You're No Spring Chicken Anymore: Your Social Security Report - BodyShop Business

You’re No Spring Chicken Anymore: Your Social Security Report

Unless you plan to work until you drop dead, you're going to need money to live on when you retire. Any idea how much money you'll have? Your Social Security report is a good place to start.

Investing for retirement is something everyone thinks is a good idea – in theory – but most people don’t make it a reality. Give someone an extra 100 bucks, and they’ll find all sorts of creative things to do with the money – most of which have nothing to do with investing for retirement. It’s not surprising, then, that many of us don’t have adequate understanding – or any understanding – of how much income we’ll have or need during our retirement years.

To help Americans plan for a financially secure retirement, the Social Security Administration has begun mailing statements to all working Americans older than 25 who’ve contributed to Social Security. These statements provide an estimate of current and projected Social Security benefits.

Your projected annual benefit is shown at age 62 (early retirement), at full retirement age (which increases gradually from 65 to 67 for those born after 1938) and at age 70 (postponement of benefits). The statement also lists Social Security taxes paid on your behalf, as well as your employment earnings to date. Typically, the statement arrives about three months before your birthday.

Use the Social Security information in the statement to help assess your retirement needs. Keep in mind that we’re living longer, healthier lives, so you have to plan to fund a retirement that could last for 20 years or more. Many financial planning experts estimate that you’ll need between 70 to 80 percent of your gross annual income to maintain your current lifestyle during retirement. And Social Security alone probably won’t be enough.

The IRA Advantage
Making annual contributions to an Individual Retirement Account (IRA) is a simple and convenient means of accumulating additional funds for retirement. Today, most working Americans have the opportunity to contribute up to $2,000 a year to a tax-favored IRA. Depending upon certain income requirements, you and/or your spouse may be eligible to deduct Traditional IRA contributions or to establish a Roth IRA. The Roth IRA may provide you with tax-free income under certain circumstances.

Regardless of the type of IRA, all investment earnings and gains in an IRA accumulate on a tax-deferred basis, meaning you pay no current income taxes on account earnings until they’re withdrawn. (Withdrawals before age 59 1/2 may incur a 10 percent penalty tax.) Over time, this tax deferral could have a powerful effect on the value of your IRA account.

Put Your Retirement Plans on Track
Accept it. You’re no spring chicken anymore. Secure your retirement by reviewing your Social Security statement and by contributing to an IRA. You should also discuss your retirement income objectives with a financial advisor. There are a lot of investment options out there. The key to success is determining the ones most appropriate for you. A

Writer Thaddeus Toal is a financial advisor in Mclean, Va., and can be reached at (800) 488-4380 or (703) 790-7051.

This article doesn’t constitute tax or legal advice. Consult your advisors before making any tax or legally related investment decisions. This article is published for general informational purposes and isn’t an offer or solicitation to sell or buy any securities or commodities. Investment should be analyzed based on its terms and risks as they relate to your specific circumstances and objectives.

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