Friday, November 28, 2014

Retirement planning on a low income

Real wages have fallen way below the cost of living. Telling low income people to save more is ridiculous in this economy. People don't have enough money to survive without going into debt, and how are they supposed to be somehow socking money away? 

Acting Social Security Commissioner Carolyn Colvin points out two realities she hopes women consider when planning for retirement. First, women make less money than men on average; when they stop working, their monthly Social Security checks are smaller, too.

Also, women tend to live longer than men. Colvin encourages women to estimate their own life expectancy with the SSA's calculator, and find out more about their benefits. Doing so, she says, often makes women realize they can outlive their savings — and that retirement benefits alone won't be enough.

The average amount of benefits in 2014 is a little over $17,000 per year for men and a little over $13,000 per year for women. One of the reasons that women are likely to have lower lifetime benefits is because they often have lower lifetime earnings than men. They are more likely than men to take time out of the workforce to care for family members. And of course we still have the issue of gender inequality [in wages].

“ Many women will say they don't have the ability to save, and what I say is that they cannot afford not to save." Notice that Ms. Colvin does not say where women would get the money to save. 

Most of us realize that Social Security was never intended to be the primary source of retirement. It was to be one of three legs on a stool, consisting of private pensions, savings and Social Security. And we know now that many of the private pensions have been reduced. Some women work in jobs where they really don't have a private pension, and of course many women — particularly low-income wage earners — find themselves just not saving as much as they should in order to ensure that they are able to have a decent income during retirement. 

This is true, so here are a few suggestions of help or ways to help women and other low income earners save for their retirement. 

One of the things we try to focus on is encouraging people , even at very young ages, to begin to save. Another way is to increase the amount of money paid into retirement plans and to take advantage of employer matching. So where there is an opportunity for the employer match, try to maximize that.

The most important thing is you need to spend below your means. Maybe it's giving up soda, or giving up cigarettes. ... And then each time they get a raise, don't take that raise. Put it into a 401(k). They haven't gotten used to spending it. It's there. And it will grow.

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