Don’t make this Social Security mistake!

One of the best financial planning strategies for Social Security is lost if the husband and/or wife begins taking benefits before their “full retirement age”.  Please seek competent professional advice before you or someone you know starts drawing Social Security.  There could be strategies available that benefit you if you will stop and consider them “prior to” filing your application…

Improving your Retirement Picture

In a recent national retirement plan survey conducted by Matthey Greenwald & Associates of Washington, D.C., employer retirement plan participants shared some interesting facts. Here is a clip of some of the key findings provided by American Century Investment Services: 

  • A majority of participants, particularly older participants, have at least some regret about not doing a better job saving for retirement. In fact, participants gave themselves roughly a C+ on putting money away for retirement and on investing. 
  • The large majority of participants across all age groups wish they had saved more in the first five years of their working lives. 
  • Only one in ten strongly agrees that they knew what they were doing with their investments. 
  • Seven in ten are at least fairly interested in having a program that would increase their savings by 1%. 
  • Roughly two-thirds in each age group expect the financial advisor to play a major role going forward when it comes to preparing for retirement. 

Does all this make sense to you?  If we can help you or someone you know have enough for retirement please give us a call now.  We are ready to help.

When to start Social Security

This is a question many people are struggling with today.   And in terms of making the key decision, surveys show many Americans today don’t understand their alternatives.  We are finding the smartest path to take depends on many factors.  One of the key factors is marital status.  Another key factor is one’s age.  But when it comes to a retiree making their Social Security decision, several issues make the decision complicated.  For instance, quoting T. Rowe Price research, “Retirees have two competing goals: maximizing Social Security benefits, which means delaying benefits to age 70, and minimizing savings withdrawals in the early years of retirement, which means taking benefits as early as possible.”

In short, we strongly suggest retirees get professional help before they make their choice.  More specifically–a married couple should seek professional help before the spouse, who has been the “lower wage earner”, starts their Social Security benefits.

A common, costly Retiree mistake

A common mistake by retirees is to underestimate their costs of Medicare, Medicare supplements, and out-of-pocket medical expenses.  For instance, it’s not uncommon for a retiree couple to pay $9,000 per year on Medicare premiums and also thousands of dollars out-of-pocket on medical bills.  And don’t forget about annual inflation.  Underestimating these expense items can ruin a good day and maybe someone’s retirement years.

The Sequence of Returns

According to William Bengen’s study, published in the 1994 Journal of Financial Planning, the amount a retiree can withdraw each year from their portfolio is somewhat related to market volatility and the sequence of their investment returns.  Therefore as retirees manage investment risks, the size of their withdrawals, and market volatility it’s possible to improve their retirement outcome.  Additionally, according to a Vanguard study, investment advisors can improve an investor’s situation using well-known and accepted best practices for wealth management compared to those of portfolios that are not.

Your Retirement Income Stream

According to retirement studies conducted by J.P. Morgan, two-thirds of the average American’s retirement income comes from their Social Security and their earnings.  And many of these people find themselves having to work longer and retire later.  And remember, Social Security benefits only replace 27% of higher incomes (past wages of at least $113,700) and up to 58% of lower incomes (past wages of $20,172) of one’s past wages (Source: 2013 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance Trust Fund).

One simple way for a 60-year old pre-retiree to improve their situation is to delay starting their Social Security income.  According to The Social Security Administration each year you wait to draw Social Security you gain an increase of approximately 7%, much like receiving a “raise” in your retirement pay check.  And though a few can’t delay, we have found with some adjustments many can wait to begin this benefit until at least their full-retirement age (age 66 if you were born between 1943–1954).  This may be a particularly important consideration if a spouse has “good genes” and stands a reasonable chance of living into their 90’s.

To possibly help, remember that the Social Security Administration now provides access to online benefit calculators through their website, www.ssa.gov.