Is Social Security your retirement plan? For many Idahoans, it is

Mar 29th, 2016 | By | Category: Commentary

Jennifer Landon_Dec_2014_cropBy Jennifer Landon

According to the Social Security Administration Idaho’s 65 and over population accounts for 213,000 people and nearly all of these residents currently receive Social Security. Here are a few other facts taken from the Social Security, 2014 Idaho Quick Facts page by AARP:

* Social Security lifts 74,000 Idahoan retirees from poverty.

* Social Security makes up 50 percent or more of the income for 63 percent of Idahoans age 65 and older.

* One in three older Idahoans relies on Social Security as their only source of income.

These facts tell an alarming story — people are not planning well for their retirement. Rather, they are relying on their Social Security benefits as their sole means of support or for a significant percentage of their income in retirement.

How many others are relying on Social Security as their retirement plan? This is an important question and one that needs to be addressed. Consider this; there is no guarantee that Social Security will even be around for many in the future. Not only that, but Medicare costs are increasing, the full retirement age is increasing, and today’s retirees may be missing out on tens of thousands of dollars in lifetime benefits by tapping into their Social Security before full retirement age.

Additionally, for those who can wait until age 70 to claim Social Security, your monthly payment can be 32 percent more than at your full retirement age. Accessing Social Security as soon as it is available to be a primary source of income is not a retirement plan.

So what can be done to change this for Idahoans? Well, the answer is simple — start planning for your retirement. And the sooner this is done, the better off you can be. I know, not really that simple. But the alternative may not be pretty. Here are few tips to get you started.

Pay off debt or save for retirement?

It can be a difficult balance, but working towards both goals simultaneously is ideal. Consider working with a debt or credit counselor to develop a repayment plan, keeping your credit score and interest rates in check wherever possible can save you money in the long run.

Take advantage of employer match programs

If your work provides a 401(k) or similar plan, aim to contribute at least the maximum amount that will be matched by your employer. This is “free money” that you do not want to leave on the table if at all possible.

Open an IRA account

If you do not have a company savings plan, or if you have maxed out your employer contributions and want to explore other investment opportunities, you can open a traditional IRA or Roth IRA. Speak with a financial or tax professional to identify which accounts make the most sense for your situation.

Continue to invest

Another savings option to consider is opening a non-qualified brokerage account. While this will not provide the tax-deferred or tax-free savings opportunities of a retirement account, it will also not have age restrictions attached, providing some flexibility for shorter-term goals.

Save where you can

To avoid gaps or duplications in your financial plan, don’t piecemeal your insurance and investments. Instead, consider using one company or an advisor to help you make sure that you’re not paying more than you should and that your assets are working together towards your goals.

Don’t touch your retirement!

Changing jobs or have old 401(k)s at previous companies? Don’t cash them out! Not only will these withdrawals be subject to an early distribution penalty of 10 percent for those younger than 59.5, every dollar will also count as ordinary income on your taxes for traditional 401(k)s, a considerable tax hit many do not calculate. There is also a low likelihood of repaying these dollars to your savings so whenever possible, work with an advisor to rollover the accounts to continue tax-deferred savings. Consider these accounts a last-case resort, not a piggy bank.

Remember, success in retirement is determined by your the choices you make today. Save diligently for retirement and carefully plan your retirement income so that you can have a financially stable retirement in your future—with or without Social Security.

Jennifer Landon, founder and president of Journey Financial Services, is an accomplished adviser, educator and presenter on financial topics.

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