What To Do When You Haven't Saved Enough For Retirement. How much is in your savings accounts? A simplified equation for determining how much you will be able to spend during your first year in retirement is Social Security benefit(s) + pension benefit(s) + 4% of retirement savings. Retirement savings in a Roth IRA or Roth 401(k) account will generally not be taxed if withdrawn past the age of 59½.) Still, you can start by estimating your fixed expenses and likely discretionary expenses to get an idea of what you will need. Every year no money is withdrawn from retirement savings is an extra year those savings can benefit from compounded returns. For a person who has not saved enough, the potential tax savings must be weighed against the ability to save more for retirement. Though Roth IRA withdrawals are not taxed, a person’s or couple’s tax rate may be lower in retirement. Allocate money needed in three to seven years to a bucket with high-quality bonds and high-quality dividend-paying stocks. A smaller withdrawal rate is used during years with bad investment returns and a larger withdrawal rate is used during years with good investment returns.
Social Security provides tens of millions of Americans with much-needed money for living expenses. Americans with a work history can claim retirement benefits as early as age 62, so it’s no wonder that few of them even consider waiting until age 70 to do so — even though it would get them their maximum monthly benefit. A recent study by the Centers for Retirement Research at Boston College showed that only 4% of women and 2% of men wait until age 70 to file for Social Security. By contrast, 48% of women and 42% of men claimed their benefits at age 62, and only about 10% waited beyond their full retirement age.
With those numbers in mind, let’s look at some of the reasons why so few people wait to claim Social Security at age 70.
1. For spousal benefits, waiting beyond full retirement age doesn’t result in higher payments
The general rule for Social Security retirement benefits is that every month you wait between age 62 and 70 to file results in a higher monthly payout. Claiming before your full retirement age — which is between 66 and 67 for those claiming this year — will permanently reduce your benefit by up to 26%. Wait beyond full retirement age, on the other hand, and retired workers can get an 8% bump in their monthly check for every year they wait due to delayed retirement credits.
However, if you get spousal benefits based on someone else’s work history rather than retirement benefits based on your own work record, then delayed-retirement credits aren’t available. Waiting until full retirement age still results in a higher check than claiming at 62, but waiting until 70 just doesn’t make sense, because it doesn’t boost your check any further than taking your payments right at full retirement age.
2. For survivor benefits, you can sometimes claim early and get the benefit of waiting
If your spouse has passed away, then your survivor benefits and any retirement benefits from your own work history are treated separately. As a result, it can sometimes make sense to claim survivor benefits based on your deceased spouse’s work…