How Much Will Your Social Security Benefit Be?

Understanding your social security benefit is a huge part of being prepared for retirement, and even the young generation should understand what they can expect to receive from social security.   It can be very confusing as there are many different rules and variables that go into the equation of estimating your social security benefit.

Basics

So let’s start with the basics.  Anyone who has worked 10 years or more, or is married to someone that has worked that long qualifies for a benefit.  The earliest you can start taking this monthly benefit is age 62, and the latest is age 70.   The monthly benefit is based on 2 main factors.  First, it is based on the amount of income you made throughout your working years (and thus how much you paid into the social security pot).   Second, it is based on when you choose to take your benefit, with a lower monthly payment if you start at age 62, continually growing until the maximum monthly benefit if you wait until age 70 to start your benefit.   Full retirement age, which I will discuss later, is age 67 if you were born after 1960.  If you were born in 1955 it is age 66 and 2 months, and increasing by 2 months each year until 1960.

Spousal Benefit

Spousal benefit is getting half of the Social Security benefit of your working spouse.  When you file to begin receiving social security, they will let you know if your individual benefit or your spousal benefit is higher, and automatically you will receive the higher of the two.  The spousal benefit maxes out when the non working spouse reaches full retirement age.  Thus it is not beneficial for a non working spouse to wait until age 70.

Real Numbers

You can actually run an estimate of your social security benefits on ssa.gov to see how much you could get in social security dollars.   I will give you one example I ran on the website with real numbers to show you an estimate of what you might expect with your social security benefit.

Ryder is 62 years old, and his wife Paisley is also 62.  He worked his entire life and made $60,000 a year.  Paisley only worked for 9 years, thus she does not qualify for her own benefit.  If Ryder chose to start taking his benefit today he would receive $1476/month.  If he waited until full retirement age, age 66 and 8 months, he would receive $2064/month.  And if he waited until age 70 he would receive $2627/month.

Now this is where it gets a bit confusing.  Time for some math.   If Ryder thinks he will die before age 78, he will receive the most total money from Social Security if he starts his benefit at age 62.  If Ryder thinks he will live past age 78 he will receive the most total money if he waits to start his benefit at age 70.     This is called the “break even” point.  The ages of 77 to 80 are almost always the break even years for any individual situation.

As for Paisley, if she chose to begin taking her spousal benefit at age 62 she would receive $671/month.  If she waited to full retirement age she would receive $1032/month.  And if she waited till age 70 she would still receive the same $1032/month.

Other Factors

If you plan to work in any form and are receiving income, it is not a good idea to take your social security before your full retirement age (66 or 67).  Your social security money is decreased based on the amount of income you receive.   Once you reach full retirement age, you can receive your social security benefit and it will not be effected by any income you are making.

The File and Suspend Strategy that you might have heard about, is no longer in effect and cannot be used by anyone filing for social security that was under age 66 as of April 30th 2016.

If no changes are made by the government to the social security program, it is projected that by the year 2035, there will only be enough money to pay 75% of the scheduled benefit to retirees.  1.   So in short, the younger generation cannot really count on the amount shown in the example above.

Retirement Plan

Your social security benefit will only be a small portion of what you will need to live on in retirement.  You need to have a retirement account to be your main source of retirement income if you do not have a work pension.  Whether it be a 401k, Roth IRA, or another type of account, most people need to have between $500k and $2 million saved in order to live a comfortable retirement comparable to how they lived in their working years.

If you need help figuring out social security or getting a retirement account set up to go along with your social security benefit, please contact us.

By Jimmy Hancock

References

  1. Goss, Stephen C. “Social Security Administration.” Social Security Administration Research, Statistics, and Policy Analysis, 1 Aug. 2010, www.ssa.gov/policy/docs/ssb/v70n3/v70n3p111.html.

Understanding your Social Security Benefit for Young and Old

social-security-2Understanding your social security benefit is a huge part of being prepared for retirement, and even the young generation should understand what they can expect to receive from social security.   It can be very confusing as there are many different rules and variables that go into the equation of estimating your social security benefit.

Basics

So let’s start with the basics.  Anyone who has worked 10 years or more, or is married to someone that has worked that long qualifies for a benefit.  The earliest you can start taking this monthly benefit is age 62, and the latest is age 70.   The monthly benefit is based on 2 main factors.  First, it is based on the amount of income you made throughout your working years (and thus how much you paid into the social security pot).   Second, it is based on when you choose to take your benefit, with a lower monthly payment if you start at age 62, continually growing until the maximum monthly benefit if you wait until age 70.

