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Given that a recent GOBankingRates survey found that 23% of Americans have nothing saved for retirement, it’s clear that many will be relying on Social Security to fund their golden years. And even if you do have retirement savings, you’ll want to be strategic about taking your benefits in a way that’s optimal for you.

You Shouldn’t Rely on Social Security To Fund Your Whole Retirement

If you’re expecting Social Security to fully fund your retirement, you could be in for a rude awakening. The average monthly benefit is $1,542.22 as of June 2022.

“Social Security today only covers a portion of the average American’s expected income needs in retirement,” said Henry Yoshida, CFP and CEO of Rocket Dollar, an investment platform that allows individual investors to use tax-advantaged funds for alternative investing.

If you’re in that 23% of Americans who have nothing saved, start saving ASAP so that you’ll be in better financial standing when you reach retirement age.

Delaying Taking Your Benefits Can Pay Off

You can start to collect Social Security benefits at age 62, but it may pay off for you to wait.

“If you are able to delay taking Social Security after eligibility, you can significantly increase the income [compared to] that minimum amount at the earliest possible access date,” Yoshida said. “For example, if you take Social Security at 62 and your income is $2,364, if you can wait to access Social Security until age 70, the income is $4,194.”

However, Waiting Until Age 70 Isn’t Always the Best Option

It’s true that if you delay taking Social Security until age 70, the amount you receive will be larger than if you start receiving your benefits before, but this doesn’t mean this is always the best option.

“You need to evaluate how that decision impacts your asset balances over time,” said Emily Casey Rassam, senior financial planner at Archer Investment Management. “If you look at the complete picture, which includes a projection of your investment portfolio balance over time, it may make more sense for you to take Social Security earlier. Often, if you delay Social Security until age 70, you are drawing down assets significantly, and that can hurt your long-term asset trajectory. Like all financial decisions, a comprehensive financial plan can tell the whole story and help you make decisions with all of the relevant data organized.

65 Isn’t the Full Retirement Age for Everyone

When deciding when to collect Social Security, it’s important to understand what you’ll receive at what age.

“Age 62 is the earliest you can take benefits. For every year an individual delays taking benefits beyond their full retirement age — which varies depending on when you were born — through age 70, the annual benefit increases by 8%,” said Richard Freeman, senior director and wealth advisor at Round Table Wealth Management. “Conversely, for every year an individual takes benefits earlier than their full retirement age, their annual benefit is decreased 8%.”

Freeman said that his clients often assume their full retirement age is 65, but this is not always the case. If you were born in 1943 or later, your full retirement age ranges from 66 to 67.

Your Benefits Are Calculated Based on your 35 Highest-Earning Years

It’s important to understand how the Social Security Administration calculates your benefit amount.

“The primary insurance amount — or amount you get based on your own record — is based on the worker’s highest 35 years of earnings,” said Herman “Tommy” Thompson, Jr., a certified financial planner with Innovative Financial Group in Atlanta. “Most people think it’s based on your last five years. I’ve been talking about Social Security for 18 years and every time I say this, someone is surprised!”

Your Spouse (or Former Spouse) Can Impact Your Benefit Amount

Thompson said it’s important to understand how benefits are calculated when you are the surviving spouse.

“When a spouse dies, the higher Social Security amount remains for the [surviving] spouse, assuming they were married for at least nine months,” he said. “Not half. Not both. The higher remains. Widows and widowers can claim as early as age 60.”

And if you are divorced, you may be able to claim your ex-spouse’s benefits.

“A divorcee can still claim on an ex-spouse’s record if: (1) The individual is at least 62, (2) they were married for at least 10 years, (3) the individual is currently unmarried and (4) the ex-spouse is receiving a benefit or has been divorced for at least two years,” Thompson said.

Social Security (Probably) Won’t Run Out

You’ve likely seen headlines about Social Security running out in 2035 — but this is a worst-case scenario and not something that should cause you to panic. However, you may need to adjust your retirement plans depending on how the gap in funding will be bridged.

“The death of Social Security has been greatly exaggerated,” said Paul Tyler of Nassau Financial Group in Hartford, Connecticut. “If Congress doesn’t add additional funds to the trust, payroll taxes on current workers will continue to support the program. However, the taxes would not fund 100% of the expected benefits. The gap could be closed by imposing means testing, deferring full retirement ages beyond 67 or increasing taxes on benefits. Any of these modifications would require many people to adjust their retirement plans.”

Read More: https://www.yahoo.com/video/social-security-retirement-7-things-110023638.html

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

MP chatted with Paul Tyler, Chief Marketing Officer for Nassau, leading the marketing strategy, direct-to-consumer channel, and innovation activity. Tyler drives the branding of insurance companies and affiliated asset management companies. He built a direct-to-consumer channel for Nassau Financial Group. In addition, Tyler launched Nassau Re/Imagine, an Insurtech-focused incubator based in Hartford. Before his role at Nassau Financial Group, Tyler worked at other insurance companies in various roles in strategy, marketing, operations, technology, sales, and compliance. He earned his A.B. from Princeton University and his J.D. from Cornell Law School.

