The longer you can wait to retire, the larger your monthly social security benefit will be in the long term.
K-State expert shares tips for planning your financial future
Pandemic or not, Kiss urges Americans to make a plan to save, pay down debt
June 30, 2020
MANHATTAN, Kan. – Even during a pandemic, Elizabeth Kiss thinks it’s a good idea to think about your financial future.
“People who are close to retirement age right now, based on social security calculations, the longer they can wait to retire, the larger their monthly benefit will be in the long run,” said Kiss, a family resource management specialist and associate professor in Kansas State University’s College of Health and Human Sciences.
Listen to an interview with Elizabeth Kiss on the weekly program, Sound Living with Jeff Wichman
The Washington, D.C.-based Employee Benefit Research Institute recently released the findings of its 2020 retirement confidence survey, indicating important differences between workers’ expectations of retirement and what is actually happening.
For one, Kiss said, the median age that active workers say they expect to retire is age 65. Yet, the median age of current retirees in the United States today retired is 62 – indicating that many people may have fewer years to save for retirement than they might think.
“The Employee Benefit Research Institute reported that 35% of workers said social security would be a major source of income during retirement,” Kiss said. “However, 64% of retirees reported that social security was a major source of their income.”
Further, Kiss noted that 51% of current workers expect workplace retirement savings plans will be a major source of income in retirement, but of those already retired, only 21% found that to be the case.
“There are differences between what we imagine when we’re working and what we actually experience when we retire,” Kiss said.
Nonetheless, there are some important steps that people of all ages can take to make sure retirement meets their expectations.
For starters, Kiss said, “look at what you’re already putting aside for retirement, either through your employer, or what you can do on your own. If you have an employer-provided retirement fund, put in enough of your money to get the maximum match. For example, if you put in 4% and they match 4%, then do that. If they’ll match more, put in more. Do what you can to get the maximum employer match.”
Then, she says, look at other spending and lifestyle choices.
“Think about whether there are ways to cut your expenses, medium- and long-term,” Kiss said. “If you are currently working less (due to the pandemic) or not working at all, you’re already looking at your expenses carefully. So coming out of the pandemic, think about whether you can continue that, or if there are changes you’ve been forced into that you’re okay with continuing.”
“After you’ve identified some of those spending areas, make plans to put that money into your retirement account.”
Kiss said sound financial management includes saving money and paying down debt at the top of each month’s budget – rather than doing it as a convenience.
“When you make your budget, your first item is savings. Your second item is debt repayment, and then it’s all your living expenses,” she said. “If you continually spend more than your income, then you’re not saving and you’re only making minimal debt repayment. So that becomes an issue over time.”
In 1983, the U.S. Congress raised the age at which many Americans can receive full social security benefits to 67 (Medicare benefits are available at age 65). The Social Security Administration publishes a chart online to find your full retirement age by birth year.
“Beginning at age 62, your monthly benefit is reduced for each month you retire before your full retirement age, and for every month after your full retirement age – up to age 70 – your benefit is increased,” Kiss said. “In other words, if you can wait to retire, your monthly benefit does increase up to a maximum amount. For those people who are in their 40s to early 50s, if they can just get it in their head to work as close to full retirement age as possible, then that’s probably a good mindset to have.”
However, she adds, everyone’s situation is unique.
“There is no one-size-fits-all to money management,” Kiss said. “You can generalize to some extent but what works for you might not work for your neighbor, your sister, your brother, whoever… You have to think about what is going to work in your situation and always look for objective information and put some thought into your decisions.”
Kiss and her colleagues in the College of Health and Human Sciences and K-State Research and Extension meet regularly to discuss emerging financial issues. To learn more about managing your money, visit their website on family finances.