Two-thirds of these monthly payouts are headed to our nation's retired workers, 61% of which rely on their Social Security benefits to account for at least half of their monthly income. The Social Security Administration (SSA) averages your 35 highest-earnings years when calculating your monthly benefit, therefore it's in your best interest to earn as much as you can each year, and to work a minimum of 35 years. Of course, there's a very lucrative reason to hold off on your claim: your benefits grow by about 8% per year for every year that you wait, until age 70. The most important number involving your claim is your full retirement age, or FRA. Put simply, if you claim benefits at any point before hitting your FRA, your benefits will be permanently reduced by up to 25% to 30%, depending on your birth year. Taking Social Security at full retirement age could be a smart move Though the decision of when to claim is entirely personal and dependent on a number of factors, including your income needs, savings, health, and whether a spouse will be reliant on your income (to name a few factors), claiming at your full retirement age might be a great idea. With around three-fifths of seniors dependent on Social Security as a "major" source of income during retirement, seniors' focus should be on maximizing their payout and netting at least 100% of their benefit as opposed to accepting a permanent reduction by claiming before they hit their FRA. If a higher earning spouse waits to claim until their full retirement age, the lower-earning spouse will have the option of taking up to half the spousal benefit based on the higher earnings spouse's work history or their own benefit based on their work and income history. The end result is workers' poor saving and extra cautious investing habits have them extra reliant on Social Security come retirement. Waiting until your full retirement age won't be right for everyone (e.g., those in poor health, lower-income spouses, or those who can't find work or generate income), but for a majority of seniors it looks to be a smart move.
When you’re unemployed, saving for retirement may be the last thing on your mind. It may seem impossible to save for the future when you have no steady income to even pay basic bills.
But depending on your situation, it may still be possible to build your nest egg even if you’re not working full-time. Here are some tools and suggestions for keeping an eye on the future during a period of joblessness.
Familiarize yourself with IRAs
Individual retirement accounts (IRAs) are great for people who don’t have access to employer-sponsored retirement plans like 401(k) accounts. A traditional IRA is similar to a 401(k), in that any contributions are deducted from whatever taxable income you have. With a Roth IRA, on the other hand, earnings are taxed up front, but any gains you have won’t be taxed when you withdraw money at retirement age.
IRAs are useful for people who are self-employed, or who earn money inconsistently through part-time or freelance work. So if you’re not employed full-time but still have some earned income, these accounts can help you save.
Think of retirement savings as a necessary expense
When you’re unemployed, it’s important to get a handle on all of your expenses so that you know where you need to cut. You may find that there are a lot of costs (luxury purchases, eating out, cable TV) that can be taken out of your household budget, while other expenses (food, electricity, debt payments) are more necessary. If you think of retirement savings as a necessity, you will be forced to cut spending elsewhere.
Roll over your old 401(k)
If you’ve been laid off from a job, you will no longer be able to contribute to the 401(k) you may have had from your employer. But the account will still exist and the money is still yours. You can let the old 401(k) account sit, but it’s better to roll it into a traditional individual retirement account (IRA). The IRA will give you more flexibility and investment options, and may also have lower fees. And you can begin contributing to it once you have any earned income at all.
Focus on rebalancing
You may not be able to add much to your retirement accounts, but you can work to make sure they are optimized. This means making sure you have the right mix of investments based on your retirement date, and getting the optimal blend of stocks in various industries and asset classes. It’s always…