Retirement: You're Richer Than You Think

[nicet4]

Originally Posted by BayAreaHillbilly

I'm screwed.

It all depends on what you do and how much longer you can work.

For many of us social security might well end up being the largest portion of your retirement income and you can increase the amount you can expect by just working one or two or even three longer years longer can make up for a lot of past sin.

In my opinion the biggest mistake those who didn't save like they should is taking social security early. I would call it one of the big deadly retirement sins.

Here's a scary fact from social security:

Fact #4: Social Security benefits are modest.

Social Security benefits are much more modest than many people realize. In June 2012, the average Social Security retirement benefit was $1,234 a month, or about $14,800 a year.

OMG, if that is all you are getting you better have 20 times your annual earnings saved up or you will be in the poor house. I suppose you could manage to live on that if you owned your home, lived in a low tax/cost of living area and had kids to help out but $1,234 monthly doesn't look bright at all.

but then:

Social Security errors that can cost you thousands

Mistake #1: Starting retirement benefits too early

Half of all Americans claim Social Security at age 62, the earliest possible age with the lowest monthly benefit. But most workers can significantly boost their lifetime payout of Social Security income by delaying the start of their monthly benefits. By how long? At least until age 66, and to age 70 if you can wait that long. For many married couples, this strategy will also improve the financial security of widows who, when their husband dies, will step up to the Social Security income their husband was receiving before he died.

That is part of why the average benefit is only $1,234/month and I think another part is the average of husbands and wives together.

Consider this:



Assume a married couple and an expected full retirement age benefit of $2,000 for the higher earning spouse. When both are 66 they should expect a total benefit of $3,000 but if both started drawing at 62 the higher earning spouse would receive $1,500 while the lower earning spouse would receive somewhat less than $750 and it might be as low as $500 for a combined total of $2,000.

That is an average of $1,000 for each of the two recipients.

Not sure exactly how that works (is it 75% of 75%?) but it can't be pretty. $1,000 more per month can make the difference of barely hanging on in poverty or living comfortably enough.

If able working just an extra year or two can cover for a lot of past non-saving sin as well. Someone with a $2,000 full retirement age benefit can increase that by $320 for an average of $1,660 each for the couple and I think that is how that "average benefit amount" comes about.

I am fortunate, I am employed and getting very close to my full retirement age so for me the full benefit amount is in the bag. For some in my age group they weren't so lucky. Some lost a job 5 years ago at age 57 or 58 and not having had a job, other than maybe a minimum wage job, for five years had to very much cut into their retirement savings. When you have zero income even a quarter million doesn't last all that many years and many are being forced to take benefits at 62 which is a trap but what else to do?

[Aville239]

As mentioned earlier the important thing is not income, it's expenses. The mistake that hasn't been corrected yet is that you should focus on future expenses not current expenses.

I don't know about you, but my expenses in retirement will be lower than now. I plan to move to a place with lower COL, go carless, won't have to wear suits, etc.

[Linda_d]

Originally Posted by nicet4

It all depends on what you do and how much longer you can work.

For many of us social security might well end up being the largest portion of your retirement income and you can increase the amount you can expect by just working one or two or even three longer years longer can make up for a lot of past sin.

In my opinion the biggest mistake those who didn't save like they should is taking social security early. I would call it one of the big deadly retirement sins.

Here's a scary fact from social security:



OMG, if that is all you are getting you better have 20 times your annual earnings saved up or you will be in the poor house. I suppose you could manage to live on that if you owned your home, lived in a low tax/cost of living area and had kids to help out but $1,234 monthly doesn't look bright at all.

but then:

Social Security errors that can cost you thousands



That is part of why the average benefit is only $1,234/month and I think another part is the average of husbands and wives together.

Consider this:



Assume a married couple and an expected full retirement age benefit of $2,000 for the higher earning spouse. When both are 66 they should expect a total benefit of $3,000 but if both started drawing at 62 the higher earning spouse would receive $1,500 while the lower earning spouse would receive somewhat less than $750 and it might be as low as $500 for a combined total of $2,000.

That is an average of $1,000 for each of the two recipients.

Not sure exactly how that works (is it 75% of 75%?) but it can't be pretty. $1,000 more per month can make the difference of barely hanging on in poverty or living comfortably enough.

If able working just an extra year or two can cover for a lot of past non-saving sin as well. Someone with a $2,000 full retirement age benefit can increase that by $320 for an average of $1,660 each for the couple and I think that is how that "average benefit amount" comes about.

I am fortunate, I am employed and getting very close to my full retirement age so for me the full benefit amount is in the bag. For some in my age group they weren't so lucky. Some lost a job 5 years ago at age 57 or 58 and not having had a job, other than maybe a minimum wage job, for five years had to very much cut into their retirement savings. When you have zero income even a quarter million doesn't last all that many years and many are being forced to take benefits at 62 which is a trap but what else to do?

Excellent points.

You also will have 4 fewer years worked, and if you are making significantly more now, in real wages adjusted for inflation, than you did 31 years ago, you'll be penalized even more. I will make 50% more in SS by staying until I'm 66. I'm staying.