3 Critical Tips for Never-ending Financial Stability
From Peter Reagan at Birch Gold Group
When planning for retirement, you want to do your very best to maximize your financial security. For most of us, “retirement” means a transition from the preservation phase of saving and into the distribution phase (learn more about the three phases of retirement saving here).
Ensuring you’re collecting the maximum Social Security benefit you qualify for seems like a no-brainer. After all, you’ve been paying into Social Security your whole life. For some folks, whether or not retirement is even possible comes down to the dollar amount of that monthly check.
Hopefully, your retirement plan doesn’t require maximizing your Social Security benefits. Today, we’re going to discuss three crucial factors to help you determine whether you should postpone your retirement.
Maximizing your Social Security benefits
You become eligible for Social Security retirement benefits as early as 62 years old. But exactly when you begin taking benefits has a big impact on how much you will receive every month.
The Social Security Administration has provided a convenient chart to show you how much money you leave on the table by claiming your benefits as soon as possible.
The bottom line? By claiming your benefits as soon as possible, you leave 25-30% of your “full retirement” payment on the table (and cost your spouse 30-35% of their benefits).
On the other hand, if you wait to claim those benefits, they grow over time (until you reach 70).
What else should we take into consideration?
Tip #1 –One of the most important decisions you’ll ever make
Aside from buying a home or car, getting married, or deciding whether to have children, deciding when to retire is one of the biggest decisions you can make.
Being hasty with this decision can be costly:
you don’t want to make impulsive choices that you might regret later. Retiring early can result in a permanently reduced lifetime retirement income, which could cause hardship when you reach your 80s and beyond.
A smart step to help you decide when it would be best to retire is to understand how much income you might receive if you pick an early age compared to delaying your retirement for a few years. If you discover you’ll need to work longer than you originally planned, you might want to consider jobs that are more compatible with your goals, such as part-time work or employment that’s less stressful or more enjoyable. [emphasis added]
Now, this doesn’t mean slave away at your desk till you collapse! A lot of my friends and acquaintances are actively engaged in a sort of “half-retirement.” They’re still working, but at less stressful and more fulfilling jobs. They’re still running their businesses, but they’ve delegated much of the day-to-day operations oversight so they can focus on the areas that interest them most.
In terms of the three phases of retirement savings, this “half-retirement” period counts as the preservation phase. You aren’t yet living off your savings, most likely – but you probably aren’t contributing too much, either.
Furthermore, the abrupt transition from full-time work to full-time leisure is a real shock for some people. Maybe it makes sense for you to gradually ease yourself out of work and into retirement?
It’s worth considering, if your health and circumstances allow it!
Tip #2 – Keep an eye on your health (and Social Security’s, too)
While it’s unlikely that the Social Security trust fund will officially go bankrupt, there are good reasons to keep a close eye on the situation:
According to the 2023 annual report of the Social Security Board of Trustees, the surplus in the trust funds that disburse retirement, disability and other Social Security benefits will be depleted by 2034. That’s one year earlier than the trustees projected in their 2022 report.
That does not mean Social Security will no longer be around; it means the system will exhaust its cash reserves and will be able to pay out only what it takes in year-to-year in Social Security taxes. If this comes to pass, Social Security would be able to pay about 80 percent of the benefits to which retired and disabled workers are entitled.
On top that 20% reduction in payments, the Medicare Trustees Report found that the Medicare fund will be tapped out even earlier, in 2031.
After that, medical coverage for retirees that use it could drop by another 11%.
And the tired solutions that lawmakers come up with boil down to one of two things: “changing tax policies to steer more money into the trust funds or tinkering with the benefit formula to reduce costs (or some combination of both).”
Yep – if you don’t have enough money, you either have to get more, spend less or do both.
This means, inevitably, that Social Security and Medicare as we know them will change. You’ll want to make absolutely sure you understand their current situations when your retirement is imminent.
Everything I can say about them today could be wrong next year.
That may not be comforting, but it’s the truth.
Tip #3 – Retiring later has more advantages than you might think
So what are the advantages of retiring later in life?
The answer is straightforward when it comes to retirement security: More income (creating the opportunity to increase your savings) and a larger retirement benefit from Social Security.
Those benefits grow monthly until they’re capped at age 70:
Benefits increase on a prorated basis until you reach age 70 when they’re 132% of your full amount if you were born between 1943 and 1954. And if you were born in 1960 or later, your benefit would increase by 124%.
Of course, waiting until 70 years old to retire isn’t possible for everyone. But no matter what age you choose to retire, at least now you’ll be armed with the information to make a better decision.
So what else can we do to increase our long-term financial security?
Bonus tip – building a stable retirement plan
Here’s a good rule of thumb: Don’t rely solely on Social Security benefits to fund your retirement, no matter when you decide to retire.
Here’s why: The cost-of-living adjustment never seems to catch up with inflation, the problems aren’t likely to be solved easily, the biggest misconception about Social Security is the money you put into the program has already been spent.
That’s why we have retirement savings accounts like IRAs and 401(k)s – because we need them!
The drawback of those same retirement accounts is that it turns every American into their very own financial planner. You are the one making the decisions about where to put your hard-earned dollars, for better or for worse. That’s incredibly challenging! We don’t even know what Social Security will look like a few years from now – how can we know what the world will look like?
We simply can’t. So the prudent will do two extremely smart things:
Diversify your savings. This is a lot more certain than trying to pick winners and losers! Nobel Prize-winning economist Harry Markowitz told us, “Diversification is the only free lunch in investing.”
And I never get tired of quoting the SEC on the importance of asset allocation:
The Magic of Diversification. The practice of spreading money among different investments to reduce risk is known as diversification. By picking the right group of investments, you may be able to limit your losses and reduce the fluctuations of investment returns without sacrificing too much potential gain.
Put down the crystal ball and pick up a history book. Okay, not literally – the point here is, we cannot predict the future. There’s just no way to know how technology and the economy and the geopolitical landscape will change in the future. Instead of wasting time trying to guess, we can rely on assets with a proven historical track record of at least holding its value (in all sorts of economic climates).
One of the major benefits of owning physical precious metals is their record of long-term stability. Unfortunately, tangible assets aren’t available in your retirement savings unless you have a Precious Metals IRA. The good news is, just about anyone can open this type of account, which gives you the choice to diversify your retirement savings with real, physical gold and silver. It’s easy to get started – you can get all the information you need for free right here.2023, Featured, retirement plan, retirement savings, social security