On the path to retirement, not only is it important to build your nest egg, but to include in your plans how to preserve it so it lasts throughout your golden years. 10,000 Baby Boomers head into retirement each day and GoBankingRates research shows that 26% have less than $50K saved for their golden years. It is crunch time for them and the 30% of seniors age 55 and over claiming to have no savings at all.
Continue Reading Below
AJ Smith, Vice President of Financial Education at SmartAsset (https://smartasset.com/retirement/) discussed with Fox Business the following tips for seniors planning toward retirement
Boomer: How can seniors estimate what they will need in their nest egg for retirement and how do they save enough to get there?
Smith: Lots of sources cite a specific number - $1 million is frequently designated as a retirement savings goal. But sometimes that’s not realistic or even necessary, and people shouldn’t get discouraged if they don’t project meeting that number. Actually, seniors’ goals can and should change over the course of their lives. It really depends on what people want and expect in terms of their lifestyle in retirement. People should consider both the ideal retirement, as well as a view that’s rooted in reality. Where do you plan to live – near family? Is that area expensive to live in? Do you want to travel, or provide financial assistance to your children and grandchildren? Other factors include whether seniors plan to work in retirement, if they take a lower-paying job to focus more on work-life balance, and how much more they can save once their mortgage is paid off. Seniors should absolutely run some different scenarios to determine the impact of different decisions on their financial security in retirement. It’s a complex decision, but there are online resources that can help educate seniors about how much they should plan on saving for their retirement.
Boomer: How do you figure out how much you should rely on Social Security and determine what you need to supplement it?
Smith: Calculating Social Security benefits can be complicated, as the allocations are different among age and income tiers. A lot of your benefits are calculated depending on your lifetime earnings. In addition, waiting to apply for benefits – this means waiting until age 70 instead of 65 (or even 62 when you can first apply) - can ensure more benefits thorough delayed credits.
If you do retire at 62 and decide to continue working in retirement, you’ll have to also consider that working after claiming benefits can reduce the amount you receive in your 60’s. Don’t worry, you will indeed get this money back in the form of higher future benefits (plus interest). Once you hit the full retirement age (either 66 or 67 depending on when you were born), you can work as much as you want without any impact to your benefits.
Lastly, many people don’t know that where you live can really make a difference in how far your Social Security benefits go. A lot depends on the cost of living and whether your locale taxes Social Security benefits. It’s definitely worth doing a little research to see just how much you can rely on Social Security!
Boomer: What steps should we take to work with a professional financial advisor to plan for retirement and what should we look for to find the right one?
Smith: A financial advisor can help you take stock of your personal financial situation and create a plan to reach your financial goals. An advisor will ask about your assets, debts, lifestyle, savings habits, risk tolerance, career, planned retirement age, and more in order to get a complete picture of your finances and a foundation for creating and managing wealth. You may want to think through some of these topics before speaking with an advisor. Then there are several steps you should take to make sure you’re working with the right advisor.
First, it’s a good idea to become familiar with financial advisor licensure or certifications. Determine if it’s important to you whether or not your advisor is certified through the Certified Financial Planner Board of Standards. If you are seeking a professional to manage your investments, you probably want a Registered Investment Advisor or Investment Advisor Representative who is registered with the Securities and Exchange Commission.
Next, find out about how much experience they have with clients like you. This is especially true if you have a complicated financial situation that needs untangling – you’ll want someone who’s successfully dealt with such complications previously.
Third, find out if the services they offer make sense for you. If you don’t have any investments, then you don’t need someone who focuses on investment management. If you need estate planning, then you’ll want someone who specializes in trusts and estates and can minimize tax liability while ensuring the seamless transfer of your wealth.
Lastly, and perhaps most importantly, find out how you’ll pay them. Fee-only advisors charge an hourly rate or a percentage of your assets – they don’t make money on commissions by selling you financial products. There are resources that can help you find a financial advisor that is a good fit for you – take advantage of those!