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In developing a retirement plan there are several factors to consider in addition to the amount you need or want to save.

1. Income Taxes.

The above discussion did not take into consideration income taxes. You might have to save more if you have to pay income taxes on all or part of your retirement benefit or your contributions. Distributions from qualified employer plans are always subject to retirement income tax. (more…)

There is an old adage that says “numbers don’t lie.” So when it comes to figuring out how much money do you need to retire, you need to understand basic math, a few retirement concepts, and some financial retirement concepts. This is where you may wish you had paid more attention to your high school math teacher. (more…)

As early as age 62, spouses can collect either on their own career benefits, or take 50 percent of their spouses’ benefits, whichever is greater. The non-working spouse can begin to collect on the other’s record only if the working spouse has already begun receiving social security spousal benefits, a small but very important point. If the non-working spouse is taking care of a child under the age of 16 or who is disabled, then those benefits can begin before the earliest retirement age of 62 under other circumstances. (more…)

You can retire at 62 and can consider it as early retirement, but it come with a penalty. You can also retire in the years between the earliest retirement dates and full retirement and get a bit more money with each passing year. Suppose you create a financial plan based upon the three-legged financial stool of personal savings, part-time income (by having retirement part time jobs), and getting Social Security Income (Social Security benefits). As your planned-for retirement date approaches, (more…)

In just a few years, the first of an estimated 77 million Baby Boomers will become eligible for benefits and will have to make that decision. A full 32 percent of the workforce has no retirement savings set aside and 80 percent have no private pension. About two thirds of retirees receive 50 percent of their income from Social Security. Today about 20 percent of Social Security recipients rely on their checks as their sole source of income. Taking the Social Security check early at age 62 versus age 65 currently costs recipients 24 percent of their monthly social security benefits and that penalty is going up to 30 percent. Unexpected taxes and additional penalties can literally take away the rest. (more…)

Once your Average In­dexed Monthly Earnings (AIME) is calculated, the Social Security Administration applies a percentage, called a Replacement Rate, to arrive at your monthly social security statement of benefits amount. The average Replacement Rate is 40 percent. However, the rate tends to be higher for low-income workers and lower for higher income workers. In this progressive way, lower-paid workers—who in theory would have less opportunity to save—get proportionally more of their incomes replaced by Social Security. (more…)

In 1999 the Social Security Administration (SSA) began mailing Social Security statements annually to all adults 25 and over about three months prior to their birthdays. In the statement, you receive an estimate of your benefits under the most current laws, and a record of your social security statement of earnings upon which your benefits are based. If you do not have this statement, you need to get one. Call 800-772-1213 or go to www.ssa.gov and request a statement order form. Because this is sensitive personal information, it is not available online. You have to mail a form to the SSAand wait for a response in four to six weeks. (more…)

This is usually referred to as the actuarial accrued liability. It is that portion of the actuarial present value of all future benefits (PVFB) that is assigned by the actuarial method to the period prior to the valuation date. present value of all future benefits is the present value of all benefits accrued and unaccrued, past and future. It is a measure of the total obligations of the plan, past and future. That portion assigned to the past is called the actuarial accrued liability. This concept will be discussed again later in the section on actuarial methods. Due to the wide variety of actuarial methods in use, the same plan and assumptions can generate Significantly different actuarial accrued liabilities. In fact, one commonly used method (Aggregate Actuarial Cost) produces a zero actuarial accrued liability by definition. It funds costs over future payrolls only. (more…)

Issues around retirement income planning are the most obvious. The traditional “three-legged stool” of retirement income planning—Social Security, pension income benefit, and income from personal savings and investments—is increasingly unsteady. Social Security faces a funding crisis in the first half of the twenty-first century because soon there may not be enough workers paying into the system to support those receiving its benefits. Social Security income lifts more than one in three older persons out of poverty—more than 60% of them women. It is by far the single most important contributor to financial security in old age in America. (more…)