Lessons Learned from Retirees

Posted on July 19, 2024 by Edward Brownlee

Lessons from retirees on their biggest retirement regrets

Thousands of Americans retire every day short on cash, friendships and plans. Investing for retirement means more than just stashing money in a 401(k). It’s equally important to cultivate the interests, relationships and activities that will fill our days with purpose and satisfaction when we retire.

Many retirees say they realized too late:

Retirees could have prepared for a more financially secure and rewarding postwork life.
Retirees would have focused on saving more money to cover the higher cost of living.
Retirees would have put more time into building relationships, taking better care of their health or cultivating new pursuits.
Retirees frequently don’t realize how much their career provided a sense of identity and self-worth.

The best predictor of longevity, health and happiness in later life is the quality of your relationships. That is the finding of the Harvard Study of Adult Development, which has followed families for decades.

The life expectancy for a 65-year-old is 84 for men and nearly 87 for women, according to projections by the Society of Actuaries based on 2019 data.

Surveys suggest many Americans vastly underestimate those numbers. Of 1,500 adults ages 45 to 80 polled by the Society of Actuaries in 2015, 41% of preretirees and 37% of retirees underestimated their life expectancy by five or more years, while 14% of preretirees and 18% of retirees underestimated it by two to four years.

A person who postpones benefits until age 70 instead of 62 would have to live to at least 80 to come out ahead.

Last year, Social Security paid out $1.38 trillion in overall benefits and got most of its funding from payroll taxes that generated $1.23 trillion. Believing that Social Security will vanish is akin to believing that these taxes will vanish too, policy analysts say.

Still, if Congress doesn’t shore up the program’s finances, projections show that it could be able to pay out only 83% of scheduled benefits in 2035, when the combined contents of its two trust funds would be depleted.

Learning is another key strategy.

Strategies to ward off dementia include getting more sleep, exercising and eating a healthy diet to maintain brain health, said Rudolph Tanzi, a Harvard Medical School professor of neurology and co-author of “The Healing Self.”

Even people who don’t have Alzheimer’s show cognitive changes with aging, so it is important to keep learning to keep your brain healthy, said Yaakov Stern, professor of neuropsychology at Columbia

References:

Social Security Benefits for Children

Posted on April 20, 2023 by Edward Brownlee

In October of 2022, more than 3.8 million children received Social Security benefits because one or both of their parents are disabled, retired, or deceased. These benefit payments to children total more than $2.6 billion every month.

Sadly, many children don’t get the benefits for which they are eligible, writes Devin Carroll. Most people don’t know about the qualifications and rules for this special benefit, so they don’t know to apply for the children in their lives.

Who Is Eligible for Social Security Benefits for Children?

A child who is your biological child, adopted child, or dependent stepchild is eligible for children’s benefits if:

you become disabled
you retire
you die
and, the child is:
- unmarried, and
- under age 18, or
- 18 or 19 if a full-time student in secondary school through grade 12 (see note below), or
- 18 or older and disabled with a disability that started before age 22.
  Note: A 2022 report by the Office of the Inspector General found that the Social Security Administration erroneously terminated the benefits of students who turned 18.

How Much Is The Benefit?

If you become disabled or retire, your qualified child is eligible for up to 50% of your full retirement age benefit.

If you have kids at home, and are thinking about filing for Social Security, filing early before full retirement age (RFA) could make more sense because your children cannot collect a Social Security benefit until you file.

Consider the difference in lifetime benefit amounts for a couple with the following circumstances.

Roger is 62 and his wife is 46. They have two kids at home, ages 8 & 10. Roger is financially well off enough to stop working and can be flexible on what age he begins to collect Social Security.

If Roger waits until his full retirement age, he’ll get $2,000 per month. If he files now, he’ll only get $1,500 per month. He ran the numbers and figured out that if he lived to 90, he’d receive an additional $70,000 in benefits for delaying filing until 66 instead of filing at 62.

