Retirement FAQs
Retirement should be a time of relaxation, not number-crunching. Unfortunately, some people wait until old age to worry about making ends meet after their working years---and this can lead to confusion and frustration. Regardless of your age, start planning your retirement right away. The best way to ensure a happy retirement is to understand the way you use money and to know what your goals will be later in life.
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How Much Money Will I Need?
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This depends on your lifestyle and your goals for retirement. CNN Money recommends that most people should plan on living with 70 percent to 100 percent of their former income during retirement. Some people don't make these adjustments to their retired life and end up taking on a part-time job to supplement their income. Be honest about your current spending habits; calculate how much Social Security, pensions and annuities will provide for you; and then make necessary adjustments based on your lifestyle. If you're still not sure, use the retirement calculator (see Resources) to determine how much you might need.
What's the Best Way to Save for Retirement?
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You've probably heard it before, but the best way to save is to start early. If this isn't an option for you, don't worry --- setting aside money later in life is better than saving none at all. If you're still working, consider a 401(k). If your employer will match your contributions to a 401(k), this is an excellent savings option because you're essentially receiving free money over the years. Stocks are also popular for their growth potential, but they will be most valuable if you invest 20 years before your retirement or earlier. If you're near retirement, bonds or a personal savings account may be a better option.
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How Does the Social Security Retirement System Work?
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Over your working years, you've probably paid into the Social Security system and earned a certain number of credits (up to four per year). To qualify for retirement benefits, you'll need to have earned at least 40 credits, which is usually equivalent to 10 years of work. When you're close to retirement age, you can apply for Social Security benefits online (see "Resources") or at your local Social Security office.
What Is My Retirement Age?
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At 62, you become eligible to receive Social Security benefits. However, your monthly benefits will be higher if you wait until full retirement age or later. If you were born in or before 1942, your retirement age is 65; if you were born between 1943 and 1959, your retirement age is 66; and if you were born in 1960 or later, your full retirement age is 67. If you plan to wait to collect benefits, make sure to sign up for Medicare before turning 65; otherwise you may receive limited benefits.
How Much Will Social Security Provide?
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Your Social Security retirement monthly benefit is based on your average salary over your years of work under the Social Security system. Your highest-paid 35 years of work will be averaged; if you haven't worked full-time for 35 years, your part-time work or years of unemployment will be factored into the total 35 years. Your benefit amount will also depend on when you started receiving benefits. If you start as early as possible (62), your benefit will be lower than if you started later. Keep in mind that if you and your spouse both worked under the Social Security system, you'll both receive a benefit. As of August 2010, the average monthly retirement benefit paid to retirees is $1,170.
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References
Resources
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