Spousal Benefit

Spousal benefit is getting half of the Social Security benefit of your working spouse.  When you file to begin receiving social security, they will let you know if your individual benefit or your spousal benefit is higher, and automatically you will receive the higher of the two.  The spousal benefit maxes out when the non working spouse reaches full retirement age (age 66 or 67 depending on your birth year).  Thus it is not beneficial for a non working spouse to wait until age 70.

Real Numbers

You can actually run an estimate of your social security benefits on ssa.gov to see how much you could get in social security dollars.   I will give you one example I ran on the website with real numbers to show you an estimate of what you might expect with your social security benefit.

Ryder is 62 years old, and his wife Paisley is also 62.  He worked his entire life and made $50,000 a year.  Paisley only worked for 9 years, thus she does not qualify for her own benefit.  If Ryder chose to start taking his benefit today he would receive $1326/month.  If he waited until age 66 he would receive $1767/month.  And if he waited until age 70 he would receive $2344/month.    Now this is where it gets a bit confusing.  If Ryder thinks he will live past age 78, it is not in his best interest to start at age 62.  If he thinks he will live past age 82, it is not in his best interest to start a age 66.  If Ryder thinks he will live past age 82 it is in his best interest to wait all the way to age 70.  Obviously he would have to either work or live off of other retirement money until age 70 to get the most out of his social security money.

As for Paisley, if she chose to begin taking her spousal benefit at age 62 she would receive $618/month.  If she waited to age 66 she would receive $883/month.  And if she waited till age 70 she would still receive the same $883/month.

Other Factors

If you plan to work in any form and are receiving income, it is not a good idea to take your social security before your full retirement age (66 or 67).  Your social security money is decreased based on the amount of income you receive.   Once you reach full retirement age, you can receive your social security benefit and it will not be effected by any income you are making.

The File and Suspend Strategy that you might have heard about, is no longer in effect and cannot be used by anyone filing for social security that was under age 66 as of April 30th 2016.    If you were over 66 as of April of this year you might be able to take advantage of this strategy.

If no changes are made by the government to the social security program, it is projected that by the year 2034, there will only be enough money to pay 79% of the scheduled benefit to retirees.   So in short, the younger generation cannot really count on the amount shown in the example above.

Retirement Plan

Your social security benefit will only be a small portion of what you will need to live on in retirement.  You need to have a retirement account to be your main source of retirement income if you do not have a work pension.  Whether it be a 401k, Roth IRA, or another type of account, most people need to have between $100k and $2 million saved in order to live a comfortable retirement comparable to how they lived in their working years.

If you need help figuring out social security or getting a retirement account set up to go along with your social security benefit, please contact us.

 

By Jimmy Hancock

References

“Social Security.” The United States Administration. N.p., 05 Oct. 2016. Web. 05 Oct. 2016.





Why you Need Disability Insurance

disability insuranceAs I grow older and now that I have a child, I am becoming more aware of the importance of insurance, and especially disability insurance. It is not a very talked about thing, in fact, I had never really heard of it until a few years ago.  So here is a good Google definition of disability insurance.     “Disability Insurance is the industry name for a plan that provides for periodic payments of benefits when a disabled insured is unable to work. The insurance product is designed to replace most of your gross income on a tax-free basis should illness keep you from earning an income in your occupation.  A professional with a family, for example, should consider disability insurance a necessity.  ” 1

Don’t I already have  coverage from my work?

Most employers have workers compensation coverage which is similar to disability insurance, but only applies to disabilities/injuries that come from the workplace.  If you are disabled by something that happens outside of work, then you are out of luck.  That is unless you have disability insurance.  Also, even if you are getting paid by workers compensations, you can still receive income from your disability insurance.

Doesn’t the government have disability coverage?

SSDI or Social Security Disability Insurance is coverage that anyone who has recently worked and payed in to Social Security qualifies for.   The issue with relying on this coverage is that the average monthly benefit  is only $1148. 2.    That is under $14,000 annually.  I don’t know many families that can live on that amount.  Also you can receive benefits from both SSDI and private disability insurance.   Another issue with SSDI is that it is the much more limited definition of disability as compared with private disability insurance.   Many people are denied SSDI when they are not “fully” disabled, but cannot do any work in their industry due to their disability.

