Financial Focus Strengthen your ‘three-legged stool’ for retirementProvided By BEN EDWARDS, AAMS®
July 17, 2022
To begin with, all three legs of the stool are facing challenges. Let’s consider them: • Social Security – Social Security has come under financial pressure because the workers-to-retirees ratio has declined significantly, according to the Social Security Administration’s 2021 Board of Trustees Report. A number of proposals have been brought forward on how to improve the long-term financial security of the Social Security system. • Personal savings and investments – In terms of building savings and investments for retirement, the picture is somewhat mixed. The national savings rate has increased in recent years, but more than half of American workers still say their retirement savings are not where they should be, according to a 2021 survey from Bankrate, a personal finance website. And the same survey found that just over half of investors with a 401(k) or IRA have taken early withdrawals – that is, they withdrew money before they retired. Furthermore, we may be waiting too long even to begin saving/investing for retirement. A survey from Age Wave and Edward Jones found that respondents began saving for retirement at an average age of 38, but the majority said they should have started saving a decade earlier. You have options for improving some parts of your own three-legged stool. For example, no matter what happens to Social Security, you can still decide when to start taking payments. You can begin collecting benefits as early as 62, but your monthly checks will be larger if you wait until your “full” retirement age, which will likely be between 66 and 67. You can even delay taking benefits until they “max out” at age 70. As for a pension, you can’t control what’s available to you through your employer, but you can create your own retirement income stream by contributing as much as you can afford to your 401(k) or other employer-sponsored plan and by increasing your contributions whenever your salary goes up. And you can also contribute to an IRA or other investment vehicle to further boost your retirement funds. Try to leave these accounts intact until you need them for retirement. This will be easier if you’ve built an emergency fund, with the money kept in a liquid, low-risk account, to pay for unexpected costs, such as those resulting from a major car or home repair. The three-legged stool may not be as universal as it once was – but you can still construct a sturdy structure to support your retirement needs in the future.
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