Retirement Planning Blog

Life is fraught with difficult questions. Some can be resolved smoothly and some may require a great deal of effort. But, as per retirement planning is concerned, there are so many ways to secure our future that we really needn’t worry. The common problem in this realm is we don’t know how much money needs to be saved for that better tomorrow.

According to survey results, about 44% of the American professionals along with 29% of mature adults of the age group 55 and more hold that they don’t know what percentage of money should be saved for retirement. However, some of the people belonging to the age bracket of 55 and more opine $250,000 or may be less than this should be sufficient when they retire. Moreover, President of ShareBuilder Dan Greenshields holds retirement savings need to be pretty much higher as in old age an individual is more prone to illness which results in greater healthcare and medical expenses.

According to Mr. Dan Greenshields, an individual’s retirement savings should be around $500,000 and $1 million. However, it may vary depending on the living style of the person. To be more precise, he added “If you live in a low cost state you need less because the cost of living is lower” and “If you live in Washington DC, New York, or Los Angeles, you need more.”

It has been found that as much as 20% of the American population nearing their retirement age believes that saving $500,000 should be adequate while 13% aims at $750,000 retirement savings. The survey reports also reflect that about 20% of Americans are trying to save $1 million minimum and 6% aiming at $1.5 million savings before retiring. About 8% of the American population is striving to maintain $2 million in their bank accounts for the retirement.

However, it is interesting to note a large number of Americans do not calculate savings for retirement in actual terms.  Almost 47% of them indulge in guesswork to decide the amount of savings to be adequate in their retirement age. In contrast, 29% of the Americans believe in doing their own research, 9% take the advice of the financial consultants and another 9% rely on the retirement calculator. Those who calculate their retirement savings on their own consider factors like healthcare and living costs, inflation, income at retirement age and Social Security income.

The last year has seen the largest increase in Social Security checks in the past 25 years with a rate of 5.8 percent. At the same time, as per the present law, the enrollees are also not going to get any cost-of-living adjustment in the next three years. In fact, the increment in Social Security is linked to the Consumer Price Index for the urban workers. It can be recalled here that the Consumer Price Index has decreased last year due to the plunging prices.

It’s the new retirees born in 1947and signed for the Social Security this year, rather than the current beneficiaries, who are going to get affected by the impact of the lack of Social Security boost. These people didn’t reap any benefit from the increase of Social Security last year. Moreover, there is every possibility that their purchasing power may erode by inflation before the cost-of-living increases once again in 2012. Andrew Biggs, a former deputy commissioner of the Social Security Administration and a resident scholar at the American Enterprise Institute has done an analysis to find out the possible impact of it on the retirees. According to the analysis, the new retirees may face a permanent benefit reduction of about 5 percent, while the benefits of the current retirees will remain the same.

Owing to the inflation hitch in 2008, newly retired couples are going to get a monthly Social Security check of $2,235. According to the calculations of Biggs, they will lose almost $1,340 per year. The calculation also says that, if the couple survives until the age of 83, they would lose around $25,000 in their lifetime.

It is not possible to evade this financial loss by delaying your retirement either, unless the cost-of-living gets adjusted, which is again projected to resume in 2012.

Social Security is the national retirement care plan that is available in the US. Pension is one of the important benefits that are provided through the program. The pension is also known as Old-age Insurance benefit or Retirement Insurance Benefits. The pension benefits are applicable after one attains the age of 62 or more.

In most cases, the payments and the benefits that you get from Social Security are made in the third of each month or on the fourth Wednesday. Usually, the benefits that you get that based according to the date of the birth and some other factors.

In order to be covered under the Social Security pensions , there are certain things that one needs to comply with. The requirements of the benefits are made as per the mode of payments and also the age of the applicant. Some of the requirements that you need to follow are:

• You need to be of the age of 62 and above to enjoy the benefits

• You need to be fully insured in the Social Security System

• You either need to apply for the benefits or convert the Disability Insurance Benefits after reaching the age of full retirement

One can apply for pension benefits through a number of ways. You can make applications for Social Security benefits :

• By making applications through the net

• By making applications through the mail

• By applying directly at the office of Social Security

• By making applications with the Immediate Claims Taking Unit

There are also some factors which determine the amount of the Social Security pension. Some of them are the amount of the payroll taxes that you pay into the Social Security Trust Fund, the age when you can claim the benefits, the current income that you are earning and also whether you are a part of any type of military service.

It may sound surprising but Social Security can provide you free loans. Under the present scenario, retirees can choose between various options like claiming the benefits at 62 and getting reduced returns or delaying claiming the benefits till 70 and enjoying full returns every month.

Now, in order to get higher lifetime benefits, you can use some unconventional strategies. One of them is known as the “Free Loan from Social Security” strategy. By applying this strategy, you can get some free loans from the social security accounts. For instance, if you claim Social Security at 62 years of age and reclaim the same at 70 years, you can receive a higher benefit. As you only need to pay back the principle loan amount, you can keep the interest and invest it in some other channel.

If you are of age 70 and adopt a Free Loan” strategy, you can first claim some benefits at 62 years of age and again reclaim it at 70 years. The interests that you receive provides you with the head-start’ on reaching the break-even age. In order to be break even, you need to live until you are entitled to the total benefits of social security.