Disability Insurance Options

When you get disability insurance you have the option of choosing the monthly benefit amount and length of time you can receive that amount while disabled.  The bigger those numbers, the more expensive it is.  There is also a feature called Return of Premium you can add to your policy.  This makes it so that if at age 67 you get back all of the money you have paid in premiums minus any claims you have received.  Thus, it can be a type of a retirement savings account, that also protects you during disability.

Pricing

An average healthy worker in a non labor field can get basic coverage for a very reasonable price of around $20 a month including return of premium.  For more extensive coverage the price would be closer to $40 or $50 a month.  Contact me for a free quote.

By Jimmy Hancock

 

  1. NAHU. “Consumers Guide to Disability Income Insurance.” NAHU.org. National Association of Health Underwriters, n.d. Web. 16 May 2016.
  2. Thomson Reuters. “Private Disability Insurance vs. SSDI.” Findlaw. Thomson Reuters, n.d. Web. 17 May 2016. <http://injury.findlaw.com/accident-injury-law/private-disability-insurance-vs-ssdi.html>.



Why Your Retirement Dollars Might Fall Short



inflation-2Predicting the future is a rough sort of business to find yourself in, especially with a world that’s been changing more and more rapidly with every passing day.  Unfortunately a lot of people planning for retirement find themselves having to do this  very thing, having to try and figure out what directions the world will be taking them in once they’re ready to stop working. Here are just a few of the ways in which retirement is changing in the next decades, to help you stay ahead of the curve:

1. Retirees are living longer than ever before.
Advancements in medical technology have increased the average life expectancy of individuals. Retirement planning is becoming more and more troublesome for both actuaries and future retirees (Smart Money, 2012). This increased longevity comes with a need to set up a matching retirement plan, particularly when some
retirements are expected to last longer than the amount of time the retirees spent working.  Rather than trying to predict how long your retirement is slated to last, be prepared for the longer estimate in response to these treatments and technologies.

2. Children are staying with their families longer, even after college.
According to a new study released by Oregon State University, young adults in the 18-30 age bracket are having a harder time than ever becoming financially independent from their parents (Journal of Aging Studies, 2012). This greatly affects those looking to retire while their children are still young adults, and can cause a domino effect that starts to influence generations to come. There’s no guarantee of the job market recovering or this trend changing in the next few years, so when looking at your retirement make sure to factor in all of your current familial expenses.

3. Social Security may not be around in the future.
Social Security has always been a problem politically since it has a foreseeable end; between longer life expectancies and the large baby boomer population, social security is anticipated to “face funding shortfalls in about two decades if nothing changes” (CNBC 2012). While it’s quite possible that the government will come to a viable solution to salvage social security benefits, it’s a good idea to plan for the ‘what ifs’ regardless. Plan for social security as less of a guarantee and more as a pleasant possibility so there are no unpleasant surprises down the road. Don’t have your retirement plan hinge on social security as it may crumble within the next few decades.

4. Inflation never stops

Inflation is a very big risk to your retirement dollars.  To the couple in their 20’s, inflation will nearly double the amount that they need to save in order to live comfortably by the time they reach retirement.  Inflation decreases the value of your savings each year, so it is important to invest your retirement dollars in a portfolio that will outpace inflation.  Savings accounts, CD’s, fixed annuities, and most bonds do not outpace inflation.  You have to put a portion of your money in stocks or you will be losing the long term battle to inflation.

Retirement is changing, but that doesn’t mean you can’t still build a healthy, strong retirement plan even with a moderately uncertain future. Your retirement is something that needs to be made to last a long time and you’re allowed to take your time putting the right amount of money into it. As long as you avoid the unnecessary risks in relying on social security, and avoiding inflation, and you prudently plan for a slightly longer nesting period for your children, and plan for your own longevity, you can avoid a few of the major pitfalls that your retirement plans may otherwise succumb to.