For most people, this math shows that it makes sense to delay receiving benefits. However, this does not account for the benefits paid to the children. While the children are eligible for benefits based upon Roger’s retirement, the kids cannot get benefits until he files. Roger’s family would be able to collect thousands of dollars more in lifetime benefits if Roger files early and turns on the benefits for his children.

Here’s how…

If you run Roger’s full retirement age benefit through the family benefit calculator, you’ll arrive at a maximum benefit of approximately $3,500 . If Roger files at 62 he’ll receive $1,500 and each of his children would be eligible for $1,000 in children’s benefits. That additional $2,000 per month ($1,000 for each of the children) is only available if Roger files for Social Security.

Whenever a minor child receives a Social Security benefit, the Social Security Administration pays the benefit to a representative payee or a parent (or legal guardian) who is responsible for managing the benefits on behalf of the child.

Before a recent law change, all representative payees were required to file an annual report. However, due to a recent change in the law, the SSA no longer requires most parents or guardians to complete an annual Representative Payee Report.

Even though the SSA doesn’t require an annual reporting, they do have the following cautioning language. “All payees are responsible for keeping records of how the payments are spent or saved, and making all records available for review if requested by SSA.”

If you haven’t spent all the money, the SSA will require you to send it back to them when your child turns 18. This is because your child is considered an adult in their eyes and they will begin to deal directly with them.

References:

https://www.socialsecurityintelligence.com/social-security-benefits-for-children/#more-2900

Social Security Administration (SSA) Benefits Increase in 2023

Posted on October 26, 2022 by admin

Social Security Administration announced that the COLA will increase Social Security benefits by 8.7% beginning January 2023 — the largest since 1981.

Approximately 70 million Americans will see a 8.7% increase in their Social Security benefits and Supplemental Security Income (SSI) payments in 2023. On average, Social Security benefits will increase by more than $140 per month starting in January 2023.

A COLA at the this level is almost unprecedented. There were only three other times since the start of automatic inflation adjustments that COLAs were higher (1979-1981)

The Social Security Administration (SSA) will mail COLA notices throughout the month of December to retirement, survivors, and disability beneficiaries, SSI recipients, and representative payees.

But if you want to know your new benefit amount as soon as possible, you can securely obtain your Social Security COLA notice online using the Message Center in your personal my Social Security account. Your personal my Social Security account gives you immediate access to important information and tools.

According to The Motley Fool, December 2022, the Social Security Administration estimates monthly payouts for an assortment of beneficiaries will be as follows:

Average retired worker: $1,681/month
Average worker with disabilities: $1,364/month
Average aged couple, both receiving benefits: $2,734/month
Average widowed mother and two children: $3,238/month
Average aged widow(er) with no children: $1,567/month

Here’s what these same monthly Social Security checks will look like once the 2023 COLA takes effect in January:

Average retired worker: $1,827 ($146/month increase)
Average worker with disabilities: $1,483 ($119/month increase)
Average aged couple, both receiving benefits: $2,972 ($238/month increase)
Average widowed mother and two children: $3,520 ($282/month increase)
Average aged widow(er) with no children: $1,704 ($137/month increase)

For a majority of recipients, a triple-digit monthly “raise” is on the way, explains The Motley Fool.

January 2023 marks when other changes will happen based on the increase in the national average wage index. For example, the maximum amount of earnings subject to Social Security payroll tax in 2023 will be higher. The retirement earnings test exempt amount will also change in 2023.

There are few, if any, federal agencies that impact the lives of the American people to the extent that the Social Security Administration (SSA) does. Millions count on SSA—retirees who worked hard their whole lives, people who are no longer able to work due to disability, and many more.

SSA’s programs touch the lives of almost every person in the nation. SSA employees work diligently to ensure that they receive critical benefits and other services, and it is my honor and privilege to lead them in their efforts.

References:

Social Security Trust Fund

Posted on October 15, 2022 by admin

Social Security’s Trustees project that the trust fund will be depleted in 2034. At that point, 71 million beneficiaries could face across-the-board Social Security benefit cuts of 23 percent if elected leaders fail to act.

