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Investor Insights Blog|Congress Considers Raising the Retirement Age – How to Protect Yourself

News and Trends

Congress Considers Raising the Retirement Age – How to Protect Yourself

social security retirement age changing?

If recent discussion in Washington becomes reality, some of the retirement income you’re counting on could arrive later than you think. But regardless of whether that happens, it may be a good idea to start creating your own safety net to ensure you’re financially prepared in your retirement years.

Will the retirement age be raised?

In March, members of the U.S. House of Representatives unveiled a proposal to increase the Social Security retirement age. Currently, Social Security beneficiaries can begin to claim 100 percent of their benefits when they reach age 67.

Proponents of delaying retirement payouts cite two main reasons:

People are living longer – The average life expectancy of those born in 1960 is three years longer than those born in 1928. Since Social Security payments continue until the beneficiary’s death, the number of payments has increased over the years.

Reduced Social Security fund – As it stands now, the fund that covers Social Security benefits will be able to provide full benefits up until 2033. After that, just 77 percent of benefits will be payable.

Those who oppose the move say raising the retirement age would cut the overall amount of benefits seniors receive and disproportionately affect disadvantaged population groups.

Delayed retirement payouts could be bad news for the unprepared

On top of waiting longer for Social Security payments, some retirees have a lack of retirement savings to fall back on. As more and more Americans reach age 65, one in four don’t have anything saved for retirement.

Those who have managed to put money away for retirement aren’t without worry. About 53 percent of Americans in this age range have $250,000, and 40 percent of baby boomers worry that they will outlive their savings, according to a recent study.

The report also found that the median retiree’s retirement account balance is four times less than what’s recommended.

[Related: The Great Retirement Savings Plan Crisis]

What can be done to safeguard your retirement

The future of retirement support in the United States remains unknown: Will the retirement age rise? Will Social Security funding continue to support retiring Americans for years to come?

Instead of waiting to find out, there are steps you can take now to ensure you’re ready for whatever happens in retirement. Ultimately, you should talk to your financial professional to discuss what’s best for you, but here are some potential actions to take:

  1. Contribute to a plan at work – If you have a retirement plan at work, make sure you’re contributing – max out your contributions if you can. Some employers match your contributions up to a certain amount.
  2. Open and save in an IRA – Whether you have a work plan or not, you can still open an IRA outside of work. You must have earned income to qualify.
  3. Consider alternative investments – Diversifying into investments beyond stocks and bonds can help you spread your risk and enable you to invest in assets you may know or have a passion for, such as real estate, private equity, crypto, and more. Only qualified custodians such as Equity Trust will enable you to open an IRA that can invest in alternative assets.

The key to any plan is starting now. Starting to invest and save just five years earlier can have a significant impact in the long run, with compounding interest coming into play.

For example: Let’s say you contribute $5,000 to an IRA each year, beginning in 2024. Assuming you received a 5-percent annual return, in 2044, you would have nearly $181,000. On the other hand, if you waited five years until 2029 to contribute $5,000, you would have just over $119,000 in 2044.

To recap:

Contributing to a retirement account with investments

Assuming 5% annual return:
Contributing $5,000 per year for 15 years = $119,000
Contributing $5,000 per year for 20 years = $181,000
Difference: $62,000

After compounding interest, you could have $62,000 more in your account if you had started saving five years sooner.

In his recent blog post and video (below), Equity Trust Head of Education John Bowens dives deeper into why it’s important to take control of your financial future.

Video: The Retirement Planning Crisis and What We Can Do About It

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