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The Shocking Can't-Miss Truth About Your Retirement
We assumed the government was looking out for us...Worked hard for decades, thinking that when we retired Social Security would supplement whatever pension we might still receive and dividends from the savings we'd accumulated.
Boy, were we wrong...
I could go on and on about how evil the government is. I could write pages about how immoral it was for politicians to take loans from the Social Security trust fund to pay for expensive programs wanted by this or that interest group so that when their reelection campaign came up, funding it would be a breeze.
But frankly, my rant wouldn't be productive. What's done is done.
Of course the situation may not be quite as bad as the media would have you believe; Social Security and Medicare aren't going to disappear altogether.
According to the most recent Board of Trustees report, Medicare and Social Security's surplus funds will run out in 2024 and 2036, respectively.
After that, retirees will still receive their monthly checks and Medicare coverage -- but at a lower rate.
The same trustees predict that through 2085, Social Security will be able to pay out 75% of the benefits estimated today, and Medicare will function at about 90% when its surplus is gone.
But we both know that's little consolation when you're about to retire...
Because after all, a 25% haircut on income we assumed was ours -- income we assumed we were working to receive -- means a 25% more difficult time financially when we retire.It's true that politicians are clamoring to come up with a fix, or change the system to make it more solvent. But they've made it clear they're not the best people to trust with your retirement...
The only person you can trust to secure a wealthy retirement is YOURSELF.
I'm convinced that even if you're retiring within the next five years, there are steps you can take today to make your golden years more enjoyable.
So to help you take the reigns of your own retirement, and to make it more wealthy and enjoyable than you're expecting, we've compiled some of the most effective tips from top retirement experts, along with an exciting and unique opportunity to receive even more first-rate portfolio advice as you prepare to retire.
A Simple Tip to Boost Your Social Security Checks
The average retiree currently receives just $1,177 in Social Security benefits per month. Which works out to about $36.72 each day.After factoring in Medicare premiums, he's left with just $26.14 a day. That's less than holding down a minimum wage job full time.
It's a sobering thought...
But this number isn't set in stone. Which is important because if you're going to be receiving a pension, or have even modest savings for retirement, there's one step you can take to boost your Social Security payouts by as much as 25%.
Simply delay collecting benefits.
You may be aware that the longer you wait to collect Social Security benefits, the higher your payout will be.But you may not know that for each year you hold off on claiming Social Security, your benefit could increase by as much as 8% per year.
There are some caveats, of course: You can't delay past age 70, and the annual rate of increase depends on the year in which you were born. But here are the specifics:
| Year of Birth | Yearly Rate of Increase | Monthly Rate of Increase |
| 1933-1934 | 5.5% | 11/24 of 1% |
| 1935-1936 | 6.0% | 1/2 of 1% |
| 1937-1938 | 6.5% | 13/24 of 1% |
| 1939-1940 | 7.0% | 7/12 of 1% |
| 1941-1942 | 7.5% | 5/8 of 1% |
| 1943 or later | 8.0% | 2/3 of 1% |
Note: If you were born on January 1st, you should refer to the rate of increase for the previous year. Source: U.S. Social Security Administration | ||
It's easier, of course, if you've got a pension coming in, a decent-sized portfolio or savings account you can draw down on, or you're planning to pick up a part-time job to stay busy.
But even if you don't want to work for a paycheck ever again, many retirement experts advise that it's actually better to live off of retirement savings for a few years and delay Social Security than to immediately claim benefits and let your savings grow.
After all, an 8% annualized gain isn't something you can guarantee in your brokerage account. But each year you delay taking your Social Security benefit, you are locking in an 8% return.
There's one exception: Dallas Morning News columnist Scott Burns summed up a recent study by the Center for Retirement Research this way, "Married women should take Social Security benefits early. Married men and single women should take Social Security benefits late."
Why is this?
Because married men earn more over their career on average, their Social Security benefit tends to be higher.
Furthermore, women tend to outlive men and widows can receive half of their spouse's Social Security payment if it is higher than their own. So if you're married, this is often a smart move you can make to benefit both you and your spouse.
If you're still not convinced Social Security will be enough...
Unfortunately, you're right. Social Security should ideally just be a portion of your retirement plan. And like I said earlier, the only person you can trust to provide a wealthy retirement is yourself.So if you're still working, it's time to become 100% laser-focused on building a rock-solid portfolio of your own -- out of reach from the government, and large enough for your own circumstances that you'll be comfortable in retirement.
I'd like to empower you to achieve this end.