With the retirement of baby boomers and lengthening life expectancies, programs critical to older Americans, such as Social Security, will come under significant strain in coming decades. Social Security’s Trustees project that the combined Old-Age and Survivors Insurance and Disability Insurance (OASI) trust fund will be depleted in 2034. At that point, 71 million beneficiaries could face across-the-board Social Security benefit cuts of 23 percent if policymakers fail to act.

Social Security is the primary source of retirement income for million of Americans. But without action, it will lack sufficient resources to pay for all of the benefits promised under current law.

Almost every American worker pays a dedicated payroll tax, which entitles them to benefits when they retire or become disabled. But as the population ages, fewer workers will be paying taxes to support each Social Security beneficiary, thereby endangering the program’s finances.

Understanding the importance of the Social Security program for low-income Americans is a critical aspect of reforming the program in a fair and equitable way.

In 2018, Social Security was responsible for lifting almost 22 million Americans out of poverty, nearly 15 million of whom were seniors age 65 and older.

Options for improving the financial outlook of Social Security’s retirement program include:

Increasing payroll taxes. Raise the payroll tax rate from its current level of 12.4 percent (half paid by employees and half by employers) on wage earnings subject to the tax. In 2022, earnings up to $147,000 will be taxed.
Raising the full retirement age. Propose increasing the retirement age above age 67 for younger cohorts to account for future gains in average longevity.
Reducing initial benefits. Change the amount that retirees can receive when they first apply for benefits. Many proposals combine a reduction in benefits for high earners with an increase in benefits for lower earners. (This is known as “progressive price indexing.”)
Adjusting benefits after retirement. Slow the growth of retirees’ benefits over time by changing the cost-of-living index. Many economists believe that Social Security currently uses an index that overstates inflation, so benefits grow faster than the true cost of living. They propose replacing the current index with chained-CPI, which is a more accurate measure of inflation. (That change would also apply to other inflation-indexed federal retirement programs and tax provisions.)

These proposals are intended to put Social Security’s finances on a long-term sustainable footing.

References:

https://www.pgpf.org/finding-solutions/retirement

Social Security cost of living for 2023 could increase 8.7%

Posted on September 17, 2022 by admin

Inflation is a loss of purchasing power over time, meaning your dollar will not go as far tomorrow as it did today. New York Times

More than 70 million Americans receiving Social Security benefits could see the largest annual cost-of-living increase in more than four decades in 2023, considering the government CPI inflation data.

The Social Security Administration will announce the formal 2023 figure around October 13, after the release of September CPI inflation data. However, the August CPI point to a Social Security cost-of-living adjustment, known as the COLA, of 8.7 percent, according to an estimate by the Senior Citizens League that lobbies for seniors and reported by The New York Times.

The COLA is calculated annually using a formula detailed in federal law. It uses one of the broadest government measures of inflation, known as the Consumer Price Index for Urban Wage Earners and Clerical Workers‌, or CPI.‌

Social Security averages together the CPI figures during the third quarter of each year, and compares that with the previous year’s figure. For example, the 2023 COLA will be calculated by averaging together the CPI figures for the third quarter of 2022 and comparing that with the same averaged figures for 2021.

Rapid inflation typically results in trouble for equity stocks and the overall market. Financial risk assets have historically performed badly during periods of inflation, while tangible assets like real estate have held their value better.

References:

Social Security is a program run by the federal government. The program works by using Social Security taxes paid into a trust fund to provide benefits to people who are eligible. Eligibility for Social Security retirement benefits starts at age 62 (the earliest you can receive them) to age 70 (when you hit your greatest amount).

Social Security Cost-of-Living Increase

Posted on November 6, 2021 by admin

Social Security Announces 5.9 Percent Benefit Increase for 2022

Based on the increase in the Consumer Price Index (CPI-W) from the third quarter of 2020 through the third quarter of 2021, 68 million people — including retirees, disabled people and others – who receive Social Security and Supplemental Security Income (SSI) benefits will receive a 5.9% cost-of-living adjustment in 2022, the Social Security Administration announced.

For the average retiree who received a monthly check of $1,559 this year, a 5.9% rise would increase that payment by $91.98, to $1,650.98, in 2022.

