American workers

Collecting Social Security

With all of the Baby Boomers that are in the position to begin collecting Social Security, the question is coming up for many as to when is the best time to begin receiving their benefit.   Given the  uncertainty of Social Security’s future and if there well be enough funds for the “Boomers”, some may be thinking that they probably should start drawing on it now rather than later.

Brett Varner has covered this question in the following article and mentions that AARP has a calculator to assist with that determination.   Apply for it when you are 62 years of age?   Or is it better to wait and apply for it later when one could receive more money?

“New Calculator Help Plan for Social Security Benefits.”

A new planning tool and calculator was launched by AARP to help Americans decide when to claim benefits and prepare for retirement to best acheive their financial goals.

The Social Security Benefits Calculator is designed to be an interactive tool for users to evaluate the ideal age for claiming their benefits according to their financial goals.  The calculator has been launched in conjunction with AARP’s “Ready for Retirement?” campaign that offers a ten-step approach for envisioning and planning for a secure retirement.

“Our research shows that many Boomers are worried about retirement because they don’t feel prepared,” said Jean Setzfand, Vice President of Financial Security at AARP. “With our new easy-to-use calculator and our ‘Ready for Retirement?’ resources, we want to help older Americans understand retirement as a life transition, visualize their goals, and take the steps needed to build retirement security.”

The calculator opens to an Overview tab that encourages people to wait to claim their Social Security benefits, noting that the longer they wait the more money they will receive on a monthly basis.  This recommendation follows data that indicates more than 50% of new claimants in 2009 elected to receive benefits at their earliest eligibility age of 62.

After a short series of questions, the calculator offers a projection of expected benefits and then displays a graph on how the amount received each month would grow if benefits were claimed at a later age.

“Too many people avoid planning for retirement because they think it’s just a numbers game, or they simply don’t know where to start,” concluded Setzfand. “More and more in today’s environment, though, individuals really have to take responsibility for ensuring their own retirement security.”

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Following is an ,article that discusses the problems faced by many Americans who will find themselves unable to retire due to the economic issues and failures over the last two years.   More people will find it necessary to continue working longer (if the are employed) and defer their retirement until a later date.  And if they are fortunate to own their home, more will turn to using a Reverse loan to fund their retirement.

Study Reveals Most Americans Unable to Afford Retirement Until Age 73

December 15th, 2010  |  by Kelly Published in News, Retirement, Reverse Mortgage
“Last week, the results of a six-month long study on employee retirement preparedness revealed that the majority of American workers will not be able to afford retirement until 73-years of age.
The “Fall 2010 401(k) Retirement Readiness Study” was conducted by Nyhart. The study reviewed almost 10,000 employee retirement accounts from 110 private and public companies throughout the country, assessing how the employees’ personal 401(k) contributions would affect their retirement age.

The results showed that most Americans will not be financially capable of retiring on time.  Employees over 55-years old will need to contribute more than 45 percent of their salary for the rest of their career in order to retire by 65. According to the study, the average employee, dependent on their 401(k) for financial stability after retirement, will not be able to retire until the age of 73.

By continuing with their current levels of contributions to their 401(k), most American workers between the ages of 60 to 64 will need to work until they are 75 in order to afford retirement.

‘Across all age groups and income levels, the employees who contribute the greatest percentage of income have the best opportunity for retirement,’ said Thomas Totten, senior actuary and lead researcher for Nyhart’s study. ‘The decision of how much an employee contributes to their 401(k) far exceeds the importance of which investment funds they choose. By increasing your contribution by just 2-4% of total income, you can shave years off the age you retire’.

The study found that employees’ 401(k) contribution percentages varied by age, typically increasing as the employee found him or herself closer to the age of retirement. The peak ages of contributions are between 55- to 64-years old.

Employees with higher salaries are more likely to contribute more to their 401(k), however, Social Security benefits decline as a percentage of income for beneficiaries with higher income, counterbalancing the higher contributions.
Ultimately, the study found that only 19 percent of American workers will be ready to retire at 65. Employees earning between $60,000 to $70,000 annually have the lowest projected retirement age at 69.9-years old. Employees who earn less than $25,000 annually have the highest projected retirement age at 77.9-years old”.
Written by Kelly Mellott

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