Life is about the choices we create, the decisions we make and the coaching we receive. Ryan Lochte, the 12-time Olympic medalist, chose to be a swimmer; trained hard. but made some decisions that cost him dearly. Speedo, Polo Ralph Lauren and others have announced that they will cut ties with him.
Simone Biles, the brilliant gymnast who was too young to qualify for the 2012 Olympics, chose to continue her work and has dominated that sport since. Her decisions have produced 14 world championships and, most recently during the Olympics, she won four gold and one bronze medal. She also made a decision to serve as the U.S. flag bearer during the closing ceremony. With decision making like this, most would agree that her future is bright.
Retirement is also about the choices we create and the decisions we make. Surprisingly, only 27 percent of U.S. households have chosen to participate in an Individual Retirement Account (IRA) and an employer-sponsored retirement plan. Five percent of households have only an IRA. Consequently, choices at retirement seem to be limited to Social Security for millions of households. But when and what decisions should you make at that time?
These decisions are complicated and must be answered considering age, work history, current work status and life expectancy.
According to a recent report from The Spectrum Group, for couples approaching the age when social security benefits can first be accepted (which is 62), there are 8,000 permutations of the decision whether neither, one or both spouses should start taking benefits immediately or should wait for a more opportunistic time.
Social security was created to be somewhat of a financial safety net for Americans. Unfortunately, it has become controversial in recent years because of concerns over its solvency and complicated nature as laws and regulations have made it difficult to decide how best to start receiving benefits.
These decisions are complicated for individuals. This is why coaching from a trained advisor is necessary regardless of age. Advisors should coach their clients to understand what role Social Security will play in your retirement finances; the impact of deciding to retire early; or even what your spouse could be doing regarding working or retirement. We do. Factors include work plans, marital status, health and life expectancy.
Recent surveys on this decision making reveal that while 14 percent of individuals plan to take benefits at the age of 62, 32 percent plan to start when they reach the age of 70 or more. As a general rule, the longer an individual can wait to take benefits, the more income they will receive over the longer term. For those deciding to start early, that decision can reduce benefits by five-ninths of 1 percent for each month between the age of 62 and the age of full retirement.
Once those decisions are made, one can review their plans for spending in retirement. Almost 40 percent of households expect Social Security to provide between 10 percent and 25 percent of their monthly retirement income. Twenty-eight percent expect it to provide 25 percent to 49 percent. So the question is, where do you get the balance of your income for life from?
So it boils down to choices, decisions and coaching. Simone Biles made good choices early, makes great decisions today and has a great coach in Martha Karolyi, the national team coordinator for U.S. women's gymnastics.
What choices are you making regarding saving and putting money away for retirement? What decisions are you making? Who is your coach?
Andy Muldoon is a senior vice president for The Trust Company in Chattanooga.