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Social Security Statements: Retirement prep

Soc Sec

By Lisa Lewitzke

If I don’t write something down these days, odds are, I’m not going to remember it. We can all use little reminders to help keep us on track. The Social Security Administration tries to give us that help by sending out Social Security Statements that provide estimates on what Social Security benefits to expect.

The statements used to be mailed out every year, then they changed to every five years, starting at age 25. To save money, administrators have said they will mail paper statements only to people older than 60 who are not receiving benefits and do not have an online account. Social Security encourages Americans to sign up online at https://ssa.gov/myaccount/ to be able to view their benefits anytime.

Too many people get these notifications and just tuck them away, but they do offer some good information, including:

  • what your Social Security retirement benefits are projected to be at age 62, at full retirement age and at age 70.  The comparison illustrates how waiting just a few more years to start collecting your benefits can be a big advantage.
  • what your benefits would be if you became disabled
  • what your spouse or child could collect in survivor benefits following your death

Having all that information on hand, especially if you are getting closer to thinking of retiring, is a great place to start to see if you are on track to making retirement happen the way you want. As you get about 10 years out from your estimated retirement date, take time to check your progress.

10 years to go

Savings

Look at how and where you are saving money. Are you maxing out your 401(k) or retirement plan contributions? If your employer offers a match to your 401(k), and you are not contributing at least the percentage that is matched, you are leaving money on the table. Roth IRAs and Traditional IRAs are other vehicles to fund your retirement. As with the 401(k), they allow anyone over the age of 50 to make additional catch-up contributions.

Timing

Many married couples want to retire at the same time. That is not always be the best decision financially. Consider staggering your retirement dates. Although for some it may be difficult to watch your spouse sleep in as you head out the door to work every morning, delaying claiming Social Security or starting to draw down your portfolio can make a huge difference in the long run. Calculate the numbers so that you understand your options.

Debt

Ten years out is when you want to take a hard look at your debts and any big-ticket commitments you can anticipate, such as assisting an elderly parent or having a child return home after college. The ideal way to walk into retirement is debt-free.

5 years left

Reallocate

This close to retirement, many investors want to shift to a more conservative balance in their investment portfolio. Be careful not to give up on stocks. You still need to be investing for growth to cover your retirement expenses because bonds alone won’t be able to keep up.

Retirement planning:
Knowing the number, by Brian Kilb, covers the component for financially planning retirement.
“You need a budget” by Tom Pappenfus, includes a worksheet.
“Covering care costs in retirement,” a Money Talk Video by Adam Baley
“Retirement investing: Where to begin,” a Money Talk Video by Kyle Tetting

Budget

The number one thing clients ask us prior to retirement is if they have enough money to retire. Most people have no idea what they want or need. Take the time to make a plan. The bills you have pre-retirement may change drastically when you are no longer going to work every day.  A budget is the only way you will know if what you have will be what you need.

Education

If you are only a few years out from retirement, it is time to really understand your financial picture. Meet with you advisor even more often to make sure you are on the right path and can make changes when needed to keep you there. Social Security benefits, employer retirement plans and pensions can be confusing. Making the right payout decisions on some of these plans can be very important – and irrevocable. Get as much education on your choices as you can.

Estimates in the Social Security Statements are projections based on your earnings history, so they get more accurate the closer you get to retirement. Still, they approximate some of what you’ll have to work with. Most importantly, they can prompt you to plan ahead.

Lisa Lewitzke is a registered representative and investment associate at Landaas & Company.

(initially posted Feb. 15, 2015; updated March 6, 2017)

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