How Social Security and 401(k)s factor into retirement planning
Retirement planning can prove to be a difficult process for many Americans, and many may find that they are depending on their 401(k)s a little more than in years past. If this is the case, you may be wondering whether these funds can sustain the lifestyle you want.
Financial adviser Roger Wohlner suggests in U.S. News & World Report that retirees need as much 70 percent to more than 100 percent of their pre-retirement income during retirement to maintain the same standard of living. However, that doesn't take into account travel expenses. Many active boomers are planning to go on new adventures when they stop working, and that may mean saving even more.
When organizing your finances, make sure to take into account how much you will receive from Social Security benefits. This year, the maximum benefit for a worker retiring at 66 is $2,366 per month.
Bill Hunot, a financial analyst, recently told NewsOK.com that those who can afford to wait to withdraw Social Security may want to delay tapping the fund until age 70. This could net you an extra 21 to 30 percent in benefits. However, retirees should consider adding an extra source of income if they are pressed for money.
"If you're depending upon Social Security for 75 percent or more of your income in retirement, you should plan to continue working as long as you can," he told the website.
Wohlner recommends that, if you have a 401(k) plan, carefully evaluate the fund so that you can understand it completely. Workers often forget about these valuable savings and then overestimate how much they will get when it comes time for withdrawal.
According to Wohlner, you should be contributing as much as you can to a 401(k) and monitor how much your employer is contributing to the account. A typical match is 50 cents, but it could go all the way up to 6 percent of your current income.
Social Security and 401(k) savings are important factors in building your nest egg, but there are other options - more and more retirees are choosing to work part-time or keep a portfolio of active investments. At Del Webb retirement communities such as Sun City Huntley in Huntley, Illinois, investment clubs regularly meet to talk about the latest developments of the markets and also share tips and advice that can help both novice and veteran traders alike.
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