The 5.9 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2022. Increased payments to approximately 8 million SSI beneficiaries will begin on December 30, 2021. (Note: some people receive both Social Security and SSI benefits).

The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.

The highest COLA increase was 14.3% in 1980. Inflation hit a peak 13.5% in 1980, dropped to 20.3% the following year and 6.1% in 1982, according to the data from the Federal Reserve Bank of St. Louis.

Social Security and SSI beneficiaries are normally notified by mail starting in early December about their new benefit amount. Most people who receive Social Security payments will be able to view their COLA notice online through their personal my Social Security account.

References:

Investing Goals

Posted on June 11, 2021 by admin

“The goal of investing is to maximize your returns and to put your money to work for you.”

Retirement and emergency fund should always be the first two investing goals on your list. But once you’ve got that covered, you probably have a bunch of other goals you want to reach.

Emergency funds

Being prepared for life’s surprises can take a burden off your mind—and someday, your wallet. An emergency fund is a stash of money set aside to cover the financial surprises life throws your way. These unexpected events can be stressful and costly.

Here are some of the top emergencies people face:

Job loss.
Medical or dental emergency.
Unexpected home repairs.
Car troubles.
Unplanned travel expenses.

3 benefits of having emergency money

Aside from financial stability, there are pros to having an emergency reserve of cash.

— It helps keep your stress level down.

It’s no surprise that when life presents an emergency, it threatens your financial well-being and causes stress. If you’re living without a safety net, you’re living on the “financial” edge—hoping to get by without running into a crisis.

Being prepared with an emergency fund gives you confidence that you can tackle any of life’s unexpected events without adding money worries to your list.

— It keeps you from spending on a whim.

You’ve heard the saying “out of sight, out of mind.” That’s the best way to store your emergency money. If the cash is only as far away as your closest debit card, you may be tempted to use it for something frivolous like a designer cocktail dress or big-screen TV—not exactly an emergency.

Keeping the money out of your immediate reach means you can’t spend it on a whim, no matter how much you’d like to.

And by putting it in a separate account, you’ll know exactly how much you have—and how much you may still need to save.

— It keeps you from making bad financial decisions.

There may be other ways you can quickly access cash, like borrowing, but at what cost? Interest, fees, and penalties are just some of the drawbacks

Retirement

Saving for retirement might be the most important thing you ever do with your money. And the earlier you begin, the less money it will take.

When it comes to preparing for retirement, there are a lot of things you can’t control—the future of Social Security, tax rates, and inflation, for example. But one big thing that you can control is the amount you save.

Social Security shouldn’t be your only retirement plan since Social Security was never meant to be anyone’s sole source of retirement income.

In fact, a 30-year-old making $50,000 per year today—and who might realistically expect to make substantially more by the time he or she retires—can expect less than $22,000 per year from Social Security at age 67 (in today’s dollars).

In the past, pensions often offered an additional source of income for retirees. But pension plans are becoming rare in today’s world, and it’s more important than ever to take advantage of the opportunity to save for your future.

Keep in mind that on average, Social Security payments make up only about 33% of Americans’ retirement income, according to Social Security Administration.

Spending now could mean you’ll pay for it later

Perhaps you’d rather spend your money on other things that are more fun than saving for retirement.

But because compounding can enhance the value of your savings, the “pain” of each dollar you save now can be greatly outweighed by the flexibility you gain later.

Of course, we’re not suggesting you’d be better off squeezing the last drop of enjoyment from your life.

But we think that knowing you’ll be all set to meet your basic needs later—with enough left over to let you comfortably do the things you look forward to in retirement—is worth going without a few treats now and then.

Choosing to spend less on certain expenses now could make a huge impact in the long run! For example, you could spend $3,600 a year on payments for a new car during the next 5 years … or you could watch that money grow to $80,000 over the next 40 years!*

Control what you can

In the end, the future of Social Security isn’t the only thing that’s out of your hands. Tax rates will almost certainly change between now and your retirement date, and inflation will continue to increase prices over time. Other government programs, like Medicare, might also change.

