Fees May Be Chipping Away At Your Retirement Savings
How close are the trusts that fund Social Security to running out of money? Worries began back in the 1980s, but over time the Social Security Administration adjusted the rules and retirement ages to ensure that retirees could continue to collect their checks. But if you are only in your thirties today – what will happen 40 or 50 years from now when you are staring retirement in the face? Studies show folks are working longer, with some not retiring till their 70s! Will you be able to count on Social Security when the time comes?
Social security was originally intended to serve those at the poverty line, or close to it. Current average benefits are modest, around $17,000. It is likely that some sort of retirement safety net will exist – but no one knows what that might look like. Whatever it is, it won’t be enough to cover all your living and health care expenses when you retire.
Politicians won’t risk losing votes by letting Millennials’ payroll tax dollars go to waste, but If you are worried about your future financial cushion – here’s what to do:
1. Build a better budget. Anticipate and plan for the big life changes that come in your thirties – marriage, a home, children, a promotion or career change. Look at your anticipated cash flow, current savings, and projected expenses, and make a new budget. Remember it’s a balancing act. Some months will be better than others, some you will have a hard time staying on track, don’t get discouraged. Money Management apps are out there that can help you.
2. Assess the insurance coverage you need. A growing family and growing assets require more insurance. You’ll want to add life insurance to your portfolio to protect what’s important to you and care for loved ones should something unfortunate or unexpected happen. Remember to audit your insurance policies periodically to be sure you have the right coverage and the right amount of coverage.
3. Revisit debt. Make a plan to be debt free (except for mortgage debt) by your forties so you can start saving more for the future rather than being tied down with debt from your twenties.
4. Plan for emergencies. The general rule is to have cash equal to 6 months’ worth of expenses in a liquid emergency fund should you lose your job or have unexpected medical bills, etc. But remember, emergency needs are not always a BAD thing. Sometimes it’s nice to be able to take a spur-of-the-moment trip or indulge yourself with a little luxury item for a special occasion. Always replace the funds as soon as possible though.
5. Start saving at least 10%-15% of your salary. Don’t succumb to the myth you are too young to think about retirement. What you put away now will grow exponentially – remember compounding? It is the increase in the value of an investment due to earning interest on both principal and accumulated interest. Make it work for you. Consider auto enroll when available!
6. If you have investments already, diversify. Periodically rebalance your portfolio to adjust allocations and get educated about investments with greater potential for long term gains.
7. Protect your financial identity against fraud. Monitor your accounts and credit score closely to find and fix errors, as well as to guard against identity thieves.
8. Live within your means. Trying to keep up with your friends in the fast lane (or the Kardashians) when you can’t afford it, will ultimately break your bank account and dig you into a black hole of debt and despair.
9. Get a will, a durable power of attorney, a release-of-information form and advance healthcare directives. Otherwise complete strangers will decide how to split up your estate when you pass on. Loved ones should know your wishes if you should be incapacitated, and how you want your care or finances managed.
10. Invest in yourself and your skill set. The more you get educated and the harder you work to advance your career, the more you grow your earning power.
CONTACT US: Assuming you won’t get a single cent from Social Security is probably unrealistic. But don’t count solely on those benefits to get you by in retirement – the cost of living and price of medical care goes up every year. Many folks today are out-living their money. Be prepared with a long term financial plan based on your goals and lifestyle, know your options and don’t leave anything to chance.