How Much Money Will You Need to Retire?

 


This article was originally published on Franklin Wolfson's website. Part of his series on Retirement, you can read the entirety of the blog, here.

Hint: It’s a Lot More Than You Think… and it’s a lot less than you’ve probably saved.

How much money do you need to retire in comfort and security? That’s the million-dollar question and for most Americans, that’s also the million-dollar answer.

According to Fidelity Investments, the nation’s largest retirement-plan provider, to be financially ready to retire by age 67, the average American should aim to have 10 times his or her final salary in savings.

Let’s face it. For most Americans “that just ain’t gonna happen.” The time you should start planning for your retirement is when you get your very first paycheck but even if you didn’t start then, there’s no excuse for not starting now.

If you accept Fidelity’s recommendation, and I highly recommend you do, here’s the time line in which Fidelity suggests you increase your savings so you can achieve that financial goal:

• In your 20s, put enough away so that by the time you turn 30, you’ll have the equivalent of your salary saved.
• By 40, aim to have three times your salary saved.
• By age 50, you should have enough saved to equal six times your salary.
• By age 60, your savings should be eight times your salary.

And you should save 10 times your salary by the time you reach 67.

Of course, life is never predictable. In some years you may have a greater surplus while in others you may suffer unexpected expenses so plan to adjust your savings accordingly.


Although most people will never have ten times their last year of salary saved for retirement start saving as much as you can beginning now so you have sufficient funds to truly make your sunset years, your golden years.

The 13 States that Tax Your Social Security Benefits

This article was originally published on Franklin Wolfson's website. Part of his series on Retirement, you can read the entirety of the blog, here. 


If you’re not worried about your Social Security benefits…you should be.

Did you know there are currently 13 states that tax your Social Security benefits? I didn’t either. Don’t be surprised if many more adopt the same tactics.

We keep hearing stories that Social Security is in long-term trouble. This is extremely bad news for the large and growing numbers of retirees whose future is growing more dependent upon this failing system.

According to a national survey conducted on retirees, 59% rely on Social Security as a major source of their retirement income and an additional 31% cite Social Security benefits as a minor source of their income. As for non-retirees, more than one-third expect Social Security to represent a major source of their retirement income and almost half anticipate it will be a minor source of the income they depend upon. In short, without Social Security, a large number of Americans are going to struggle just to meet their basic needs.

So if you’re in or approaching retirement you need to be aware that Social Security is in trouble, real trouble. Beginning around 2020, according to a report by the Social Security Board of Trustees, the program’s cash inflow including interest earned, will turn into a cash outflow due to the increasing number of boomers leaving the workforce, a falling worker-to-beneficiary ratio and longer life expectancies. By the year 2034, per the Trustees, the program will have used up the entirety of its spare cash, potentially leading to a 21% cut in benefits.


The conclusion you should draw from this is simple. If you’re young, get prepared. If you’re older, you should be scared.

Check out Franklin's article to read the entirety of the article. 

3 Reasons Why the Middle Class is in Trouble

This article was originally published on Franklin Wolfson's website. Part of his series on Retirement, you can read the entirety of the blog, here. 

Are you approaching retirement? Do you have parents or relatives who are facing uncertain times as they reach the end of their careers and launch into their golden years?

While it's no longer a shock, the United States's economy is just not getting any better. And the middle class continues to bear the greatest burden of the nation's financial challenges. According to an analysis by the Pew Research Center, almost 90% of the major U.S. metropolitan areas it surveyed between 2000 and 2014 showed a decline in middle-class families. In some cases families have ascended into higher income levels while many others have descended into lower income levels. This study appears to corroborate a nationwide trend that’s been evident for the past thirty years or more.

What's causing the middle class to shrink? Take a look at the following 3 reasons behind this dip.

1. Wage growth has been relatively stagnant

Although nominal wages have been rising, inflation adjusted wages have been relatively stagnant.
This has a profound negative effect on a major portion of our society. For young adults, the cost to attend college and for senior citizens needing proper medical care costs keeps rising at a faster pace than wage growth. In the last ten years or so, medical care costs have risen faster than the Consumer Price Index and college tuition costs have increased at even a faster rate. These are ominous signs affecting both the young and the old.

2. Failure to Balance Income and Debt

The wide spread adoption of the use of debit and credit cards has made purchasing products and services much easier but high interest rates and an unbalanced income to debt ratio has made paying for those things more difficult. As a result, most Americans are carrying too much debt in relationship to their income, their ability to handle emergencies or their discipline in allocating funds for savings and investment to ensure a safe, secure and extended retirement.

According to the Survey of Consumer Finances, the debt burden of the average middle-class family in 2013 was more than 120% of annual household income. Although this is down from its peak of more than 140% in 2010, the amount is more than twice as much as it was just 25 years ago.

These high levels of debt are forcing middle class families to divert funds that should be saved for retirement to paying monthly debt payments instead. Families that don’t plan properly or fail to stick to their plan are destined to go from crises to crises until just one unforeseen or unplanned event becomes a financial catastrophe that affects the entire family.

3. Historically low interest rates

The Federal Reserve’s low interest-rate policy has been a boon for existing and new homeowners seeking to buy or refinance their homes and businesses that rely on access to cheap capital to expand their operations, hire new employees or develop new markets or finance other business opportunities.

As with so many things that sound good, some groups benefit while others may suffer even though the long-term effects for the nation as a whole may be positive.

There is no question that many middle-class families have benefited from low mortgage rates but with yields on CDs, savings accounts, checking accounts and U.S. Treasury bonds hovering around all-time lows, many middle-class families that counted on the guaranteed income of interest-bearing assets are suffering from shrinking incomes and reduced purchasing power.

Check out Franklin's article to read the remaining four reasons why the middle class is in trouble when it comes to saving and living through their retired years.