
What are your annual expenses? This is one very important thing to consider when figuring out how much you will need to retire. Always add in other elements, such as inflation, and put away a certain amount for unforeseen events, such as car or home repair, or emergencies.
What investments do you currently have, or can you purchase, that will allow for sufficient growth? Saving isn’t enough. You need to have an active portfolio with investments that will continue providing income through your retirement years. Make sure you have a well balanced portfolio, as many several investments with great potential.
What can I withdraw annually from my investments without damaging my purchasing power? This is a question many have, and it will depend mostly on the size of your portfolio, as well as what you plan on leaving behind as a part of your estate. Try to draw as little as possible to maintain your lifestyle.
What accounts should be drawn from first? You should always make use of taxable accounts before dipping into tax-deferred, such as 401(k)s, so that interest can increase the amount to its highest possible limit before you use it as living expenses. It is wise to allow your investment accounts to grow to full season before relying on them as income.
What about Social Security? Social Security is always a valuable option, especially if you have a weak investment portfolio. However, you may want to wait until 65 before applying, as signing up at 62 (the minimum age) can greatly reduce the monthly amount you receive on your checks. However, Social Security, added to any valuable taxable accounts is a great way to maintain a decent lifestyle all through your retirement age, without having to return to work in your golden years.
The End of Retirement?
According to John Michael Greer the outlook for retirees in the coming years is going to be bleak. In a recent blog post he claimed that most of the securities and assets that retirees depend on will lose more than half of their face value. This speculation is based on his belief that the investment practices of the last 30 years which turned debts into assets has left the market flooded with unpayable debts across all sectors of the economy.
When the value of all these debts are added together, says Greer, they far exceed the revenue created by the aggregate amount of the global economy. Basically there is not enough money on the planet to pay for these debts.
For anyone approaching retirement age this is bleak news. It has become a common practice for a large number of people across the world to base a substantial portion of their income on investments. However, if the global market is as unstable as Greer claims in his blog post, these securities will lose the vast majority of their value in the coming years resulting in massive losses to everyone’s retirement plans.
It goes beyond securities however. Even money put into simple saving accounts at people’s banks will be under threat. The weak global economy will ultimately create a period of substantial deflation. The problem is that most of today’s wealth is just paper. The wealth is not based on anything substantive. In other words it is imaginary wealth. As the market comes to realize this the value of our money will begin to drop, possibly to the point it is virtually worthless.
Totten argues that this destabilization in the economy will be felt across all market sectors – stocks, bonds, currencies. Even assets like crude oil will lose the vast majority its value. Within the next decade or so there will be no safe bet for retirees to rely on.
The question is what happens after this current economic crisis is over? The news is still not good. The current retirement system is based on the “age of abundance.” When the dust settles and the current crisis is over we will have left this age behind and returned to a time where the majority of economic activity happens outside of the market. Household economies that used to exist in the past will arise once more. The success of these households will depend on the contributions of everyone, including the elderly. Of course this process will not happen overnight; it will take many years before this type of economy rises again.
For anyone near retirement age or already retired, Greer advises you to take all your money and put it into the most stable investment you can find. Also it is essential you begin putting a Plan B into place right away.
Fewer Americans Expect To Retire, But Most Are Confident
Scottrade recently commissioned a 2009 American Retirement Study for studying retirement plans and generational differences in financial planning. They sampled 1000 Americans aged 18 years or above for this study.
Following their study, Scottrade concluded that only 32% of respondents, 7% less than that in 2008, expected to fully retire at their retirement age. They also observed that retirement accounts of 43% of respondents had decreased by 10% or more since 2008 and that 67% Americans did not plan to contribute to IRA. Also, though 77% of the respondents were concerned about Social Security, more than half were pretty sure of it running out before they retired.
Furthermore, 61% of respondents were confident of their retirement planning ability with Gen Xers (64%) and Boomers (67%) believing in curtailing expenses. Gen Xers did it by using coupons (66%), cutting back on entertainment (65%), paying down debts (57%), and reducing credit card spending (55%) while Boomers (67%) did the same by comparison shopping (70%).
Confident of saving enough, only 5% Gen Yers used advisers for retirement planning as against 28% who planned independently. They were also considerably focused on working more to earn more (30%) and searching for a better-paying job (29%).
Social Security Administration Targets Young Workers
A new program has been launched by the Social Security Administration, aimed at teaching the young work force about the importance of saving, investing, and preparing for retirement. It focuses mainly on small steps that can be taken to increase the amount of retirement funds available to them in the future, apart from benefits from Social Security.
