Welcome back to Powering Your Retirement Radio. I am your host Dan Leonard, and I am a PG&E Retirement Specialist. Social Security is one of the most popular and confusing programs around. In Season two of Powering Your Retirement Radio, I will talk about Social Security Fundamentals. In addition, we will cover claiming, spousal benefits, delayed retirement credits, and various other topics in the coming episode.
Today I will start with a startling study by Vanguard, in which the results are heartbreaking. The survey of 5 million households with investments at Vanguard illustrates how little the average investor has saved. It also shows how few assets they own. If someone that makes $50,000 a year with a 3% growth rate in their income will earn over $3.5 million in their career, the low savings rate is not because they do not make enough money.
The moral of the story is it doesn’t matter when you start saving, but you need to start. The earlier, the better. Social Security is so popular because people don’t save enough while they are working.
Then I focus on how Social Security was never designed to be an income-replace vehicle. After that, I will cover a few key terms you should know when you look at your Social Security record. Finally, I will leave you with some thoughts about claiming Social Security. There are a lot of unknowns when making your claiming decision.
How long will you live? How well will your other investments do? What do you want to do with your assets when you pass?
The way I look at it is this. You either want the largest possible payout from Social Security over your lifetime. Or you want to retire and reclaim your life sooner rather than later. There is no one correct answer.
I find decisions around retirement and retirement income are rarely based on facts. Most of the time, money decisions are based on emotions. I don’t want to work anymore! I can’t leave until I have 40 years on the job. And sadly, many more people retire early because they have to rather than they want to. Early retirement due to health concerns is more common than you might think.
Saving for retirement doesn’t have to be complicated. Pay yourself first. Once you have done that, you are on your way to prosperity. If you were 20 years old today and could save $371 a month, you would be a millionaire at age 65. That is 540 months, and the $371 seems easy when you are 40 to 50 years old. At 20, it is a little intimidating. It is a total investment of just over $200,000. Yet Vanguard says their average investor has just under $61,000. If you are listening to this, you can do better. The average person isn’t listening to a financial podcast, so keep up the excellent work!