Last Week’s Question of the Week: How many retirees in the United States are currently receiving Social Security Benefits? ANSWER: In 2018 there are approximately 42 million retirees are receiving Social Security payments averaging $1404 a month, or about $16,848 a year.
HOST: I think the theme today is how to stress less about your future retirement by perhaps taking a look at things today, and perhaps just make a few adjustments in your planning?
KLAAS FINANCIAL: Yes, so today our topic is about how to remove the stress of whether or not you are going to be ok as you go to retire, and the way we feel is the best way is to take a look at where you are today, and what changes may need to take place to get you there. And we have some action steps you can take away today!
Retirement that looked like it was quite far away just a few years ago, but is now perhaps 15 years or less away and so the question is, have I done or am I doing what I need to do?
ACTION 1: Shore up retirement savings accounts
- If you have a 401k or 403b, are you maximizing the deferment every year? Are you putting away 10% or more?
- Are you taking advantage of the ability to save up to $18,500 and adding the catch-up provision of another $6000, $24,500 deferred?
- In an IRA, putting away at least $5500, and adding the extra $1000?
- Looking at future tax ramifications of your retirement income and considering perhaps the idea of starting to put money into Roth 401ks or IRAs?
- Asset allocation, is it correct for you within those accounts at this point? Review at least quarterly, and perhaps review with a professional who can give you suggestions with regards to the amount of risk you can afford, and risk that you can live with.
HOST: How should we be looking at our debt as we plan for our retirement?
KLAAS FINANCIAL: The true goal for people looking towards getting to where they need be for retirement is to be eliminating debt. Sometimes easier said than done, especially as many people are trying to help kids with college, updating their homes, taking a vacation once in a while, or are having to deal with medical bills.
FACT: As of December 2017, a NerdWallet Study told us that the average U.S. household has over $15k in Credit Card debt, average mortgage debt of $174k, auto loans of $27k, and student loans of $46k.
According to the study, there seems to be a lot of untamed spending — a habit credit cards help perpetuate. In fact, of those carrying credit card balances, 41% attribute them to overspending on needless purchases. Only 23%, by contrast, point to a period of unemployment as the reason for their debt, while just 17% blame emergency medical expenses.
ACTION 2: Eliminate credit card debt & watch your credit
- First, we would suggest that you look at your credit card debt and takes steps to eliminate it. What starts off at zero percent often changes within 6 months to ridiculous double- digit rates.
- Use annualcreditreport.com or creditkarma.com to watch who is doing what with your credit.
ACTION 3: Track your spending using technology.
- To carve out extra money to save, track your spending using consider using an app: Suggestions to look into would be:
- Mint
- Pocket Guard
- YNAB… You Need A Budget
- Wally
- Mvelopes
- Good Budget (good for couples)
These all help you determine where your money is going and invest more by eliminating wasteful spending.
HOST: What about paying off the mortgage before retirement? Good idea?
KLAAS FINANCIAL: Yes, a very good idea! Let’s point out that the average mortgage in the U.S. is currently $174,000.
ACTION 4: PLAN to Pay Off Your Mortgage
Consider re-financing if necessary so that you can have your mortgage paid off by the time you retire.
Reasons Why?
- Having the mortgage paid off lowers your required cash flow.
- Getting rid of an anti-asset — a liability — is like making an investment. For every dollar you pay on your principal, you’re making the interest rate back because you’re not paying it to someone else.
- For example, paying off, or down, a 4 percent mortgage makes you 4 percent with no management fee.
- Paying off your mortgage is 100 percent safe. There is zero market risk.
HOST: What about savings and health savings accounts?
KLAAS FINANCIAL: Yes, for savings. Believe it or not, an estimated 39% of Americans have absolutely no money in savings, while 57% have less than $1,000 to tap for emergency purposes.
ACTION 5: Put money away in emergency savings, and Health Savings Accounts (HSA’s)
At a minimum in an emergency fund, we all need three months’ worth of living expenses available in cash at all times, 6-12 months would be preferred as we get closer towards retirement.
Also, putting away money in a Health Savings Account if you have one available to you through your work: 2018 HSA limits for contributions are: Limits for 2018: Individual: $3,450 ; Family: $6,900 (officially has been set back to $6850 but IRS will accept $6900) ; CATCH UP- Individuals age 55 or older can continue to make an additional $1,000 catch-up contribution.
Catch C.J. Klaas and Maleeah Cuevas on Money in Motion every Thursday on Madison's 1310 WIBA from 8:05-8:35am.
