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Month: February 2015

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Should You Consider a Phased Retirement?

Retirement ConceptIf you’ve ever dived head first into freezing water or jumped into a hot spring, you know that extremes in temperature can cause a shock to the system. Sometimes it’s best to just ease in bit by bit if you want to remain as comfortable as possible. The same can be said about retirement. According to a survey conducted by the Transamerica Center for Retirement Studies, 64 percent of workers would like to enter their golden years in stages, slowly making the transition from full-time to part-time employment before collecting their final paycheck. If this type of opportunity appeals to you as well, consider the following questions and answers.

What are the benefits of a phased retirement?

Because phased retirement programs allow you to gradually reduce the hours you are working, they ease the transition between paycheck and no paycheck as well as work time and free time. This allows you to determine if you’re actually going to enjoy life without a job. It also allows you to test out a lower-income budget. And you get to do it all while still maintaining your social ties at the office.

Ultimately, phased retirement will keep you in the workforce longer. It may enable you to postpone tapping into your retirement savings or drawing Social Security. This decreases your chances of outliving your money.

Will my employer give me this option?

According to the Society for Human Resource Management, only 13 percent of U.S. businesses offer a phased retirement option. In 2014, 4 percent were formal programs, while 9 percent were informal opportunities.

The government recently implemented a phased retirement program for federal employees. Eligible federal workers began submitting applications for the program last fall. They are allowed to work 20 hours per week at their normal hourly pay rate as well as draw half of their retirement annuity. If they choose phased retirement, they must set aside at least 20 percent of their work week for mentoring other employees.

If the government’s program is successful, it is possible additional employers will follow suit. Many already fear losing large numbers of Baby Boomer workers without enough adequately trained replacements standing by. In fact, a 2011 survey of human resource directors conducted by the AARP found that 65 percent want to keep older workers on as part-time staff or consultants. They’re also very interested in developing knowledge transfer and mentorship programs (53 percent).

What else do I need to know?

Depending on your situation, a phased retirement could come with financial consequences in addition to a gradually decreasing paycheck. For example, if you have a pension, future benefits may be tied to your salary. You’ll need to find out how payments are calculated under your plan and if working fewer hours will reduce your payout.

Health insurance could also become an issue. If you enter phased retirement before you turn 65, you’ll be ineligible for Medicare. Unless your employer chooses to allow you to continue your work healthcare policy, you’ll have to obtain coverage some other way.

While using a phased retirement program to work longer and postpone dipping into savings may be a wise move, it doesn’t eliminate the need for careful financial planning. Whether you’re interested in a phased or traditional retirement, we are here to help. Please don’t hesitate to contact us with any retirement planning questions you have.

 

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You Can Now Track Your Social Security Benefits Online

You Can Now Track Your Social Security Benefits Online
Most seniors know a great deal about Social Security. After all, according to the Social Security Administration, these benefits make up about 38 percent of the average retiree’s income. Many retirees actually receive more than 50 percent of their income from Social Security, so it makes sense to stay up to date on related news and possible future changes to the program. However, here’s something you may not already know: since 2012, it has been possible to track your Social Security benefits online.

Of course, you have to sign up first.

Visit the “my Social Security” sign up page at www.socialsecurity.gov/myaccount to create your personal account. In addition to your name, Social Security number and address, you’ll need to provide the correct answer to a few personal questions based on the financial information in your Experian credit report. Questions range from the amount of your mortgage payment to when you took out your last auto loan. Correct answers allow the site to confirm your identity.

It’s easier than it sounds. The most time consuming part of setting up your new account is likely to be finding a user name that is not already in use and selecting the “password change” questions. Once your account is active you can view estimated benefits and your earnings record. Or, if you’re already collecting benefits, you can review payments and change your bank information for direct deposit.

There are a few things you cannot do online.

If you spot a mistake in your earnings record, you cannot correct it online. Instead, you’ll have to call the Social Security Administration to report the error. Additionally, if you’re interested in the Supplemental Security Income program that covers disabled adults and children with limited income and resources, you will need to schedule an appointment at your local agency office.

The online system also does not include any features for reporting stolen Social Security cards, requesting replacement cards, or changing the name on your card due to marriage or divorce. That must be done the old fashioned way with a call to the Social Security Administration.

Tracking your Social Security benefits is an important step in retirement planning.

To qualify for Social Security benefits, you earn “credits” for each year you work. Most people need to earn 40 credits over their working lifetime to receive benefits. If you have earned enough credits, the Social Security Administration can estimate your future benefits based on your average earnings. Generally, the older you are—and the closer you are to retirement—the more accurate this estimate will be.

The estimate includes how much you can expect to receive if you retire at early retirement age (62), full retirement age (currently 67) or age 70. You can use this information to determine the amount of other income you’ll need to generate—from savings and investments—for a comfortable post-retirement life.

If you’d like assistance reviewing your Social Security benefits information and planning your retirement investments, I’m here to help. Please don’t hesitate to contact me with questions on this or any other financial planning topic.