Most Americans will either have to or want to retire one day. With the massive population of baby boomers out there, millions of them already have started their retirement and millions more will be retiring every year for the next decade or more. To have a good retirement generally requires a lifetime of planning, but for millions of Americans there just is not going to be enough in Social Security and basic retirement funds to make those golden years all that golden.
24/7 Wall St. frequently has looked at long-term planning issues around investing and retirement. The good news is that if you are set to retire in the immediate years ahead, there is effectively zero risk that your Social Security benefits will not be there for another decade or two. The bad news for the majority of the population is that most people will not be able to live very well only on Social Security alone. Even adding in retirement funds may not make those golden years all that pleasant without some additional self-help. You need to take action and make an effort to help boost your income and cash available immediately and in the years ahead.
While Social Security is safe for the boomers and elderly, younger generations have very low expectations. Their expectation is that Social Security will not be there for them at all, or if it is there the benefits might be greatly reduced. All this makes it imperative for people of all ages to begin thinking about how to supplement their retirement as early as possible.
Investment advisers commonly tell clients to have saved $1 million, $2 million or more to be able to enjoy retirement. Even if you aren’t working any longer, those pesky costs from food, insurance, medicine, transportation, clothing, shelter, utilities, bills, vacations and entertainment all will keep adding up every month. We previously provided a basic plan for most ages on how to save that $1 million for retirement, and that is very attainable, but the reality is that most people just aren’t anywhere close to having saved that much money.
There are some basic issues that need to be considered about funding a proper retirement and taking a reality check about just how golden your future golden years will be. It is assumed that you are going to have some Social Security, if you are already near retirement, but the statistics from government and independent researchers show that an additional retirement account or other savings have to be in place. Here are some basic stats on Social Security, retirement income and so on:
- The average monthly Social Security benefit paid to retirees in 2019 was said to be about $1,461 per month, and the maximum benefit at full retirement age was $2,861.
- According to a May 2019 report from Fidelity, the average 401(k) balance was $103,700 and the average IRA balance was $107,100. These figures are just inside of Fidelity, but the number of people with $1 million or more in their 401(k) was 180,000 and the number of IRA millionaires was 168,100.
- The Social Security Administration (SSA) website indicates that the average life expectancy for those turning 65 today is 84.0 years for a man and 86.5 years for a woman. One in three is expected to live past 90, and one in seven will live past 95.
- Census data from the 2018 American Community Survey showed that the median U.S. household income was $61,937. This varied widely from state to state, from under $45,000 in Mississippi and West Virginia to over $80,000 in Washington, D.C.; Hawaii; Maryland; and New Jersey. Households maintained by those aged 45 to 64 had the highest median household income in 2018 at $75,289.
- Early withdrawals of 401(k) and IRA assets can destroy your retirement, and helping your adult kids may be blowing your own retirement.
Add all this up and here is what it means ahead for Joe Retiree. Even the maximum monthly Social Security benefit is unlikely to go very far in your retirement, and the average 401(K) and IRA accounts are likely to add only a few thousand dollars per year in income.
Here are 10 simple efforts that can boost your income and give you extra cash to make your retirement really feel like they are the golden years.
1. Knowing When to Begin Collecting Social Security
Knowing how to time your Social Security payments is a critical part of retirement for most Americans. Your mandated retirement age of 65 to 67 depends on what year you were born, and the SSA website shows a table of scheduled benefits. Some people choose to start taking their Social Security benefits at 62 years of age, while others choose to delay their benefits until age 70.
That SSA table shows a breakdown of how much more you get per month for delaying or how much less you receive for starting early. For anyone born 1960 or later, the full retirement age is 67 years old. Taking Social Security for those born 1960 or later at age 62 reduces monthly payments by 30% (to $700 for each $1,000 eligible at full age), and delaying Social Security until age 70 turns a $1,000 benefit into roughly $1,280. Taking money sooner or later depends on needs, lifestyle, how long each person reasonably expects to live and many other factors.
Don’t forget: if you start taking Social Security before the mandatory age of 70, you can always choose to interrupt the benefits and let those monthly benefits grow.