Our daily roundup of retirement news your clients may be thinking about.
1 more year of work barely budges Social Security benefit
Social Security computes retirement benefits based on the compensation of a retiree's 35 highest paying years, so conventional wisdom says to stay in the work force at least that long to maximize monthly benefits. But one expert reminds readers that one extra year on the job is really just an incremental change, in a Q&A article in USA Today. The expert was responding to a reader who had worked for 29 years and was wondering if she should work yet one more (she said she was told by a Social Security rep that 30 years would be substantially better for her than 29.) “Another year of work will raise your Social Security payments fractionally — like by 1/29th — using 30 years instead of 29 plus a zero,” the expert writes in response, adding that workers may want to use SSA’s Retirement Estimator to get a good idea of their benefit. “It knows your past earnings, and you can input any future earnings and retirement scenarios you want.”
The best way to save for the golden years isn't even a retirement account
A health savings account is an effective savings vehicle for people who want to build their retirement nest egg, according to this article on Forbes. The account offers a triple tax benefit: it is funded with pretax money, offers tax-free growth on savings, and allows savers to withdraw the funds tax-free if the money is spent on qualified medical expenses. The unused funds continue to grow tax-deferred and savers will owe ordinary income tax once they withdraw the funds for nonqualified expenses.
It takes a lot of work to be ready to retire. Don’t forget these things.
People tend to forget the emotional part of retirement when they start planning for the golden years, according to this article in the Washington Post. They also fail to sign up for Medicare and factor healthcare costs and major purchases and repairs in their retirement budget. As the average life span is increasing, people should also prepare for longer retirement, and ensure that their estate plan and other legal papers are updated.
How can you make a too-small nest egg last longer in retirement?
A retired couple who hasn't saved enough for retirement is advised to keep their savings liquid so they have funds to cover their living expenses, according to this article on personal finance website Motley Fool. The husband can also maximize his Social Security retirement benefits by prompting his wife to claim a spousal benefit on his record even if she was never employed. The couple may also tap their home equity by applying for a reverse mortgage, an expert says. "It's definitely a backdrop or a backstop on someone's retirement income. If they haven't saved diligently enough, it is a great play. It's a great source of income."