Early Social Security Means a Smaller Check

January 15, 2019

Bad news in the media can spark people to take Social Security before it is gone. Claiming Social Security benefits early means a smaller monthly and lifetime benefit for you and likely for your surviving spouse, according to The Motley Fool tit in an article on a Gallup survey of retired and non-retired people in “Social Security: Why Claiming Early Could Be All the Rage Next Decade.” The Social Security Administration reports that 62% of retired Americans rely on their benefits for at least half of their income stream, with about a third of Americans relying on Social Security for almost all their post-working income.Only one in 10 people don’t depend on Social Security at all for income, when they are retired. Your retirement benefits are based on your 35 highest earning, inflation adjusted, years. To max out, you’ll need to have worked for 35 years. Years with zero income can impact your overall totals. Birth year is another factor. That determines your Full Retirement Age (FRA), the year that you become eligible to receive your full retirement benefit. Claim earlier, and you risk permanently reducing the monthly benefit by as much as a third. Claiming after your FRA could boost benefits by 32%. Most people do start claiming Social Security benefits before their FRA, for a variety of reasons. Sometimes it’s because they have lost their job, are over 60 and can’t get hired. Some people simply don’t know that the longer they wait to claim, the higher their benefits will be. What is clear is that 60% of retired workers in 2013 took their benefits between 62-64, with another 30% claiming between 65-66. One in 10 workers took benefits after their FRA. There has been a change in recent years. While more people are waiting longer to claim their benefits, fewer are waiting until their FRA. The reason is tied to the headlines. People are worried that Social Security is going to be cut, and they want to get the income they can while the agency is still fully funding benefits. The 2018 Trustees Report (officially, “The 2018 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds”) said the agency will pay out more than it collects in 2018, the first time this has occurred since 1982. The net cash outflow is expected to grow faster starting in 2020, and then by 2034, the $2.89 trillion in assets may be gone. Congress will need to act, or benefit cuts to all retirees will have to be made—by as much as 21%. Can anyone know what will occur between now and 2034? Congress could fix any concerns by passing a bill that solves the problem, and those who claim early will be left with smaller benefits. We also don’t know when we are going to die. The decision of when to claim must be made by each individual, based on their FRA, their other sources of retirement income

Thinking of Your Retirement? Consider Some Top Regrets

January 11, 2019

Retirement expectations don’t always line up with reality. Are you picturing your retirement? Without careful planning, those years might not live up to your plans, according to The Washington Post in “The top regrets of retirees.” Global Atlantic conducted a study looking at retirees and found that many admitted that they had made mistakes in their retirement planning. The report was based on data from more than 4,200 retirees and pre-retirees in America. The company wanted to learn how expectations for retirement costs lined up with reality. The expectations often did not. The risk of running out of money is real, said the report, noting that 39% of retirees said they had planning regrets. Here are the top reasons for regret: They found themselves relying too much on Social Security for income. They did not pay down debt before retiring. Many people today are retiring with a mortgage. People used to pay off their mortgage before retiring, but it’s less and less common now. They didn’t save enough. Most people didn’t start saving for retirement until they turned 31. Missing almost a decade in saving can make a huge difference over time. Let’s say an employee puts away $50 every time she gets a paycheck—twice a month—and puts the money into an account with a 6% annualized return. If she started saving at age 23, by retirement age she’d have $227,150 in that account. If she waited to start saving until age 31, the account would be worth $128,578—$88,572 less. If she was able to save $100 per paycheck, by retirement, she’d have $434,299 versus $257,156. The power of time and compounding makes a huge difference. Compounding is the process through which an asset’s earnings are reinvested to earn additional earnings over time. The more time your assets have to grow, the most compounded growth can occur. Age 31 seems relatively young to start thinking about retirement, but by waiting that long, workers are missing out on almost a decade of savings, asset accumulation and the associated potential of compound returns. The survey also revealed that women are more likely than men to have retirement planning regrets, with 62% of women having retirement regrets, versus 47% of men. Reference: The Washington Post (Dec. 10, 2018) “The top regrets of retirees.”

Save for Retirement over Many Decades

December 20, 2018

A 40-year saving plan can go a long way toward a healthy financial retirement. A key to financial security in retirement is to begin saving early. An example of success is Orville Rogers, who was flying around the country to attend master’s level track meets during his retirement, according to Money in “This 100-Year-Old Has Been Retired for 40 Years, Has a Healthy Savings Account and Is a Track Champion. Here’s His Impressive Path to a Rich Retirement” Starting early and savings often combine as a powerful force. He started saving in 1952, 25 years before the creation of the retirement savings plan, we know today as a 401(k). Back in the day, companies provided their employees with pension plans and those without a pension plan lived on Social Security when they retired. Life expectancies were shorter, so you didn’t need quite so much money. Rogers was born in 1917, and his peer group’s life expectancy was about 48.4 years old. By saving for retirement and using his downtime between flights to educate himself about money, he started investing and says that his account is now worth around $5 million. He says he wasn’t particularly frugal either and supported his church and other Christian causes throughout his life. However, he had time on his side, making periodic investments over an extended period of time. Another practice that extends life: exercise. Rogers took up running at age 50 and hasn’t stopped yet. Studies have shown that anyone, at any age or stage, is helped by a regular schedule of physical activity, tailored to your personal needs. Even people who are wheelchair bound and living in a nursing home can benefit from a chair exercise program. Among older seniors, the ability to walk a quarter mile (one lap around a track), is linked to better health outcomes. Until recently, Rogers ran five to six miles a week. He’s in rehab now and working his way back to his prior running and training schedule. When you live as long as Rogers has, you outlive a lot of family members and friends. Rogers moved into a retirement community two years after his wife died, making new friends because, as he says, “… if I don’t, I’d have none left.” Faith has also been a strong force in his life over these many years. At 98, he wrote a book, The Running Man: Flying High for the Glory of God. When he was starting out in his retirement years, he flew church missions in Africa. An estate planning attorney can advise you in creating an estate plan that fits your unique circumstances. Reference: Money (Nov. 2018) “This 100-Year-Old Has Been Retired for 40 Years, Has a Healthy Savings Account and Is a Track Champion. Here’s His Impressive Path to a Rich Retirement”

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