By Financial Social Media and Jimmy Hancock

 

References

1. http://www.smartmoney.com/retirement/planning/the-cost-of-living-longer–much-longer-1328897162395/

2. http://oregonstate.edu/ua/ncs/archives/2013/jan/no-more-%E2%80%9Cempty-nest%E2%80%9D-middle-aged-adults-face-family-pressure-both-sides
3. http://www.cnbc.com/id/100338122/Yes_We_Can_Fix_Social_Security_but_It_Won039t_Be_Pretty

How to Maximize Your Social Security Benefit



social security moneyYou have worked hard and are finally ready to enjoy your golden years aka retirement. And yes, you have also planned and saved for these future retirement years. Maybe you planned many years ago or maybe you planned just recently; but either way, you probably factored in the boost offered from your future Social Security benefits. Whatever the boost might be, wouldn’t you want to maximize those benefits if possible? If the answer is a resounding “YES”, then you need  to learn about the various claiming strategies, and fully discuss them with your financial coach. The proper strategy can amplify your lifetime Social Security benefits significantly.

Wait As Long As You Can

An example of one strategy is waiting as long as possible to start claiming your Social Security benefits. The earliest age that a retiree can start claiming these benefits is 62 years old. However, did you know that once you reach your full retirement age (between 66 -67), your social security benefits increase by about 8% each year plus inflation adjustments? A guaranteed 8% growth rate year over year is unheard of these days in the investing world.  Your benefits are maxed out at the age of 70.

Other Strategies

Are there claiming strategies that can optimize your Social Security benefits even if you need to start collecting at an earlier age? The answer is “Yes”. Advantageous strategies can be applied to this situation as well when you know how to maneuver through the claiming process… you just need the proper expertise to guide you through the rules.  There are many different situations and needs but here are just a few strategies that might fit your situation.

Spousal Benefit

Spousal benefit is getting half of the Social Security benefit of your spouse.  If your individual benefit is less than half of your spouses benefit then it is wise to take the spousal benefit in most cases.  This is especially true if you are older than your spouse, since you can claim half of what their full benefit would be, as long as you are at the full benefit age.  This is true even if they are not at the full benefit age yet.

File and Suspend

The file and suspend strategy is a unique way to use the spousal benefit to your advantage.  The strategy involves the higher wage earner filing for and then suspending their benefits at full retirement age.  This allows the spouse to receive their spousal benefit, while the higher wage earner can wait for a future time when they can take their benefits at a much higher amount.  This is a great way to increase your overall benefit in the long term, while still giving a small amount of income while waiting to max out the benefit.

Seek Help

There are many other aspects and complications that can be thrown into the mix, but those are just a few options to think about.  Overall, these claiming strategies can cushion your retirement years with thousands of dollars. If you are thinking about navigating through your Social Security claiming process alone, it might be very unrealistic because the rules behind these strategies can be complex and confusing.  It’s best to seek the help of a financial coach who has an in-depth knowledge of the best Social Security strategies for retirees.  Make certain that you fully learn and understand the rules of each strategy before you choose. You can add thousands of dollars to your retirement funds just by applying the right Social Security claiming strategy for you.

By Jimmy Hancock

5 Basic Tips for Creating a Solid Retirement Plan

retirement planWe all know what the retirement picture is supposed to look like.  We spend our whole life working toward that magical retirement age when your golden years begin–the hobbies, the travel, spending time with your grandchildren.  However, with a rocky economy and volatility in the markets your picture might not be so clear.

Consider these basic tips to see to it that your retirement is spent doing what you love.

  1. Set your retirement goals:  Think about what you want your retirement picture to look like.  Does it involve living in a paid-off home, buying a motor home, or relocating to a house on the beach?  Do you want to donate to charities, or provide for your children and grandchildren?  What will it take to make it all come together?
  2. Start Planning now:  Whether you are just beginning or looking to retire in five years, start taking the steps to prepare now.  Establish IRA’s or participate in your employer-sponsored 403b or 401k plan and fund them with as much as you can.  One goal would also be to increase your contribution each year to help insure that you have enough money to retire.
  3. Reevaluate your life expectancy:  It is no secret that with medical technology and living a good healthy life we are living longer than ever.  According to the Society of Actuaries, a 65-year-old man has a 41% chance of living to age 85, and a 20% chance of surviving to age 90.  A 65-year-old woman has even better odds.  She has a 53% chance of living to age 85, and an impressive 32% chance of reaching age 90.  With these statistics in mind, ramping up your savings is more crucial than ever.
  4. Determine your Social Security benefits:  Did you know the longer you delay retirement, the larger your Social Security checks grow?  While you can officially start drawing funds at age 62, if you hold off until age 70, you’ll double your benefit amount.  Even if you wait until age 66, your Social Security checks will grow by one-third.  While working past age 65 might not appeal to you, the higher payout amount certainly should.  There are many more strategies to get the most from Social Security, especially if you are married.  To explore your options and determine when you will begin to draw Social Security benefits, visit www.SSA.gov.  They even have an online retirement estimator to help guide your decision.
  5. Work with a trusted Financial Coach:  If you really want to get the best out of your retirement plan, it’s best to place it in the hands of a capable retirement specialist who will coach you through the process, recommend appropriate investment tools, offer practical advice on savings, and keep an eye on your retirement portfolio.  For more information on working with a coach versus an planner click on the tab at the top of this page called Why You Need a Financial Coach.

