Social security and pensions are important parts of a retirement portfolio. Here we break down the basics.
- Social Security and your pension or retirement plan will only get you so far in reaching your retirement dreams. That's where your personal savings comes in. The first step is determining what your regular retirement income will be excluding your income from your own savings.
Request a personal earnings and benefit estimate statement from the Social Security Administration to find out what you can expect each month from Social Security. Remember that Social Security benefits rise with inflation. If your Social Security benefits seem too skimpy, it's worthwhile to check in. They might not have the most updated information, or there's an error.
Projecting what your retirement or pension plan will be requires more legwork. First, know the reasons behind your expected future payments. Defined benefit plans such as a pension often are linked to Social Security payments. And consequently, a fatter Social Security benefit could mean a slimmer pension check.
Second, be persistent about seeking information. Some plans will update you regularly about your benefits as you near retirement. Others aren't as accommodating. Finally, don't overlook those pensions owed to you from a brief employment stint or from companies that have merged out of existence or gone belly up.
Compare your expected pension and Social Security income with the amount of income you think you'll need to determine whether or not your current investments will cover the difference between the two figures. Remember that you probably won't need the entire lump sum of your retirement costs the minute you retire. More than likely, your investments will continue to grow during your retirement. It's always better to use conservative projections and then be surprised on the upside.
People of full retirement age can receive their full Social Security benefits no matter what their earnings are. Even if you begin receiving Social Security before reaching full retirement age, you can earn up to a certain amount and still receive benefits. Don't forget to reevaluate and review your financial plan periodically. Stay financially fit, friends.