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Plan Your Retirement with Longevity in Mind

There are two important questions that investors need to answer in regards to their retirement planning:

  1. How much money do I need to save? AND
  2. How long should I expect it to last?

Increasingly, investors need to consider even a third important question as they work through their retirement planning:

What if I live to 100?

As medical advancements improve quality of life and offer the potential to extend one’s longevity, there’s the very real possibility that individuals retiring today, next year, or within another few decades are going to enjoy longer, more active lives than generations before them. While this is great news for you and your loved ones, it adds some complexity to the retirement planning equation.

Accordingly, you should plan your retirement with longevity in mind. Read on to learn how.

It’s essential to plan your retirement with longevity in mind. Read on to learn how.It’s essential to plan your retirement with longevity in mind. Read on to learn how.Consider Your Retirement Age

Age is an essential factor to consider as you look toward your retirement plan. Not only should you think of the age you ideally wish your retirement income to hold out until, but you also need to consider the age at which you’ll retire. The individual who plans to retire at age 65 needs to account for many more years of retirement savings than the one who holds off until age 72.

You should also consider what your income will look like in the years as you approach retirement. Do you plan to work full-time at a day job and then launch straight into a full retirement? Or are you anticipating that you’ll have a gradual shift from full-time employment to part-time, and then a post-retirement hobby job that brings in some extra income on the side?

The employment-to-retirement mix looks different for everyone. However, if you plan to remain employed to some degree throughout even a few of your retirement years, you can offset the amount of money you’ll need to rely on from retirement investments during that time. This can help you to extend the life of your retirement savings and may be a longevity strategy to consider.

Hold Off on Claiming Social Security Benefits

Social Security benefits are a part of most investors’ retirement plans, but they aren’t the same for everyone. It’s important to have a good understanding of what your Social Security benefits might look like in order to plot the best course for the remainder of your retirement income needs.

One essential factor in determining the amount of Social Security income that you can rely on during your retirement years is the age at which you plan to start withdrawing your Social Security benefits. The longer you wait, the greater your month-to-month benefit will be.

Ideally, you want to wait until you achieve your Full Retirement Age (FRA) or possibly to the maximum of age 70 in order to take advantage of all that your Social Security investment has to offer. You can consult an FRA table to understand more about maximizing your Social Security benefit.

Evaluate Your Investment Mix

You don’t want to put all of your eggs in one basket when it comes to your retirement planning. A diversified investment portfolio can help to provide confidence as you move forward in your plans.

To plan your diversified retirement strategy, you should consider a variety of investment vehicles and strategies. Often investors will gravitate toward investments that offer certain guarantees or income benefits.  While these may be worthy of consideration, it is always important to remember that every investment has advantages and disadvantages and these products may carry additional fees, charges and restrictions. In the world of finance, diversification is important. Bear in mind that there is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. 

Your financial advisor can provide personalized recommendations for diversifying your portfolio according to your income goals and risk acceptance. Additionally, they may have helpful tips for seeking to maximize your investments with the anticipation of longevity in mind.

Stay on Top of Your Expenses

It is never too early to begin preparing for the phase of life where you will either choose not to work, or be unable to maintain employment.  This is an inevitable event for almost everyone, but unfortunately many individuals fail to plan. Establishing good spending habits is one of the most basic, but also most significant steps that you can take as you think about retiring.  It is common for people to anticipate spending less in retirement, but learning new habits is extremely difficult. By controlling spending during your working years, it will make for a smoother transition to a phase of life where living within your means becomes even more critical. 

With this in mind, it’s important to plan for your retirement with realistic figures that represent your desired lifestyle, length of retirement, and set expenses you can’t avoid. You need a retirement budget that accounts for the dollars you will spend year-to-year so that you can build a retirement income that matches your expenses.

There are calculators and general rules of thumb that can help you to estimate an ideal retirement budget for your lifestyle and longevity plans. But when it comes to getting the best idea of what you as an individual will actually need for your future plans, it’s best to work with a financial advisor who can show you how your financial goals align with your retirement needs with longevity in mind.