Personal Finance Generally

What is financial literacy, why do so many people struggle with it, and how can we become more financially literate?

I’d first start with what financial literacy is not.

It’s not receiving a passing grade on a finance exam.

It’s not having a large bank account.

It’s not staying current with market news.

Achieving financial literacy means that you 1) are both aware of and shape your financial habits, 2) make smart decisions with your money, and 3) allocate your savings in a manner that leads to long-term financial stability.

How can we manage our money more confidently, and what would this look like in practice?

Start with innovative, small steps.

Many studies have proven that significant behavior changes start when a person makes small changes consistently over time.

For instance, people who weigh themselves daily tend to be more successful in managing their health. A similar easy financial step is simply setting the same time each week to review your account balances and weekly charges.

Once every three months, take a look at your retirement plan balance.

Simply creating awareness will start to have a very positive effect on your outlook and behavior.

How does our health affect our wealth, and what can we do to ensure we’re on track to a prosperous future?

Health, wealth, and happiness are connected at the hip.

Studies have proven that credit scores correlate with life expectancy.

Does one directly impact the other? I’ll leave that for future scientists. However, it intuitively makes sense that someone who pays their bills on time has less stress than someone who doesn’t. That person probably also gets regular checkups with the doctor. The person probably also exercises moderately every week.

Start building some order in your life today!

Budgeting and Saving

What three out-of-the-box strategies can you share to help us improve our personal budgeting, and why these three?

Turn savings into a game. Good rewards can quickly change behavior.

1. “Round Up”

The first game is to save your change simply.

Roll up each transaction to the nearest dollar and transfer the change to your savings account. You will be surprised how fast your savings grow. Many banks have automated programs that make this easy to do.

2. “Put a Prize on the Table”

The second is to create a set of personal rewards for saving a certain amount of money each month.

These could range from going to a special restaurant to getting the headphones you always wanted. You must carefully consider what savings targets make sense and what you can reasonably achieve.

3. “You Really Did Save…”

If those aren’t enough, try the “receipt game.”

Every time you get a receipt from a store or pharmacy, you usually have an amount the store claims you saved.

Make it real.

Transfer that amount from your checking into your savings account.

What strategies should we use to save more, and why might these be the most effective?

The most successful long-term savings plan is to spend less than you earn. Spending is the only lever that’s really under our full control.

If you carefully control your expenses, your savings account will grow. This means challenging a lot of your monthly expenses that may not really be essential.

What should we look for in a bank account, how might this change be based on our financial situation, and why?

Never leave your money and forget it.

Figuring out the best bank account does depend on the stage of your financial journey. If you are just starting, you should pay close attention to fees and minimum deposit requirements. Great savings habits can be crushed if high fees wipe away the results.

Also, pick a bank with one of the free, automated savings programs that will grow your account balances. Later in life, as your balance grows, you will want to pay close attention to the yields you earn and the ability to link the account to a low-cost brokerage account easily.

Handling Debt

What steps should we take to reduce our current debts, and why?

The first step is to figure out how to get your effective interest rate as low as possible. Credit card debt is the most expensive. Generally, a home equity loan is one of the cheapest. Consolidate the debt on the most favorable terms possible. You may be able to get all debt moved to a card with a low A.P.R. If you are lucky, you may be able to pay off the credit card with a home equity loan. Once you have done this, start paying it off as fast as possible. You will likely need to change your spending habits. However, if you don’t, the long-term consequences can be destructive.

What are some commonly made debt reduction mistakes, and how can these mistakes be avoided?

My biggest mistake is people paying off the wrong bills first. The financial firm with the most effective collection process may not be the first to pay if the total interest is the lowest. Prioritize paying off the bills with the biggest drag first.

Investing

What three out-of-the-box tips can you share to help us better approach personal investing, and why these three?

Even in a rapidly changing world, some basic investment principles remain constant.

1. Don’t try to time the market

Keep investing consistently in the market through your 401(k) or a brokerage account.

2. Allocate your assets to sectors, not stocks

Over time, how much of your money is in stocks v. bonds will matter much more than whether you properly timed your investment in Tesla.

3. Don’t overreact to market events

Ignore the ups and downs and keep your money hard at work where it should be kept.

What are smart places to park cash, and why?

Before retirement, keep your savings in a smart mix of high-yielding savings and bank CDs.

As you near retirement, explore the benefits of allocating some to fixed annuities that will create tax-deferred accumulation and higher interest rates over a 3- to 7-year period.

Should investments into VC funds be included in one’s portfolio?

Don’t even consider putting money in a VC fund until you max out your traditional retirement savings.

And even at that point, be cautious.

You will see portfolio recommendations ranging from 1-2% to 10-20% in alternatives.

Remember that venture capital funds tend to be less liquid than most alternatives.

While the return may be high, the time horizon to realize that result maybe 5 to 10 years.

Insurance

What types of insurance should we consider being covered by, and why?

