Looking Beyond Social Security to Fund Retirement
When you imagine retirement, bliss, relaxation, and comfort probably come to mind. In order to achieve this ideal retirement, you’ll need a means of income and of course you probably don’t want to be forced to work. But wait—isn’t that what Social Security is for? Not quite. For many, Social Security payments are not enough to fund retirement. Even if the check covers all your expenses, it could be beneficial to have additional income or a backup plan.
First, assess how much you’ll be receiving and what your expenses will be in retirement. Whether you’re retired or close to it, figure out your living costs. This number will dictate how much extra income you’ll need. To determine an estimate, Social Security calculates the amount based on the 35 highest earning years of your career—but don’t forget to subtract Medicare premium. As of 2019, the average Medicare Part B deduction is $135.50. You can also check out Social Security’s website to get a quick estimate: ssa.gov/oact/quickcalc. While you can start receiving payments at 62, your checks will be smaller than at full retirement age, which is 66 or 67 depending on your birth year. But, did you know that if you defer your benefits to 70, you’ll receive a bonus so your checks will be larger?
There are many opportunities for secondary income. An obvious option is a part-time job. While some enjoy employment, many retirees prefer a more laid-back retirement. If working isn’t a part of your retirement plan, there are alternatives. Consider life insurance and annuities as choices for extra income. A financial professional can help determine which plan would work best for your situation and detail the benefits.
If retirement is still far, act now by contributing as much as you can to your retirement savings plans. Whether you have a 401(k), an IRA, or anything else, saving a lot now can potentially elevate worry and stress in the future. By setting up automatic payments, you won’t have a chance to miss the money or use it.
Finally, make sure you’re withdrawing the correct amount. Whether you know about it or not, you’ll have to take Required Minimum Distributions (RMDs) from every tax-deferred retirement account once you turn 70 & ½ and they will be subject to tax. This can be beneficial or disadvantageous depending on your situation. However, be cautious of how much and often you withdrawal from the accounts, because if you want to make the money last your lifetime—maybe longer if you have beneficiaries—a well thought out and structured plan is necessary.
Social Security benefits are helpful to many, even if it doesn’t directly contribute to income. It is a right that lawful workers earn through paying the tax for years. Sadly, you’ll most likely need additional income for your living costs and (well deserved) luxury expenses in retirement. If this seems like a lot to handle on your own, it probably is. Fear not—we offer complimentary phone, video, and in-person consultations to discuss how we can help you plan the ideal retirement for you. Call us at 1-800-467-8152 or email email@example.com to schedule so we can help kick start your retirement plan!