Work with a Professional to Plot Your Course

Establishing a retirement savings plan isn’t a simple task. If you’re looking at popular financial resources, blogs, and free calculators to help you put the pieces together, you probably have a lot of questions.

You don’t want to tackle the task of retirement savings on your own. There are too many variables – including the longevity question – that complicate the planning process and challenge oft-repeated rules of thumb.

Don’t leave your retirement savings plans to your best interpretation. Instead, call on the aid of a professional financial advisor who can evaluate your specific situation and help you determine a course that makes sense for your desired retirement.

Your financial advisor will work with you to look at lifestyle factors, anticipated retirement needs, and your risk acceptance to give you some practical options for building a portfolio that’ll work to serve your needs once you hit your retirement years. The experienced advisor will even give you some practical pointers for considering retirement with your longevity in mind.

To learn more about how a CERTIFIED FINANCIAL PLANNER™ professional can help you work through your retirement planning, contact Puckett & Sturgill Financial Group today for a consultation!

How to Maximize Your Social Security Benefits

Are you approaching retirement age and considering how your Social Security benefit plays into your plans? Did you know that there are a variety factors that can contribute to your ability collect your full potential benefit?

When it comes to understanding your Social Security benefit, you may be wondering about your eligibility and how to maximize your Social Security income. Here are some of the most important factors to keep in mind when calculating your potential Social Security benefit.

Requirements to Qualify For Social Security Retirement Benefits

Social Security retirement benefits are based on your lifetime average earnings and your age when payments begin. In order to qualify, you must work for at least 40 quarters (10 years of work where you paid Social Security taxes) and have attained age 62.

Determine Your Full Retirement Age

Before you can figure out what your Social Security benefit will be, you need to determine your full retirement age (FRA), which is calculated based on your birth year. You can use this chart to find yours:

Birth YearFRA
1943-1954Age 66
1955Age 66 + 2 months
1956Age 66 + 4 months
1957Age 66 + 6 months
1958Age 66 + 8 months
1959Age 66 + 10 months
1960+Age 67

Once you know your FRA, you can strategize the timing for collecting your benefit. There are certain advantages to waiting until you reach your FRA, rather than cashing in early.

If you wait until you reach your FRA, you can collect 100% of your benefit. And if you wait until between your FRA and age 70, your benefits have the potential to increase by 32% by the time you reach 70.

On the other hand, if you begin to collect before you reach your FRA, you risk losing out on some of your benefit. You can start benefits as early as 62 but in doing so your benefits may be reduced by as much as 30%. If you collect between age 62 and FRA, you may end up with up to a 25% reduction in the total benefit you receive.

Look into the Impact of Your Marital Status*

Your marital status impacts your Social Security benefit, depending on whether you are married, widowed, or divorced. In any of these cases, you may be eligible to collect benefits based off of your spouse’s past earnings. Speak with your financial advisor to learn more about how your situation will affect your benefit.

Consider Your Employment Situation

Your past and current (if applicable) employment situations will also affect your Social security benefit. While your FRA and retirement status are the biggest factors here, other retirement benefits and your income leading up to the year of your FRA may also come into play.

For example, if you qualify for an employer sponsored pension plan that is not covered by Social Security, such as Federal Civil Service, your Social Security benefit may be lessened or eliminated.

You also want to take care to pay close attention to your income in the years leading up to your FRA. If you plan to work between age 62 and your FRA and will be earning more than $17,640, you’ll lose out on $1 in benefit for every $2 you earn above the income threshold. If you do not plan to work beyond age 62 but still have income in excess of $46,920 in the year before the month that you reach your FRA, you’ll lose out on $1 for every $3 you earn above the threshold.

Note: the earnings limits are as of 2019 and adjusted annually for national wage trends.

Calculate Your Tax Responsibility

Lastly, once you’ve run the numbers on your anticipated Social Security benefit, you’ll want to take a look into how this benefit will be taxed once you begin receiving checks in the mail. To calculate your tax responsibility, you can add your provisional income plus 50% of your Social Security income and see which tax bracket you fall into.

If you’d like to learn more about planning for retirement, contact Jacob Sturgill today!

*Information received from MFS 2019 Social Security Reference Guide.
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