There are many ingredients needed if you are to ensure a comfortable and satisfying life. Health is certainly one of them and finance is another. When it comes to the latter the importance of money management can never be overestimated. Anyone setting out on a career will hope to gradually earn more money as times go by and when they finally retire they should aim to have enough money to continue to finance that comfortable life even though there is no longer a monthly pay check coming in.
Along the way there may be a student loan to pay off, regular living expenses, perhaps the first automobile and then there is real estate. Mortgage finance taken over a long period helps to build up an asset because over anything but the short term there should be inflationary growth. The recent recession was one of those occasions when growth went into reverse and even those adept at money management found that they only had limited control over their affairs. While there may be competing demands for monthly income it makes sense to think about the future, even if retirement seems so far away. The earlier you start to save towards retirement the larger will be your fund when it finally arrives.
The Social Security System is intended to provide support for all though there are questions about whether there will be sufficient reserves to maintain the present levels of benefit because that will involve increasing taxation. More people are living longer putting extra pressure on the System.
People can claim from the age of 62 and too many US Citizens find themselves in need of that money as soon as it is available. Those who can delay until 70 will be effectively investing for those eight years and they reap rewards as a result. It is a complex system but it is safe to say that those who can wait before taking benefits have managed their money well. It seems that as few as 2% actually wait until they are 70: 40% take the money as soon as it is available.
Their logic may be that take the money because who knows how long they may live? Certainly that is a valid point and taking the money and investing elsewhere has some merit. However needing to take a smaller sum at 62 and then running out of funds is a significant danger. You can expect to receive between 25 and 30% less taking benefits at 62 rather than at full retirement age, 66 or 67 with 8% growth per year from then to 70 when you will receive the maximum.
Regular Saving: Paying off Debt
Throughout your working life, if you are putting money aside for retirement you ought to be able to reach the age of 62 and make your decision on drawing benefit or not for logical reasons not necessity. Saving is sometimes difficult and those caught out by the recession may still have a legacy to debt to clear before being able to contemplate saving. They should clear that debt as a matter of priority, especially if it is incurring a high level of interest, something like balances on credit or store cards. Taking out no credit check loans to clear those balances will definitely help. The interest rate applied to personal loans is much lower than that applied to even the best credit card.
A loan can make a positive contribution within your budget; if you have not got a budget then you should even stop what you are doing now and start to prepare one to put your ‘financial life’ down in ‘black and white’.
If you are still in the early stages of your career you will certainly have time to repair your finances with many years when you can put money aside for retirement. Make it a habit so that it is automatic and you effectively write off that money each month as not available to spend on anything else. As years go by you are likely to have family expenses, your mortgage and even your children’s education after finishing basic schooling. No one is suggesting that meeting competing demands for your money is easy; it is a balancing act but it is certainly unwise to forget retirement. You want to be one of those 2% ideally, taking your benefits at 70!