But there’s one thing that only you can completely control: how much you save. Start now and you might be surprised at how little you notice the sacrifice.

7 Social Security Rules

Posted on March 8, 2021 by admin

The earlier you claim your Social Security retirement benefits, the more you — and perhaps also your spouse — stand to lose.

For many Americans, Social Security represents the largest share of their retirement income. Some people believe in starting to collect Social Security as early as possible, which is generally at age 62 because they’re afraid they won’t get their share, but doing so means that you won’t get the full monthly benefit amount, even once you reach full retirement age. But there’s really no “right” time.

You should plan to need about 70% of your pre-retirement earnings to maintain your standard of living. And if you have average earnings, your Social Security benefits will replace only about 40%.

Additionally, The Wall Street Journal reports that a rapid increase in retirement-age Americans along with a decrease in working-age adults contributing into the system is putting pressure on Social Security and the promise of lifetime income.

In fact, the system’s board of trustees reports that the fund can only pay full benefits until 2034. State pension funds are also stretched—a $1.4 trillion shortage was reported in 2016.

Those who have plans to depend on these shaky resources could experience financial consequences if they don’t find an alternate income source. However, 40% nearing retirement have no formal retirement income plan, and 20% have no plan.

According to the Social Security Administration (SSA), the average woman reaching the age of 65 today will live until 86.5. The average man who is 65 today can expect to live until 84.

Planning is the key to creating your best retirement. See our tips to spruce up your retirement planning: https://t.co/5NMOnPEuXb #ASW2021 @AmericaSaves pic.twitter.com/C0SIbA5Msj

— Social Security (@SocialSecurity) February 24, 2021

The longer you wait to start collecting Social Security, up to age 70, the larger your monthly check could be. Experts recommend that you wait to start claiming benefits as long as you can to maximize your payout for the rest of your life.

Your “full retirement age” falls somewhere between ages 66 and 67, depending on the year you were born. Retiring at your full retirement age will get you 100% of your monthly Social Security benefit.

If you can hold off on taking your benefits until after your full retirement age, your benefit increases by 8% each year you wait, up to age 70. After that, there’s no additional benefit to waiting — in fact if you don’t start collecting by age 70, you’re leaving money on the table.

To ensure you don’t run out of money is to postpone claiming your Social Security retirement benefits. There are advantages to waiting as late as 70 years old. The following are some reasons to wait until full benefit allowance before benefits:

1. Your social security benefit is based on your 35 highest-earning years

Social Security calculates your monthly checks with a formula that uses your 35 best-earning years — that is, the 35 years during which your income was highest. If your earnings record doesn’t include 35 years, missing years are replaced with zeros, lowering your potential benefit.

So, it’s worth staying in the workforce at least 35 years if you can. The more peak-earning years in your formula, the bigger your monthly benefit checks can be.

It is recommended that you check your earnings record once yearly to confirm that the Social Security Administration has recorded your earnings correctly

2. Your benefit might be taxed

You will be surprised to learn that your Social Security income may be taxed? About half of retirees pay federal taxes on their income from the program and up to 85% of your benefits could be considered taxable income by Uncle Sam.

Many states also tax at least some residents’ Social Security income. There are 26 states that do not tax benefits. Choosing to delay collecting Social Security benefits until your full retirement age — or even beyond — might be the simplest way to avoid paying taxes on your Social Security benefits, at least for a while.

The extent to which your benefits are taxable is based on what the SSA calls your “combined income.” It includes taxable income, such as withdrawals from tax-deferred retirement accounts like traditional 401(k) plans and traditional individual retirement accounts (IRAs).

Depending on the amount of your combined income, up to 85% of your Social Security benefit could be taxed.

One way to dodge such a tax torpedo is to withdraw less money from your tax-deferred retirement account each year. And delaying claiming Social Security can help you do that because you’ll get a bigger monthly benefit.

3. You can claim benefits as early as 62

The earliest age at which you can start receiving Social Security benefits is 62 for most people, and 60 for those who claim survivor’s benefits.

