Many of us are counting on ours, or our spouses’, Social Security Benefits for a significant part of our retirement income. But, if you or your spouse are government workers or teachers, you may be in for a surprise with Social Security WEP and GPO offsets.
A lot is being written about how much money Americans can withdraw from their investments to fund their retirement years. Now, a new research institute launched by Fidelity Investments has outlined the order in which money should be withdrawn from various tax-deferred and taxable investment accounts. Described as the ‘withdrawal hierarchy,’ the Fidelity Research Institute suggests the order, with modifications made courtesy of other financial planning experts.
A successful retirement is not merely measured in financial terms. Even those who retire with small fortunes can face boredom or depression and the fear of drawing down their savings too fast. How can new retirees try to calm these worries?
Two factors may help: a gradual retirement transition and some guidance from a financial professional.
Retirement planning is not entirely financial. Your degree of happiness in your “second act” may depend on some factors you cannot quantify. Here are a few of those factors as well as the questions they may end up provoking in your mind.
The median retirement age for an American woman is 62. The Federal Reserve says so in its most recent Survey of Household Economics and Decisionmaking (2017). Sixty-two, of course, is the age when seniors first become eligible for Social Security retirement benefits. This factoid seems to convey a message: a fair amount of American women are retiring and claiming Social Security as soon as they can.1
What if more women worked into their mid-sixties? Could that benefit them, financially? While health issues and caregiving demands sometimes force women to retire early, it appears many women are willing to stay on the job longer. Fifty-three percent of the women surveyed in a new Transamerica Center for Retirement Studies poll on retirement said that they planned to work past age 65.2
Staying in the workforce longer may improve a woman’s retirement prospects. If that seems paradoxical, consider the following positives that could result from working past 65.
What is the retirement outlook for the average fifty-something working woman? As a generalization, less sunny than that of a man in her age group. Most middle-class retirees get their income from three sources. An influential 2016 National Institute on Retirement Security study called them the “three-legged stool” of retirement. Social Security provides some of that income, retirement account distributions some more, and pensions complement those two sources for a fortunate few.1 For many retirees today, that “three-legged stool” may appear broken or wobbly. Pension income may be non-existent, and retirement accounts too small to provide sufficient financial support. The problem is even more pronounced for women because of a few factors.
The American Lawyer recently reported that attorneys at large firms make the same kind of retirement planning mistakes the rest of us do. That goes to show that even though the best practices of personal finance are well known and in many cases even simple, we all need to be more diligent about informing ourselves and acting on what we learn.
Contribution limits for most retirement savings accounts, including 401(k) and individual retirement accounts, will not change in 2017, the IRA announced as part of its annual cost-of-living adjustments.
Picture an 18-wheeler, its 4,000-cubic-foot cargo trailer filled to capacity with stacks of $100 bills. The driver shuts and locks the trailer, closing the door on roughly $10 billion. Now imagine that truck driving off to a landfill, where that $10 billion will be dumped, shredded and buried, rendered useless.
How many words have been written about retirement? It’s a preoccupation for many, and we devote so much time, thought, and energy toward saving for the last day we go to work. Saving and investing in such a way that we no longer have to work may seem ideal at first, but it raises a question: what do you have planned for all of that free time?
Why are women so challenged to retire comfortably? You can cite a number of factors that can potentially impact a woman’s retirement prospects and retirement experience. A woman may spend less time in the workforce during her life than a man due to childrearing and caregiving needs, with a corresponding interruption in both wages and workplace retirement plan participation. A divorce can hugely alter a woman’s finances and financial outlook. As women live longer on average than men, they face slightly greater longevity risk – the risk of eventually outliving retirement savings.
Sometimes that reality reflects an age difference, other times one person wants to keep working for income or health coverage reasons. If you retire years before your spouse or partner does, you may want to consider how your lifestyle might change as well as your household finances.