Moving Beyond Social Security For Retirement Planning
Many of us either depend (or will depend) on Social Security to make up the foundation of our retirement income
. Although this program will play an important role for many of us, it is important that we keep in mind the limits of what it can provide us and ensure we put in place elements to secure the rest of our retirement. This is especially true as administration changes are making it clearer than ever that Social Security may not be around in twenty years to provide us the safety net we need.
The good news is it is never too late, or too early, to begin retirement planning.
What can I expect from Social Security?
The average social security payment is $1,063.90 per month. You can calculate your estimated benefit with an online calculator, or order a statement in the mail from the Social Security Administration.
Experts suggest you should prepare to have 70 to 90 percent of your pre-retirement income to maintain your current standard of living. Consider additional health care costs, especially if you choose to retire before you qualify for Medicare at age 65. A financial advisor could help you determine what you'll need to save to supplement your Social Security, based on your estimated expenses. There are many options available to those seeking to supplement their social security income.
Take advantage of your company's 401(k) plans: Your 401(k) gives you access to an immediate tax break because contributions are taken out of your paycheck prior to taxes, thereby lowering your taxable income. The growth is also tax deferred, so you don't pay taxes each year on the increasing funds. In addition to those benefits, some employers match funds, often 50 cents on the dollar for the first 6 percent that you save.
Consider an IRA: Whether your company has a 401(k) plan or not, an IRA (Individual Retirement Arrangement) is an excellent way to compliment your retirement savings. There are two types of IRAs: traditional and Roth. A traditional IRA offers tax-deferred growth, meaning your contributions are tax deductible, and you pay taxes only on your withdrawals in retirement. A Roth IRA doesn't allow for pre-tax contributions; however, you owe no taxes on your money when you make withdrawals in retirement.
Consider less traditional opportunities to grow or supplement your retirement investments: Taking a part time job during retirement will allow you to withdraw less from your IRA, thereby giving your money more time to grow. A reverse mortgage may be an option if you are 62 years or older, allowing you to convert the equity you have built in your home into tax-free retirement income. You may also want to consider your location. Moving to a less expensive area, or home, could help you stretch the retirement income you already have.
Retirement planning is best done with an experienced guide; consult with your financial advisor to determine the best path to a successful retirement for you.
by: Wesley Watkis
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