The largest share of Americans — about 35% of men and nearly 40% of women — choose to claim at age 62.

If that’s your plan, understand that claiming early carries a penalty, one you’ll pay by receiving smaller monthly checks for the rest of your life. Check your online Social Security account to compare what you’d receive in monthly checks at age 62 with what you’d get from waiting until you are older.

Despite all that, there are circumstances when you have few choices — you need the money to live, for instance, or you don’t expect a long life — and claiming early makes sense.

4. Your full benefit amount is tied to your full retirement age

“Full retirement age,” or FRA, is a technical term in the context of Social Security. It refers to the age at which you are eligible to receive the full amount of your monthly benefit — meaning without any penalty applied for claiming early, or any bonus applied for delaying claiming.

In other words, claiming benefits before reaching full retirement age means your monthly benefit will be reduced — by as much as 30%. Claiming after you reach FRA means your monthly benefit will be increased by as much as 8% for each year you wait past FRA to claim, up until age 70.

So, what exactly is your full retirement age? That depends on the year you were born, but for most people it’s between age 66 and 67.

5. Your spouse’s work history can help you, too

Understanding your options can really pay off with Social Security. For example, if your spouse or ex-spouse earned more money than you, it may be better for you to claim spousal benefits — which are based on your spouse’s or ex’s earnings record — instead of claiming based on your own work history.

If you’ve been a stay-at-home spouse, or earned low wages or didn’t work for very many years, you may be able to receive up to half the amount of your spouse’s or ex-spouse’s monthly benefit. (In the case of an ex, you generally must have been married to the person for at least 10 years, as well as meet other conditions, to claim spousal benefits based on that person’s earnings record.)

It’s one more case where doing research and planning your Social Security claiming strategy is an investment in your future.

6. When you claim won’t affect your total payment

Some people think that taking Social Security at age 62 means more money overall. But, starting benefits at age 62 makes your monthly checks smaller than if you’d waited until FRA. But whether you start early (and get smaller checks) or later (with bigger checks), you should receive about the same total payout over the course of your retirement.

The Social Security system was designed for you should get the same total amount of benefits over the course of your retirement regardless of the age at which you first claim benefits.

That doesn’t mean there isn’t a powerful reason to wait — ideally, even to age 70 if you can. If Social Security is going to be a big part of your retirement income, the bigger checks you’ll get from waiting will be valuable to your quality of life in old age.

Your monthly benefit will be reduced if you claim before reaching what the SSA calls your “full retirement age,” an age set by the SSA that depends on the year you were born. For example, full retirement age for a person born in 1955 is 66 years and 2 months, while full retirement age for anyone born in 1960 or later is 67.

7. You may be able to collect survivor’s benefits even after remarrying

The rules for remarriage and survivor’s benefits sometimes throw people off, probably because your age when you remarry is a big part of the equation.

Survivor’s benefits let a widow or widower collect up to 100% of the late spouse’s Social Security benefit amount. You generally can claim this type of benefit as early as age 60, but the benefit will be reduced if you claim it before reaching your full retirement age. (Social Security’s pamphlet “Survivors Benefits” has details).

But what if you remarry? Again, that depends on the age at which you remarry. The Social Security Administration explains:

“Usually, you can’t get widow’s or widower’s benefits if you remarry before age 60 (or age 50 if you’re disabled). But remarriage after age 60 (or age 50 if you’re disabled) won’t prevent you from getting benefit payments based on your former spouse’s work. And at age 62 or older, you can get benefits on your new spouse’s work, if those benefits would be higher.”

References:

Social Security Administration, ssa.gov, Benefits Planner: Retirement—Learn about Social Security Programs, 2018.
Adamy, J., Overberg, P., Wall Street Journal, “Growth in Retiring Baby Boomers Strains U.S. Welfare Programs,” June 21, 2018.
Social Security Administration, ssa.gov, “Summary: Actuarial Status of the Social Security Trust Funds,” June 2018.
Reuters, “U.S. State Pension Funding Gap Rises to $1.4 Trillion in 2016: Pew,” April 12, 2018.

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