How You Can Protect Your Retirement

You may have noticed an increase in media coverage regarding the uncertain future of social security.

This has led to Americans wondering if social security will run out by the time they are eligible to receive the benefits they have been paying for throughout their careers.

The bad news is that, according to the 2022 annual report from the Social Security board of trustees, social security’s cash reserves will be fully depleted by 2034 if Congress does not implement any changes to balance social security’s budget.

The somewhat good news is that if social security’s cash reserves do become fully depleted, this doesn’t mean that you won’t receive any social security benefits.

Rather, you will simply be receiving less benefits than you might have expected or planned for.

So why is social security in trouble?

The most prominent reason observers have raised concerns about the future social security is longer life expectancies, a smaller working-age population, and an increase in the number of retirees.

The reality of the situation is that by 2035, the number of Americans 65 and older will increase to more than 78 million from about 56 million today.

As a result, more people will be taking money out of the social security system – but there will be fewer paying into it – see the problem?

There are several ways Congress can balance the social security budget, each of which has its benefits and pitfalls.

While the how and when Congress decides to resolve the social security crisis remains uncertain, there are a few things you can do to ensure your retirement.

Tip #1: Save Your Money

If you aren’t already, start saving!

No matter your age it is important to start saving as early as possible.

Start small and try to increase the amount you save each month.

The sooner you start saving, the more time your money has to grow.

Make saving for your retirement a priority – set goals, make a plan, and stick to it!!

To show you how important saving is, consider this:

If you saved $6,000 each year and your money earned 7% annually, in just 15 years you will have saved $150,744!

In 35 years you will have saved $829,421 for your retirement!!

Tip #2: Know Your Retirement Needs

Did you know that only half of Americans have calculated how much they need to save for retirement?

Retirement is expensive.

Experts estimate that you will need 70 to 90 percent of your preretirement income to maintain your standard of living when you stop working.

So, it is important that you calculate how much money you want to have saved to maintain your lifestyle and fulfill your retirement needs and wants.

Tip #3: Contribute to Your Employer’s Retirement Savings Plan

If your employer offers a retirement savings plan, such as a 401k, you should sign up and contribute all you can.

There are several benefits to contributing to your employer’s savings plan.

For instance, your taxes will be lower, your company may kick in more, and setting up automatic deductions makes it a quick and easy process.

Over time, compound interest and tax deferrals make a big difference in the amount of money you will accumulate.

So talk to your employer and learn more about your plan.

Tip #4: Learn About Your Employer's Pension Plan

If your employer has a traditional pension plan, check to see if you are covered by the plan and be sure to understand how it works.

Ask your employer for an individual benefit statement to see what your benefit is worth.

It is also important learn about any benefits you may have from a previous employer as well as be sure you find out what will happen to your pension benefit if you change jobs.

If you’re married, you may also want to look into if you are entitled to any benefits from your spouse’s pension plan.

Tip #5: Don’t Touch Your Retirement Savings!

If you withdraw your retirement savings now, you will lose principal and interest and you might lose tax benefits or have to pay withdrawal penalties, so be sure not to touch your retirement savings!

Tip #6: Consider Investing

How you save is just as important as how much you save.

Inflation and the type of investments you make play important roles in how much you’ll have saved for your retirement.

Know how your savings or pension plan is invested and learn about your investment options.

It’s important to diversify your savings by putting it into different types of investments in order to reduce risk and improve return.

Consider meeting with a financial advisor/planner to see how to best invest your saving and save yourself the headache.

A financial advisor/planner will make your money work for you.

The earlier you start investing the more your money will make you!

Tip #7: Put Money Into an Individual Retirement Account (IRA)

You can put up to $6,000 a year into an IRA and if you are 50 or older you can contribute even more.

It’s all up to you.

Another perk of IRAs is tax advantages.

You have two types of IRAs to choose from: a traditional IRA or a Roth IRA – each with different tax treatments.

Additionally, the after-tax value of your withdrawal will depend on inflation and the type of IRA you choose.

IRAs can provide an easy way to save.

Similar to your 401k, you can set up automatic deductions from your checking or saving account and whatever amount you’d like deposited into you IRA.

Tip #8: Create an Estate Plan

Think of your estate plan as a comfort blanket for your money and assets.

If something were ever to happen to you, such as a car wreck, that caused you to become incapacitated or even takes your life, you don’t want all your hard earned savings to be spent on legal fees or have your family members stuck in probate court…unless you really don’t like them…

Consider meeting with an estate planning attorney to ensure that if something were to happen, distributing your estate will be a quick and easy process.

And if you do hate any of your relatives, organizing your estate is the best way to ensure they get nothing!

Conclusion

While your social security benefits are beneficial to your retirement plan, they shouldn’t be the only thing you rely on to ensure a relaxing retirement.

Following these 8 tips will provide you with security and a sense of comfort knowing that your retirement is not completely in the hands of Congress.

It is your retirement after all!