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Retirement Planning Strategies: Financial Watch April 2016

April 19, 2016
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More Than Investing: Two Strategies to Save for Retirement

Whether you are single, have a family with young children, or are a couple nearing retirement—most of us struggle to find a balance between enjoying life today while investing in our future, like retirement. It’s a fact that many Americans do not have enough money saved for retirement. According to the Government Accountability Office, 29 percent of those age 55 or older do not have retirement savings or a traditional pension plan1. Don’t be a statistic—plan for your golden years.

What can cash-strapped Americans do if they are having difficulty saving all they need for retirement? It boils down to two strategies: working longer and deferring Social Security benefits.

Strategy #1: Work Longer

Thanks to modern medicine, people are living longer and healthier lives. However, as you can expect, one of the downsides to such an upward trend is that we worry about running out of money in retirement. Two options are to save more money while we are working and/or work longer. Most companies today don’t have a mandatory retirement age. If you like your job and enjoy the people, why not stay a few more years?

  • The average retirement age is about 64 for men and 62 for women, according to a recent brief from the Center for Retirement Research at Boston College2. However, more Americans are considering staying in the workforce longer. The percentage of workers who expect to retire after age 65 has steadily increased from 24 percent in 2005, to 33 percent in 2010 and 36 percent in 2015, according to an EBRI (Employee Benefit Research Institute) Retirement ConfidenceSurvey3
  • Unless a layoff or health reasons force you out sooner, work a few extra years to save more money toward your work-sponsored 401(k), pension or other retirement plan (e.g., traditional or Roth IRA). You could even earn free money if your employer offers a 401(k) match program.
  • When you are ready to slow down a bit, talk with your employer about the opportunity to explore part-time work. This offers a nice transition into retirement, and will keep an income stream flowing.

Strategy #2: Defer Social Security benefits

Working longer also allows you to take advantage of another strategy to bank more cash for retirement: deferring Social Security benefits.

  • The earliest age you can start taking Social Security is 62, however, you will get reduced payments by taking benefits early, and there is no chance that they will increase throughout your lifetime. It may be wise to take money out of savings or a home equity to avoid losing that money in the long run. 
  • Baby boomers can start taking benefits at age 66, but the age requirement will steadily increase to 67 for those born after 1959. You could take your benefits then, but the rub is really in delaying taking benefits up until age 70. That’s because your benefits can increase by 8 percent each year when you delay from age 62.

I outlined just two strategies to help you save for retirement. I can assist you with these and other essential ways to plan for retirement given your current financial situation. Contact the office at 217-971-1256 to schedule a meeting if you’d like to discuss.

1http://www.cnbc.com/2015/06/03/most-older-americans-fall-short-on-retirement-savings.html

2http://crr.bc.edu/briefs/the-average-retirement-age-an-update/

3http://capricorn.bc.edu/agingandwork/database/browse/facts/fact_record/5670/all