Social Security During Retirement: What Are Your Options?

When Should You Start Taking Your Social Security?

You are eligible to file for social security benefits when you turn 62, but if you do, your monthly check will be reduced significantly for the rest of your life. You may have little choice if you are out of work or in poor health and need the money to pay expenses. But if you have the wherewithal to work a few more years or have other sources of income, delaying checks until age 66, or your full benefit age, will increase your monthly amount by 33% or more.

How Can You Boost Your Social Security Payouts?

That’s not the only way working longer can boost your payouts. Your social security benefits are based on your highest 35 years of earnings. If you are a highly paid employee, working longer will displace some of your lower-earning years. You can see the Social Security Administration online tool that allows you to review your earnings record and get an estimate of your benefits. You should review this record annually because unreported or under-reported earnings reduce your monthly payments. To get your online statement, go to ssa.gov/mystatement.

If you work and get paid until age 70 and you start taking your full social security benefit at age 66, you can save four years of social security payment into your pretax or Roth retirement account. What a difference this makes!

Make Sure You’re Ready To Retire

Re-assess what you will spend in retirement. Most people underestimate how much they will spend when they retire. However, some financial planners and retirement calculators advise much more than you will need. While you may save on dry cleaning and commuting costs, you will still need to pay for groceries, utilities, and gas. If you refinanced to take cash out of your home, you may still have mortgage payments. And even after you’re eligible for Medicare, you will spend some money on health care costs. Fidelity Investments estimates that the average 65-year old couple will spend $260,000 on health care in retirement (“Health Care Costs,” 2016). Still convinced you can live on less?

Here is a good idea—try living on your projected retirement income for 6 months while you are still working. This exercise will force you to evaluate your spending and cut back if needed. That means you’ll be able to save more. And at this point in your life, saving is one of the few things you can control.

Are you getting ready to retire? Do you wonder what you should do with the money in your retirement account?

6 Smart Retirement Savings Strategies

Are you looking for strategies to help you successfully prepare for retirement? It’s never too late to start saving for your future.

Here are 6 tips that can help you get on track to a fully funded future:

1. Student Loans
Don’t worry about quickly paying off your student loans unless the interest rate is really high. It is important to realize that $2,500 of a student loan’s interest is tax deductible. Also, interest rates are often fixed and fairly low—between 3.4% and 6.8% for loans issued after 2006. Keeping them and paying them off slowly makes sense. Of course, like any debt, it is better to eventually pay them off than to have them. Make sure you pay off your higher interest loans first. This strategy will make a real impact on your financial landscape by helping you pay off debt faster and save for the future sooner.

2. Money for a House
Siphon off cash for a down payment. As untouchable as retirement accounts should normally be, a loan from your retirement account can be a good idea. You can repay the loan over 30 years, under most plans when the loan is intended to help with the down payment for a principal residence, and the interest you pay goes back into your same retirement account. To justify this strategy, you need to have enough time before retirement to repay the loan and replenish the accounts. Also, be strategic about which investment account you tap. Take the money from the conservative portion of your investment portfolio. For example, the interest you are paying back to yourself can replace a bond fund or money market fund.

3. No Cashing Out!
Resist cashing out a retirement account. When you leave a job, you have several options. You can leave your account with your former employer, roll it into an IRA, roll it into your new employer’s plan (if your employer permits such rollovers), or ask your former employer to cut you a check. You may be tempted to choose the last option, but in most cases, that’s a bad idea.

4. Prepare for Contingencies
If you have not done so already, fuel an emergency fund with enough money to cover at least six month’s worth of basic expenses. This cushion helps keep you solvent after a layoff and prevents you from borrowing your way out of a crisis. The key is to have access, not necessarily cash on hand, for up to 6 month’s worth of expenses.

5. Dare to Downsize
You may have hoped to move to smaller living accommodations as soon as the kids were grown. Some 74 homeowners, who have watched the value of their homes decline in recent years, are reluctant to sell until the real estate market rebounds. Even if your home hasn’t returned to its former value, moving to a smaller, less expensive home can save you thousands of dollars a year in taxes, utility costs, and insurance. These savings can be funneled into retirement savings. You may need some help with this approach but do the financial analysis and make a wise decision. An accountant can help you with the math.

6. Catch-Up Contributions
Because so many people wait too long, there are powerful government incentives that work in your favor once you’re over 50. At 50 and above, you are permitted to contribute significantly more to your 403(b) or 401(k) plan than your younger colleagues. The current “catch-up” amount for a 401k is $6,500 and for an IRA it is $7,000. Make sure to check the current amount because it does change occasionally.

Now that you have some good strategies on how to wisely prepare for retirement, make sure you check out 5 factors that may affect your retirement.

Start Saving for Retirement With These Important Steps

Saving for retirement can be difficult—especially when you’re focused on paying bills, feeding and clothing your family, paying for school supplies, and much more! If you haven’t already started saving for retirement, now is a perfect opportunity to make this happen.

Here are a few tips on how you can easily save for your future years of ministry:

Save at least 10% of your income towards your Future Funded Ministry plan

This provides a simple target for you to work towards as part of a disciplined savings approach. You may start at a lower level and then focus on increasing your contributions over time to get to this percentage.

Plan on living 20-25 years in retirement after age 65

People who live to age 65 have a 50% chance of living to age 85 and a 25% chance of living until 92.

Plan on needing 70% to 80% of your income in your Future Funded Ministry years

Certain expenses will likely disappear or be reduced once you leave the workplace.

To make your savings last, withdraw less than 4% a year

This simple formula has proven very accurate over time. It provides a guideline for how much to withdraw each year without exhausting your Future Funded Ministry savings.

Rebalance your asset allocation at least once per year

Rebalancing is when you adjust your portfolio back to an appropriate asset allocation mix. This keeps your investments aligned with your risk tolerance and goals.

Bonds percentage of your portfolio equals your age

This rule is a reminder that your portfolio needs to change as you age, becoming gradually more focused on avoiding risk and providing income.

Consider matching your personal values with investing

Faith-based funds are a family of mutual funds that invests in companies that meet certain moral and ethical standards. They avoid companies that manufacture or distribute alcohol, anti-family entertainment, tobacco, gambling, and/or other potentially offensive practices.

Express your personal values in your investment decisions.

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To help you better understand retirement planning terms, click here.

Looking for faith-based IRA options? The FaithBased IRA from Envoy Financial could be the perfect solution for you!