Retirement Income Planning

According to the Social Security Administration, before Social Security; the elderly, orphans and disabled people often depended on charity and lived in almshouses or workhouses that were funded by taxes.

 Over time, trade association called guilds and fraternal organizations also helped provide for the needs of the elderly, sick and disabled. Eventually defined benefit pensions and social insurance programs were developed by companies and governments to provide for retirement.

In 1935, The Social Security Act was passed as part of the Franklin Roosevelt’s New Deal. Although the Social Security system was not the first government social insurance program, it is a model of success.

If you were born before 1937, you reached full retirement age at age 65. Full retirement age has been adjusted to age 67 for people born 1960 or later. The chart below shows how benefits for spouses and retirees are impacted by early retirement.

Full Retirement and Age 62 Benefit By Year of Birth

Today people can live twenty to thirty years or more in retirement. Social Security is strained by a relatively smaller workforce and growing life expectancy. Here is a link to the Social Security Website where you can set up an account to check on your earnings record and get an idea of how much your Social Security Benefit will be during retirement.

The number of companies offering defined benefit pension plans has steadily declined in recent years. Employers are increasingly shifting the responsibility for retirement income planning to the employees.

IRAs and 401k are very good ways to put money away on a tax deferred basis for retirement. Although Individual Retirement Accounts (IRA), and 401K retirement savings plans have grown in popularity, most people have little or no retirement savings. Most financial experts agree that you should start saving for retirement as soon as you begin working.

As popular as IRAs and 401ks have become, many retirees find they are not well suited for distributing income and insuring that you do not run out of income during retirement. Fixed annuities offer retirees a way to insure their retirement funds because they do not lose money due to market fluctuations, they also provide for income distribution options that can guarantee income for life.