The pamphlets that are being handed out to people between the ages of 25 and 35 works to dispel some of the rumors about Social Security, and better inform workers about that benefits of saving. Some of the information speaks about the chances of SS being around for their retirement, as it has been projected that funds will run out by 2041.
It also explains the importance of adding small investments over time, as even $25 a week, with compounded interest of 5%, will come out to almost $165,000 within forty years, which would put many of the young workforce at retirement age. This would be in addition to benefits that the SSA assures us will still actually be there.
According to the Social Security Board of Trustees, in 2041, taxes will still allow for “$780 for every $1,000 in benefits scheduled”, which will be enough to supplement an already well established retirement fund. But this is fully the responsibility of the worker, and so the issue is an important one.
Young workers can start expecting to see the inserts within the coming months, which are similar to those given to workers over the age of 55, explaining all possible benefits, the way compound interest increases investments, and how to make the most out of your retirement funds. It also discusses the way that Social Security payouts work, and the chances of applying for, and receiving, disability in the case of early retirement.
Research Shows That Baby Boomers Will Face Inadequate Retirement
According to the Boston College Center for Retirement Research for Boomers, there may be a possibility that forthcoming baby boomers may have a problem with their retirement funds if their only option after they resign from work is their 401 (k) plan and Social Security.
Boston College Center’s director for external relations Andrew Eschruth believes that a lot of retirees may not be able to continue with the lifestyle that they’re used to because according to the guideline that they’re using, for someone to be able to live at ease after retiring, they would need at least 65 to 85% of their pre-retirement income.
Back when George W. Bush was still President, he recommended the idea that a share of the Social Security be placed in a private investment of some sort. However, it became a big issue that came under so much scrutiny that his administration decided to let this suggestion go. Now that a new President has taken over, it’s up to him to come up with a solution on how to organize this “mess” concerning Social Security.
In view of the fact that this may happen, the Boston College Center proposes future retirees to consider other option to bridge the gap of their income need once they’ve stopped working. They suggest something that is fixed and binding and would ensure them a good life by receiving the proper amount they need to maintain their standard of living. One such resolution that they’ve been contemplating on is an “exploratory idea” where the obligatory involvement of an employer to pay their workers is required.
It seems that retiring nowadays is a hard thing to do especially since one might face more financial problems due to inadequate resources. It’s good to know that some people have the initiative to try and deliberate upon an answer that will greatly affect a lot of people in the coming years.
What is the difference between Social Security and a private pension?
The Social Security system and private pensions are alike in that they provide retirees with guaranteed income upon retirement. They differ in how they are administered. Social security is overseen by the federal government, whereas private pensions are the sole responsibility of the companies that provide them.
For generations, American workers have relied on a combination of pension funds and Social Security for financial security in their retirement years. In the past decade, both systems have come under scrutiny.
Pensions consist of a combination of employer or employee contributions. Some pensions involve a combination of funds from both the employee and his company. The monies are typically invested in stocks, bonds or mutual funds. The objective is for the portfolio to accumulate investment wealth so that, after a number of years, the fund can serve as income for the worker throughout their retirement.
Types of pensions include a defined benefit plan, 401k plans, profit sharing and money purchase plans. The defined benefit plan guarantees the worker a specific monthly income upon retirement. 401k’s, which have become hugely popular, combine employer and employee contributions in a portfolio that is invested in mutual funds. Profit sharing gives the worker a stake in the ownership of their company and money purchase plans involve strictly company contributions.
Many pensions have shifted from money purchase plans to profit sharing and 401k plans. Many companies have altered their philosophy on pensions and are encouraging a combination of risk from their business and the worker through mutual contributions.
Social Security is taken from every American worker regardless of age, employment or income. The government uses the money to establish, in a sense, trust funds that cover expenses for retirement and various disability or survivor insurance. The government’s promise is that every worker will eventually benefit from the program when they retire or are disabled and prevented from working. Most working Americans begin to receive Social Security payments when they reach age 63.
In addition to money taken out of a worker’s paycheck, the worker’s employer has to make a matching contribution to the Social Security program. Therefore, what the worker sees on their paycheck as their contribution is only half the money.
Much debate in recent years has focused on whether or not Social Security can survive the retirement of the Baby Boomer generation. Americans live longer than ever before and many experts feel the retiring Boomers will drain the system of funds within 20 years. Many in the industry maintain that Social Security will not be available to workers under the age of 40.
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