Life and business events drive your insurance needs.

Insurance is an asset that should match a liability on our balance sheet. Life events create liabilities.

For instance, when you rent an apartment, you need insurance to protect your property and protect you from getting sued by other tenants for the damage caused by your leaky faucet.

If you have kids, you need insurance to pay for their care if something terrible happens to you.

When you buy a house, you’ll need homeowners’ insurance.

If you start a business with a partner, you’ll need insurance to cover expenses if something happens to one of you.

When you get closer to retirement, you should consider protecting some of your savings from an ill-timed market downturn with an annuity.

Other

Everyone should take their financial security into their own hands.

Educate yourself and your loved ones.

Build a plan.

And most importantly, act on it!

Responses provided by Paul Tyler, Chief Marketing Officer for Nassau.

Topic Contributors

Questions based in part on topics and comments provided by:

1. Jen Hemphill, Accredited Financial Counselor at Association for Financial Counseling and Planning Education (AFCPE®)
2. Herman Thompson, Jr., CFP®, ChFC®, Certified Financial Planner® at Innovative Financial Group
3. Leslie H. Tayne, Esq, Financial Attorney and Founder/Managing Director at Tayne Law Group
4. Linda Hamilton, Executive Vice President and Chief Operating Officer at Iroquois Federal
5. Ann-Marie Anderson, Financial Advisor at PHP Agency
6. Paul Dilda, Head of Retail Strategy, Products and Segments at BMO Harris Bank at BMO Financial Group
7. Matthew Benson, CFP® Owner and Certified Financial Planner™ at Sonmore Financial
8. Josh Richner, Outreach and Marketing Coordinator at National Legal Center
9. Ken Tumi, Founder at DepositAccounts.com and expert at LendingTree
10. Martin A. Federici, Jr., Chief Executive Officer at MF Advisers, Inc.
11. Ba Minuzzi, Founder and Chief Executive Officer at UMANA

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Planning for retirement is challenging for everyone, but it can be especially difficult for single individuals. Single-income earners need to prepare financially without the decision-making and income support of a spouse or partner. How can they get ahead of retirement and long-term financial planning?

If you’re planning on retiring single, take these steps to ensure you are able to positively position yourself for retirement.

Create a Financial Fallback Plan

Single-income earners may discover there’s a gap between what they think they need for retirement and what is actually required. Scott Pedvis, financial advisor with Wells Fargo Advisors, recommends singles create a financial fallback plan.

“A financial backup plan can involve a higher cash emergency savings and more robust disability and long-term care insurance protection than couples might select,” Pedvis said.

Without a second income, Paul Tyler, chief marketing officer at Nassau Financial Group, said a single person really has only one retirement saving lever to pull which is clearly labeled “expenses.” Singles may adjust their everyday lifestyle to help keep expenses low and embrace the habit of being intentional when it comes to making changes in financial planning.

“A single person doesn’t have a partner to help think through the tough questions, including how to care for elderly parents, pay for healthcare if employment ends earlier than planned and covering inevitable long-term care costs,” Tyler said. “The decision process may be simpler with only one voice in the conversation. However, you need to prompt the dialogue yourself.”

Build a Network of Professional Advisors

While a single individual may prompt financial planning dialogue on their own, they do not necessarily need to go about every aspect of retirement alone.

If you need advice about important financial matters, don’t be afraid to reach out for guidance and support. Pedvis said singles retiring can build a trusted network of professional advisors. Among these members include a financial advisor, accountant, attorney and healthcare providers to be allies in their corner.

What about the role of family and friends in your network? Pedvis said it’s great to have strong relationships with friends and family to help you in times of need. However, single individuals need to make sure neither friends nor family members take advantage of their independent status or create serious financial burdens for you.

Take extreme care before turning over your financial matters and decisions to anyone else, whether they are a loved one or a professional. Pedvis recommends single individuals stay actively involved in these decisions and work alongside people they trust to make decisions in their best interests. In the event you should become incapacitated, consider evaluating the possibility of engaging a corporate trustee to manage your finances.

Get Estate and Wealth-Transfer Plans in Place

Don’t delay when it comes to estate planning. Gather together the following key documents to form the foundation of an estate plan.

• Will
• Power of attorney (POA) for financial matters
• Durable power of attorney for healthcare
• Health Insurance Portability and Accountability Act (HIPAA) release authorization
• Living will
• Revocable living trust

“Carefully designate beneficiaries of assets in IRAs, employer-sponsored retirement plans, insurance policies and annuities,” Pedvis said. “Lay out clear directions for the distribution of remaining assets for your heirs and don’t forget about your digital assets and accounts.”

Plan for Change

Someone who plans to retire single may still experience life changes before their retirement date.

There’s still time for singles to enter into committed relationships or get married. If any of these life events happen, Pedvis said to make adjustments accordingly in your financial plan and plan for change.

Read More: https://www.gobankingrates.com/retirement/planning/how-to-save-for-retirement-as-single-income-earner/

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Receive Updates

Show Sponsors

The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.