A Mistake You Can’t Afford to Make

Many of us have spent our lives pursuing a dream. For some, defining what exactly that dream looks like in retirement can be complex. The professional team at Ambassador Advisors can help make plans that go beyond living out your golden years on income from retirement investments and Social Security benefit payments.

Insufficient retirement income from investments and Social Security is a cold reality for many today. It is not just low-income families who have problems setting reliable and realistic retirement goals. Many middle-class Americans who have bought homes and raised families while sending some of their children to college are setting themselves up for difficulty during retirement by making one crucial mistake: they plan on working part-time during retirement to supplement their investment and their Social Security income. This one planning assumption could set them up for a world of trouble.

It is essential to mention some Social Security penalties that you may face, if you begin to collect benefits before your age of full retirement eligibility (currently 67 for those born after 1960). You can start receiving benefits at the age of 62, but at a 30 percent reduced rate, which is a permanent reduction. Additionally, if you decide to do this and work, your benefits can be withheld, if your income exceeds $17,640 per year.

Retiring before full retirement is the only time that employment will pose an adverse effect on your Social Security benefits. If you wait until your full retirement age of 67, you can work as much as you like and still collect full Social Security benefits.

Many Americans—one in five—will live to the age of 80. Some hold the view that working until the age of 70 is common, and that they will be able to work for at least half of the years they spend in retirement. Surprisingly, more than half of workers expect to work past age 65 or do not plan to retire.*

So what’s the big deal? How is a retirement plan that includes working a bad idea? The answer is often unforeseen expenses.

Here are just a few variables or unforeseen expenses that will make it difficult to rely on work as a source of income during retirement.

Declining health or the need for long-term care is an important variable to consider. Cognitive decline, dementia, and Alzheimer’s Disease are life-altering. These terrible diseases are enormously challenging to manage and will directly affect your ability to work. The families of those with these long-term diseases manage the decline and bear a financial burden that can devastate any retirement plan.

Reduction in or elimination of Social Security benefits is a real possibility that could throw many off of their plan. Although not working will not be the cause of this financial crisis, if working is a replacement for a retirement investment plan, this decline in benefit amounts can be devastating.

An increase in a family’s financial needs outside of healthcare is always a risk. Relying on a paycheck, if you need to manage an unexpected capital expense, or even paying for something as simple as clothing for your children or an increase in property taxes will put stress on your employment income.

Any economic downturn that negatively effects the company or industry in which you plan on working could eliminate your job and leave you without a source of income from work.

Any way you look at it, the odds are stacked against you, unless you have a vibrant financial investment plan. Such a plan needs to not only can maintain your current standard of living, but also be built to handle the unexpected.

It’s not too late! Ambassador Advisors recommends that you consult a professional that will help you sort out your retirement needs. Call us, and let our professionals help you secure your future.

Sources
* https://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2018/11/when-do-americans-plan-to-retire
https://www.aarp.org/retirement/social-security/questions-answers/will-social-security-retirement-benefit-increase/
https://www.aarp.org/retirement/social-security/questions-answers/working-while-collecting-social-security/
https://www.fool.com/retirement/2019/06/02/55-of-americans-are-making-this-retirement-plannin.aspx
https://transamericacenter.org/docs/default-source/retirement-survey-of-workers/tcrs2019_sr_what_is_retirement_by_generation.pdf
https://www.thinkadvisor.com/2019/05/09/10-barriers-to-retirement-preparedness-415-331677/?slreturn=20190509132429
https://www.usatoday.com/story/money/2019/05/30/social-security-not-going-go-bel

Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc.(APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purposes of avoiding penalties that may be imposed by law. Each tax payer should seek tax, legal or accounting advice from a tax professional based on his/her individual circumstances.