Save Social Security for Later, When You Need It Most

Save Social Security for Later, When You Need It Most

I think we’ve been looking at Social Security retirement benefits all wrong. In the long-running debate about when to take Social Security — as early as age 62 or as late as age 70 — the focus has been on timing your claim to get the most money, in total, out of the social safety net. This is a circular argument that will never be fully decided until the Social Security recipient in question dies. So let’s shift the focus from the question “How do we get the most out of Social Security?” to “How do we get Social Security when we need it most?” Simply put, you’re more likely to run out of money at the end of retirement than at the beginning. Behavioral science explains why we are all so prone to preferring money today over tomorrow. It’s called “hyperbolic discounting,” and behavioral economists plead that we meaningfully overvalue money now, unfairly discounting money later. But the risk of making less money in your early retirement years is dwarfed in comparison to the risks of longevity and inflation in the latter stages of retirement. And the probability you will outlive your money meaningfully decreases if you wait to take Social Security. Prove it! Let me show you through an example that, while hypothetical, is no doubt close to reality for many. We’ll consider three couples, the Earlies, the Fullers and the Laters. Each couple: Retires with $1 million in tax-deferred retirement savings. Has an identical 50 percent equity, 50 percent fixed-income portfolio. Has a pretax retirement income need of $90,000 per year. Will supplement their Social Security...
Before You Write That Check: Back to School Time Is 529 College Savings Plan Time

Before You Write That Check: Back to School Time Is 529 College Savings Plan Time

By: Joe Delaney It’s back to school season, an exciting time for parents and grandparents watching the next generation advance to the next step in their journey. Whether they are heading off to kindergarten, middle school, high school or about to meet their first dorm mate, it’s a good time to look at your own journey, too. Our financial journeys are influenced by our families, like it or not, and vice versa. That’s part of why we get so excited to watch the next generation come up. We understand that to be attached in some way to their success is our family privilege. We’re attached to their potential financial insecurity as they come up in the world, too. We know if they work hard and achieve their goals they will be more likely to be self-sufficient. Anything we can do to help is a good investment we’re more than willing to make for our children. Before you write that check, though, hold on. There are great benefits to supporting their future in a smart way you don’t want to miss out on. What is a 529 college savings plan? Simply put, a 529 plan is like a savings account specifically for college. It is not literally a savings account, however; it is an investment vehicle offered through your state that can be set up in a variety of ways to try to maximize returns in time for teens to head off to college. Who opens it? You do. 529 plans belong to the account holder, not the beneficiary, making 529s an ideal alternative to direct gifts to the college-bound...