We hope this has been helpful to you.  If you would like more information click on the contact button and we will send you more information or set up a time to meet with you.

By Jim Hancock

Five Essentials for Early Retirement Planning

retire timeWho wouldn’t want to retire early and pursue their own goals and desires? The problem is that without sensible retirement planning it can be difficult to save up enough to retire at 65 and even harder to get to that point early. To help, here are five things you can do to help get yourself there a little quicker.

1. Track Expenses

The first thing you need to know is “Where is my money going?” Follow the money to see how much you’re spending on what. With this information, you can determine if you’re spending your money wisely and what luxuries you can do without on a monthly and annual basis. Are you working hard just to pay for cable TV, fancy cars, and gasoline? What can you cut out? What is a necessity? You’d probably be surprised to learn just how much you can do without and still live comfortably.  Matson Money Blue is an online tool you can use to track expenses.

2. Save More

Easier said than done, to be sure, but with what you’ve learned by tracking expenses you’ll see that you can probably save more than you think. The sad truth is most people save much less than they should.  Some experts advise saving 10% or 15% of your paycheck for retirement, but some people, by cutting unnecessary expenses, have been able to save 50% or even 70%!

This has two effects. The first is that by saving more you will be able to retire earlier. The second is that you will acclimatize to a less-expensive lifestyle and your retirement nest-egg will go even further, providing even greater security.

3. Side Jobs

For some people, even cutting out every last unnecessary penny still won’t get them to where they want to be. The obvious answer is to increase your income. This can be done a number of ways. If you have experience in a given field, you can become a consultant or a freelance writer. Handy with tools? Some people make spare money assembling things such as IKEA furniture for the “less-than-handy”. If you keep your eyes open, you can find focus groups to participate in that offer financial compensation. Some of you can even dust off your old baby-sitting skills. Make a list of your skills, even non-job related ones. Which ones might bring in a bit of extra money?

4. Start Early

The longer you wait, the harder it will be to retire early. Compound interest works greatly in your favor if you start in your 20s or 30s, and despite its ups and downs, the stock market can be a good wealth generator if you have a long horizon. But what if you’re past your 30’s? Is it too late? Absolutely not! CDs and bonds are safer investment vehicles. It may not be as wild a ride as the stock market, but it’s certainly more stable. Be sure to educate yourself on which vehicles are right for your investment and retirement plans.

5. Price Health Insurance

One drawback to early retirement is that you still won’t qualify for Medicare until you’re 65. Until then you’ll have to buy your own health insurance, and the cost will increase as you get older. Shop around for a plan that fits your budget, and don’t forget to see if you qualify for any federal subsidies.

It takes a lot of planning and preparation to retire early. If you’ve been fortunate enough to be able to save since your first job, you’re way ahead of the game. But if you’ve had to wait until later to be able to save, you still stand a chance by including these five steps into your game-plan.

By Financial Social Media and Jimmy Hancock

Keys to Maximizing Your Social Security Benefit

social securityYou have worked hard all of your life. You have raised a beautiful family that you are proud of, and you and your spouse are finally ready to enjoy your golden years together. And yes, you have also planned and saved for these future retirement years. Maybe you planned many years ago or maybe you planned just recently; but either way, you probably factored in the boost offered from your future Social Security benefits. Whatever the boost might be, wouldn’t you rather maximize those benefits if possible? If the answer is a resounding “YES”, then you want to learn about the various claiming strategies, and fully discuss them with your financial coach. The proper strategy can amplify your lifetime Social Security benefits significantly.

