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- How To Recession Proof Your Savings
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Credit Claims For Kansas Retirees: Protecting Savings And Investments With Attorneys
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Do you know how you will finance your retirement? Do you know how much you need to live comfortably during your non-working years? These are difficult questions that many people do not spend enough time considering.
According to a three-part survey conducted by CNBC, more than 70% of Americans have received a serious financial wake-up call during the COVID-19 pandemic. Now, people across the country are thinking more about their long-term financial goals and paying closer attention to their progress toward achieving them.
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One popular way to refine your goals and measure your progress is to review the average retiree income levels in the US, along with other important retirement statistics. Your situation may be different from that of the average person, but a metric can be informative, especially when you can tap into specific categories of data, such as age groups.
According to the latest data from the United States Census Bureau, the median annual income for individuals age 65 and older is $47,620, while the average annual income is $75,254. A few other income data points for people of retirement age are illustrated below.
Everyone should have a basic understanding of the median and average statistics, especially when using them to inform a retirement plan.
Because retirees with higher incomes tend to skew the average retirement income, the median income is a more accurate measure of the national average.
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It represents the value that exists in the exact middle of a data set. To determine the median of 13 retirees’ incomes, you would organize the values from smallest to largest. The number that falls in the 7th place is the median retirement income.
It is the average of all values in a data set. To calculate the average of 13 retirees’ incomes, you would add up the incomes and divide the sum by 13.
In general, the median is more useful than the mean for assessing average retirement income. This is because the average is skewed by individuals with very large incomes. These outliers can easily push the metric up into unrealistic territory for average people.
Saving for retirement can start at any age, but the strongest retirement plans are associated with aggressive savers who started early, often in their early 20s. Unfortunately, life circumstances prevent many people from saving for retirement until their 30s, 40s or 50s.
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Starting to save for retirement later in life is challenging, but you can do it successfully. It just takes careful planning and persistence. When you start at age 50 or older, it usually also requires sacrifices and tighter retirement budgeting.
Vanguard conducted a study to examine how America saves. The average and median retirement savings by age group are as follows:
How are you doing relative to the median for your age group? If you are significantly behind, it may be time to meet with a financial advisor. Doing so will improve your chances of accumulating enough savings to generate a sufficient amount of income during retirement.
If you’re wondering how much retirement income you need, you’re not alone. Most people struggle with this question, especially those who lack financial experience, literacy or familiarity with the retirement planning process.
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In general, a good retirement income is about 75% to 85% of the pre-tax income earned in your last working year. This rule of thumb reflects the following assumptions: you’ll save about 15% of earnings annually, you’ll maintain a balanced budget, and you’ll pay less in taxes in retirement.
That said, the target percentage may need to be revised upward or downward depending on your life expectancy, health care costs, and retirement lifestyle, which depends on your primary geographic location and travel habits. To get a more accurate idea of what a good retirement income looks like for you, start by filling in your future circumstances.
As illustrated, income typically declines with age. This is largely due to how the typical retiree gradually withdraws his or her retirement portfolio, slowly reducing its income-generating potential over time.
Unfortunately, the rate of decline can be accelerated by a host of retirement risks, including runaway inflation and unexpected health care withdrawals. As a result, sound investment management is important before and after you retire.
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Not all individuals follow the traditional path to retirement. Depending on your income level, savings rate and expected spending needs, you may be able to retire early. However, saving for retirement is challenging enough; early retirement requires excellent planning and a heightened level of fiscal discipline.
Many people have multiple sources of retirement income, which may include pension plan distributions, Social Security benefits, and investment account distributions. Ideally, you should have multiple, diverse income streams to ensure you have enough to live comfortably, optimize your tax position and protect against inflation. Let’s take a closer look at the most prominent sources of retirement income.
According to a recent study by Schroders, 62% of working Americans plan to continue working in some capacity during retirement. Fortunately, there doesn’t seem to be a shortage of work. In fact, there are a wide variety of opportunities for retirees to earn money and build their skills – from blogging to being a life coach.
Every time someone is paid, a 6.2% Social Security tax is withdrawn from the gross amount. For the self-employed, this percentage doubles to 12.4%. Then the Social Security program pays this money to eligible retirees, including you. The amount you receive is based on how much you earn during your working years and the age you choose to start your benefit.
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A study conducted by the National Institute for Retirement Security shows that 40% of Americans rely solely on Social Security benefits to finance their retirement.
According to the Social Security Administration, for 2022, the maximum Social Security benefit you can receive each month is $3,345 for those at full retirement age. The estimated monthly average Social Security income is $1,657, after a 5.9% cost of living adjustment.
How to maximize this income: Delay receiving your Social Security benefit until full retirement age, which is between 66 and 67, depending on when you were born. Claiming the benefit before full retirement age will result in a reduced monthly payment. Brian Fry, a CERTIFIED FINANCIAL PLANNER™ and founder of Safe Landing Financial, offers the following guidance:
“To receive 100% of your Social Security benefit, you must wait until full retirement age. Every year you claim before full retirement age, you give up between 5% and 6.67% of your full benefit. Benefits increase by about 8% for each year you delay claiming Social Security after full retirement age.”
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According to the Pension Rights Center, only about one-third of American retirees receive income from defined benefit retirement plans, reflecting the steady decline in pension plans. According to the United States Department of Labor, there were 113,062 pension plans in 1990, but only 46,869 in 2018.
The median private pension in the United States pays out $10,606 per beneficiary annually, according to the latest data from the Pension Rights Center. Other types of pensions, including state and military pensions, pay higher benefits on average.
How to maximize this income: In general, by working for a pension plan sponsor as long as possible, you can increase your benefit. Usually the benefit will also increase as you earn more money.
According to the Transamerica Center for Retirement Studies, 48% of American workers expect their main form of retirement income to come from personal financial assets, some of which are tax-advantaged.
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Depending on how they are structured, the first three vehicles offer the potential for either tax-deferred or tax-free growth. The latter two asset types do not receive favorable tax treatment.
Regardless of the personal financial assets you own, strive to maintain a holistic perspective. The success of your retirement plan depends on how the various assets complement each other and your other sources of income, not on stand-alone performance. In this regard, make sure that you strive to maintain an appropriate degree of diversification. This can help improve the risk-adjusted performance of your retirement portfolio and extend the longevity of your savings.
Building adequate sources of income is one aspect of the retirement journey. Being strategic about the way you withdraw funds during retirement is the other. Without a solid plan, you can spend too much too quickly and not have enough money to support your lifestyle. Fortunately, the strategies outlined below can help you extend the longevity of your savings.
Don’t underestimate the importance of
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