Retirement Income and Social Security



BY MIKE MCGILVARY
Financial Advisor

 

One of the most important factors in making sure those getting ready to retire are confident with their financial plan is to know what their projected income in retirement looks like. What makes up my retirement income? Have I saved enough to create my own paycheck when I stop working full time?  Over the years, the makeup of retirement income has changed dramatically. In previous generations, a person may work their entire career for the same corporation and be eligible for a pension. Retirees of previous generations must have felt at ease knowing they had their pension payment for the rest of their lives.  Additionally, the retiree could turn on their Social Security benefit to supplement the pension income.  As the years have gone by and people’s life expectancy has increased, corporations cannot afford to continue to offer this type of benefit.

What does this mean for workers who are planning for retirement today? For starters, taking full advantage of your employer’s retirement benefits (401(k)/403(b)/SIMPLE IRA…etc.) is extremely important. Knowing what these benefits are and putting together a strategy to maximize your retirement savings in accordance with your budget is of equal importance. The difference between the savings plans of today and pension plans of yesteryear is how the employee derives his or her income. With pension plans, participants can typically choose a guaranteed income stream for the rest of their lives.  With today’s 401(k)s and other traditional savings plans, a check for life is not usually an option.  This highlights the importance of how you claim Social Security benefits and how that integrates with your financial plan. Our firm believes you should establish a reasonable withdraw rate from your retirement accounts (401(k)s, IRAs, etc.), while also taking into consideration non-retirement accounts. We also recommend that you speak with professionals who understand the ins and outs of the Social Security system to ensure benefits are being maximized, based on the specifics of each family’s situation.

As financial advisors, we can help you plan for the long-term and put you in touch with other professionals that have a vast knowledge of the things that we do not deal with on a daily basis. Having a team of professionals with resources that can provide help to you and your family will put you at ease.  Many people default to claiming Social Security at age 62, which is the earliest retirees can typically take it.  Is that the best option? It depends on your spending needs and goals; it depends on your health and how long you expect to live in retirement.  Please consider having a conversation with an expert before you make a final decision.


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