America’s retirement crisis is grabbing the attention of lawmakers in Washington. There are two new bills up for debate.
Local financial professional Tom Jacobs from Jacobs Financial Services explains those bills and offers steps we should take now for a more secure financial future
The Senate Special Committee on Aging is introducing two bills to address what lawmakers are calling a “retirement crisis.” The Retirement Security Act of 2019 would help more small businesses offer retirement plans to their employees.
The second bill, called the SIMPLE Plan Modernization Act, would allow businesses with a hundred or fewer employees to have greater access to SIMPLE savings accounts. SIMPLE stands for Savings Incentive Match Plan for Employees. These retirement plans are less expensive for small businesses to administer.
First, you need to take inventory.
If you don’t know what you have in savings, now is the time to find out. Figure out how much money you have in each of your retirement accounts, including 401(k)s and IRAs.
Don’t forget about all your previous jobs. If you have a 401(k) from a different job, consider moving those savings to a self-directed IRA or rolling them into a new 401(k). Once you know how much you have, ask yourself, is it enough?
The best way to determine how much you need for retirement is to meet with a financial advisor who can look at your entire financial picture and create a custom retirement plan for you.
Utilize tax-advantaged accounts.
Jacobs Financial has a wide variety of options to maximize our savings. Utilizing tax-advantaged accounts is one of the best ways to save for your future.
Your employer-sponsored 401(k) is a great option. Many employers match a percentage of what you contribute. Not only are you benefiting from interest growing on the account, you also get free money from your employer!
Retirement savers who use a tax-exempt account like a Roth 401(k) or Roth IRA deposit money they have already paid taxes on. That money grows tax-free and is taken out tax-free.
You might also consider putting money into a Health Savings Account. It does have some restrictions, so do your research before deciding if it’s right for you.
Consult your financial professional to determine how to utilize tax-advantaged accounts.
Set a social security strategy.
When preparing and thinking about retirement, Social Security is top of mind. But this isn’t something you should be relying on. The average monthly benefit is only $1,461, which is likely not enough to support all your income needs in retirement.
One strategy to consider is delaying your benefits. Most people take Social Security at age 62, but this permanently reduces your benefits. To avoid a reduced monthly benefit, wait to claim Social Security until your Full Retirement Age.
Jacobs Financial has resources on their website, jacobsfs.com to help you figure out your Full Retirement Age.
Create a retirement spending plan.
One of the biggest fears we hear from people is they are afraid of running out of money in retirement. A spending plan should be part of your comprehensive retirement plan and can help alleviate those fears.
Your spending plan will outline exactly how much money you can afford to spend in retirement. You may have heard of an old rule of thumb that states you should plan to live on 80% of your current spending after you leave work.
That’s not always accurate. In fact, many people underestimate how much they will spend - especially if they plan to travel or stay active.
At Jacobs Financial Services, we alleviate this concern by creating a guaranteed income plan, maximizing social security and informing our clients of where their money is and how it will last them.
To learn more visit jacobsfs.com
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