Retirement Matters

If you’re wondering how much of a Social Security payout you may receive, one number to keep in mind is 35.

Your benefit is based on your 35 highest years of earnings. If you work less than 35 years, the calculation uses zero for your annual income in the years you’re short. Here is an article that provides a description of how Social Security benefits are calculated.

Social Security benefits were established during the Great Depression to help ensure Americans would not retire in poverty. However, they’re not meant to be the “end-all” retirement income plan. If you haven’t taken a good, hard look at all of the savings and assets that you’ve acquired to create a financial strategy for retirement, that’s where we can help. We can help identify potential retirement income gaps and create a financial strategy using a variety of investment and insurance products to help you pursue your financial goals.

It’s also important to assess your current financial strategy and determine what assets to draw from first, particularly in light of their tax status during retirement and the option to delay taking Social Security to potentially optimize your benefit. You should talk to a financial advisor and tax advisor about how to create a tax-efficient retirement income withdrawal strategy.

A common mistake in retirement planning is underestimating your life expectancy -- maybe based on your parents’ or grandparents’ age -- and not saving as much as you need. However, it’s more likely for people to live longer than previous generations, and also have higher medical bills. Even if one spouse dies young, it doesn’t mean the other won’t live late into their 90s. 

Women who took time out of the workforce to care for dependents can be particularly vulnerable during retirement. One recent study found that, in a 10-year break early in their career, the shortage of contributions to Social Security and a retirement plan could result in a loss of up to $1.3 million in retirement savings.

You also should consider the impact of inflation throughout retirement. Even though the inflation rate has been low in recent years, it can still make an impact over the long term. For example, an average 2 percent inflation rate over a 20-year timeframe can reduce the buying power of a dollar to just 67 cents.

Also investigate the investment fees associated with your retirement account, as they can have a tremendous impact. A recent analysis revealed that many teachers who invested in 403(b) retirement plans could have account balances 20 to 50 percent higher had they invested in lower-cost holdings over their savings period.

The same issues can be found with company-sponsored 401(k) plans. A plan that offers funds from only one fund family may not give you enough choices. It is also important to understand the fees you are paying.

Interested in reading more? Here are some articles that may be of interest to you:

[CLICK HERE to read the article, "Your Social Security: 35 Years of Work,: from Center for Retirement Research at Boston College. Oct. 20, 2016.]

[CLICK HERE to read the article, "What's Your Plan B for Retirement?" from U.S. News & World Report. Aug. 3, 2016.]

[CLICK HERE to read the article, "How Retired Clients Can Deal With Small COLA: Retirement Scan," from Financial Planning. Oct. 9, 2016.]

[CLICK HERE to read the article, "Pros and Cons in Investing with TIPS," from U.S. News & World Report. Oct. 13, 2016.]

[CLICK HERE to read the article, "Think Your Retirement Plan is Bad? Talk to a Teacher," from The New York Times. Oct. 21, 2016.]

[CLICK HERE to read the article, "Q&A: Fees and Your Retirement Plan," from Bankrate.com. Sept. 27, 2016.]

Raymond C. Lantz, Jr. is the president and founder of USA Wealth  Group, Inc. Ray has many years of experience advising clients in retirement and sophisticated tax planning strategies, multi-family and commercial real estate projects, and legacy planning. Ray is a graduate of Clark University, holds a law degree from Boston College, and a master of laws in taxation from Boston University. You can hear him every Sunday on Money Wise with  Ray Lantz on WBSM 1420AM or on the Radio Pup app.