 
Benefits of waiting to Claim

An example of one strategy is waiting as long as possible to start claiming your Social Security benefits. The earliest age that a retiree can start claiming these benefits is 62 years old. However, did you know that once you reach your full retirement age (between 65 -67), your social security benefits increase by 8% each year plus inflation adjustments? Wow, the money claimed increase considerably just by waiting a little longer.

 
Other Benefits

Are there claiming strategies that can optimize your Social Security benefits even if you need to start collecting at an earlier age? The answer is “Yes”. Advantageous strategies can be applied to this situation as well when you know how to maneuver through the claiming process… you just need the proper expertise to guide you through the rules. Once you know these rules and know how to navigate confidently through the claiming process, you can apply a strategy that works in your favor, and maximizes this money.

 
Spousal Benefit

Some of these claiming strategies involve the idea of spousal benefits. Here, spousal benefits can be applied to a “Restricted Spousal” strategy as well as a “File and Suspend” strategy. According to Jim Blankenship, CFP, EA of Forbes Advisor Network, “File and Suspend allows for the lower wage earner to increase his or her benefits by adding the Spousal Benefit, while the higher wage earner continues to delay his or her benefit, adding the delay credits.” On the other hand, the Restricted Application for Spousal Benefits “provides one spouse or the other with the option of collecting a Spousal Benefit, while at the same time delaying his or her own retirement benefit.” All and all, any couple must carefully consider the particular rules pertaining to these strategies in order to determine the appropriate strategy that applies to their specific situation.

 
Conclusion

Overall, these claiming strategies can cushion your retirement years with thousands of dollars. If you are thinking about navigating through your Social Security claiming process alone, it might be very unrealistic because the rules behind these strategies can be complex and meticulous. Even the employees at the national and local Social Security offices cannot give any advice; therefore, it’s best to seek the help of a financial coach who has an in-depth knowledge of the best Social Security strategies for retirees. The world today is very different… life expectancy has increased, pensions have dwindled, medical costs have increased, and the economy remains uncertain. Especially now, maximizing your Social Security benefits is necessary because these are unfavorable conditions. So, make certain that you fully learn and understand the rules of each strategy before you chose. You can add thousands of dollars to your retirement funds just by applying the right Social Security claiming strategy for you.

 
Authored by Financial Social Media (financialsocialmedia.com) and Jimmy Hancock

 

References
Blankenship, Jim. “Are You Leaving Social Security Money on the Table.” Forbes. 26 November 2012. <http://www.forbes.com/sites/advisor/2012/11/26/are-you-leaving-social-security-money-on-the-table-you-might-be-if-you-dont-understand-and-use-this-one-rule/>
Roberts, Damon. “The Retirement Planning Edge: Maximizing Social Security.” Fox Business. 27 November 2012. <http://www.foxbusiness.com/industries/2012/11/27/retirement-planning-edge-maximizing-social-security/>

Guide to a Baby Boomers Retirement

profileThe ripe age of 65 is no longer a valid number for those planning their retirement. As more and more baby boomers reach this age, demographers and researchers are skeptical as to just how long they will live. Not only does this uncertainty have effects on a national level, as to the cost of Medicare and Social Security for future generations, but it also has effects on a personal level, and the complications it causes for future retirees and their spending and saving plans. The juxtaposition between American medical advances and deteriorating health and lifestyles begs the question: live too long and risk running out of money; die young and you can’t take it with you. Let’s look at the facts and then discuss the possible solutions in this rising debate.

 

Medical Advances = Longer Life Expectancies
At least one member of a 65-year-old couple can expect to live for another 23 years, to age 88.
There is a 30 percent chance of living past 92.
The current life expectancy for an American at birth is 77.9 years—58 percent longer than in 1900, when the average life expectancy was 49 years.
From 2000 to 2007 the rate of death from heart disease, the leading cause of death, plunged 19 percent, while the rate for cancer, the second-leading cause of death, fell 5 percent.
95,000 fewer Americans died of heart disease in 2007 than in 2000, even as the population increased.
Adding 3.1 to 7.9 years to life expectancy by 2050 would add an estimated $3.2 trillion to $8.3 trillion to Medicare and Social Security outlays above current expectations.