3 Simple Tips for a Wealthy Retirement Without Relying on Social Security
Building a solid retirement portfolio isn't difficult. But it does require discipline.You can summarize all the experts' advice into this retirement-saving trifecta:
- Spend less than you make.
- Invest the difference.
- Manage your money with diversity in mind.
Track your monthly inflows (paychecks) and outflows (bills and other expenses) for one month using personal finance software like Quicken, Mint.com, or even a spreadsheet of your own.
Is there more money coming in than is going out? If so, you're off to a good start -- but could there be more?
Go through each expense line by line to uncover unnecessary expenses, like too-frequent trips to Starbucks, or dinners at your favorite restaurant.
Do you really need over 1,000 channels from your cable provider? Do you ever send more than 50 text messages in a month, even though you've got an unlimited plan?
Eliminate extravagances, and trim necessities if possible, then for the important part...
Invest the difference
All that extra money you've now freed up can -- and should -- be invested.
Ideally, try to max out your tax-advantaged accounts like your 401(k) and IRA -- especially if your employer matches 401(k) contributions. The good news is that if you're close to retirement, you're allowed to contribute more to tax-advantaged accounts than younger folks.
Here are the IRS-instituted maximums for 2011:
| 401(k) Contribution Limits (under age 50): | $16,500 |
| 401(k) Contribution Limits (50 and over): | $22,000 |
| IRA Contribution Limits (under age 50): | $5,000 |
| IRA Contribution Limits (50 and over): | $6,000 |
And lastly, make sure to...
Manage your money with diversity in mind
Your portfolio should contain both stocks and bonds.John Bogle, legendary founder of The Vanguard Group and index fund advocate, advises that your age should match your bond exposure.
So if you're 20, a safe balance is to have 80% of your portfolio in stocks and 20% of your portfolio in bonds. If you're 60, a safe balance is for 40% of your portfolio to be in stocks, with the remaining 60% in bonds.
The bond side of your portfolio should be spread among U.S. Treasuries (higher safety, but lower yield), corporate bonds (lower safety, but higher yield), and everything in between.
A well-respected bond fund like Dodge & Cox Income [DODIX], Managers Fremont Bond [MBDFX], or iShares Lehman Aggregate Bond [NYSE: AGG] offers diverse exposure to the total bond market with below-average fees.
The stock side should contain a mixture of growth-oriented companies, and -- especially as you near retirement -- dividend-paying stocks.
The latter is important because:
- Dividend-paying stocks outperform non-dividend-paying stocks over the long term.
- Dividend-paying companies tend to be more conservative in their management style (less likely to take on high levels of debt, etc.).
- Even in a market downturn, a safe dividend means your investment is still earning something.
Or you could invest in a best-of-breed dividend ETF like iShares Dow Jones Select Dividend [NYSE: DVY].
Of course, though these tips are helpful advice, this merely scratches the surface on how to perfectly set up your portfolio for retirement.
I'd like to share with you a unique solution that will give you even more expert advice on 401(k)s and IRAs, annuities, wills and trusts, and all other aspects of retirement that matter to you most.
I think you'll be surprised at all the information I'd like to share with you.
Your Chance to Get Expert Retirement Advice From a Respected Certified Financial Planner
As I said, there's plenty more I'd like to share with you about preparing for retirement.But first allow me to introduce myself...
My name is Matt Argersinger. I'm the executive publisher of Motley Fool Rule Your Retirement, a retirement-planning newsletter written by Robert Brokamp, CFP®.
Before joining The Motley Fool, Robert was a financial advisor at Prudential Securities. He spent years researching proven money-building retirement strategies, the latest money-saving tax loopholes and more to help his clients make the most of their money.
Though he worked with some excellent people, he wasn't satisfied. More than anything, because he was forced to sell his clients what the company offered.
So he left Prudential and became a Fool, eventually founding our Rule Your Retirement newsletter, where he combines his love of teaching with his vast insider knowledge of retirement planning, to bring you the most up-to-date investment strategies around.
Robert is a widely respected retirement expert
Not only has he written countless articles on Fool.com and in renowned publications like Newsweek, Robert Brokamp has also authored (or co-authored) 4 top-selling books and recently gave a speech at the SEC that was broadcast on CSPAN.Not to mention -- he's the in-house financial advisor for Motley Fool employees as well!
Now if you're like most Americans, your retirement planning could probably use a jumpstart...
From college loans and mortgages to raising children, many expenses have popped up making it difficult to save as much as you'd like.
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It will certainly take time, discipline, and -- most importantly -- sound education, but it is possible to get yourself on the path to a carefree retirement... today.Which is why I'd like to invite you to join Robert and become a member of his Rule Your Retirement newsletter service today.
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