That last fact paints a pretty good picture as to what will happen to the cost of Medicare and Social Security. As life expectancies rise, so does the federal tab for old-age benefits. Social security came into play in the 1930’s, when the life expectancy was 65.2 years. At that time, the government did not expect retirees to use Social Security. However, with life expectancies on the rise and many retirees spending more time in retirement than in the workforce, the federal budget for retirement benefits is swelling exponentially. Moreover, the explosion of rising life expectancies that we have been experiencing in America since 1950 may not continue at the same pace because of the obesity epidemic. Even as Americans live longer lives, they are expected to spend more years disabled and paying for expensive health care.

Deteriorating American Health & Lifestyles
The rate of obesity in the U.S. has risen 48 percent in 15 years, and by 2020, 45 percent of the population is expected to be obese.
Deaths from Alzheimer’s disease have increased, from 49,558 in 2000 to 74,632 in 2007.
Two-thirds of retirees underestimate the average life expectancy at their age, with 42 percent doing so by five years or more.

It is crucial to know, understand and plan according to your financial needs. There are steps that baby boomers can take to protect their portfolios from uncertainty. A Social Security check should only make up about a third of a retiree’s income and should be supplemented with contributions made to an Individual Retirement Account (IRA) and a 401(k) Also, by delaying Social Security payments until age 70—instead of 62 or 65—retirees can increase monthly payments and make the program a far more valuable income stream late in life.

Obviously, saving more, spending less, and working longer are ways in which you can protect your financial assets and future. Regardless of whether you can expect a long life or disability payments in your future, it is vital that you plan for your retirement.

Authored by Financial Social Media (financialsocialmedia.com)

Retirement Planning Basics: Investment Accounts

retirePlanning your investments to build a retirement fund can be a dizzying prospect. The various questions and options and details and accounts and amounts are enough to make anyone’s head spin. Wouldn’t it be nice if there was a generic recipe for success? A nice neat list of step by step instructions on how to make the best decisions on where, when and how much when it comes to investing for your retirement. Unfortunately, this list of steps is incredibly dependent upon each individual and their current situation and future plans, so a sure fire success route doesn’t exist.

But before you stop reading, there are a few broad steps that most financial professionals agree will most likely lead you down the right path. By investing your money in retirement accounts by the priority of which will give you the most return, you can take advantage of what each has to offer. Here’s the order that is suggested for the majority of people in terms of retirement accounts.

1. Fulfill Your Company’s Match Program: The exact amount of this will differ for each individual depending on the company that they work with, but whether you have a 401K or a 403b, the best place for your money is in those accounts reaping the assistance of your employer. Match programs offer a two for one that is too valuable to turn down. Before you invest anywhere else, make sure you are investing enough in your 401k or 403b to get your full match.

2. IRA to the Max: There has been a long standing battle between the Traditional IRA’s and the Roth IRA’s. When it comes to your retirement planning, your Roth IRA should win this battle. There are a few different reasons why you should make this move. Investing in a Roth allows you to pay taxes on your income now, and avoid the higher tax rate as it grows in your retirement. Also, investing in an IRA gives you more choices and flexibility than is offered in many 401k plans. You can decide where you want to open your account based on your personal preference or individual situation. This step of maxing out a Roth IRA can change based on the individual though, as some people cannot open a Roth IRA because of their income level.

3. 401k or 403b to the Max: After you have reached your company’s matching level and have maxed out your Roth IRA, turn your funds back to the 401k or 403b until they are maxed out as well. Having both your Roth IRA and your 401k/403b maxed out gives you some variety in your portfolio in terms of how the investments are taxed. This variety gives you something of a safety net in terms of how taxes and other investments change over time and the affect they will have on your funds. As a side note, when you plan to max out your 401k or 403b, keep your eye on the ever changing contribution limits which vary each year.

4. Open Taxable (Non-Qualified) Accounts: If you have filled in the previous three steps, you will find yourself at the final, and most open ended step of the journey. If you are married this could be a joint account, and for the singles it is a personal account. You can use this account as an emergency fund since there are no age requirements to when you can take the money out without penalty.
This plan is not something to jump into without doing your homework. Like mentioned before, there is a reason that no one has created a perfect plan that fits everyone. Depending on your personal income, you might not be eligible for certain funds, like a Roth IRA, or you might be eligible for some accounts that could take higher priority, such as a SEP IRA. But, for most people, looking for a general order of priority for their retirement investments, these four steps are a great place to start.

Authored by Financial Social Media (financialsocialmedia.com) and Jimmy Hancock