Retirement for Millennials (males and females born between 1981-1996) might seem a long way off.But those who were born at the start of the generation that followed Generation X, have already reached their middle years. What this means is, retirement for some millennials isn’t that far off. Relatively speaking, that is.
Says Registered Financial Consultant (RFC) Samuel Dixon, in a recent Newsmax article, the key to financial independence for millennials in retirement is to start saving as early as possible. “Starting the investment journey while young provides leverage,” Dixon states. It also offers the ability to compound your funds, which will bring you that much closer to financial independence. The key to retirement, is making investment in stocks that will grow in value over a five to 10 year period.
That said, what are some other things millennials who plan on retiring comfortably should keep in mind while they’re still young? According to a new report, lots of millennials are approaching forty or are already past that young middle-age milestone. What this translates into is that they are old enough to begin contemplating Social Security and what role, if any, it might play in their retirement.
Here is what the experts can tell millennials about Social Security as it exists right now in 2022, and beyond.
Disability Benefits are Included in Social Security
It’s common for most people to associate Social Security with retirement benefit only. But the real story is that Social Security goes beyond retirement itself. Says one professional financial advisor, Social Security includes not only benefits for the retired worker, but also for “their family for disability and death.”
In other words, if a worker becomes disabled and can’t work for longer than a year, they might qualify for benefits and so can their children, so long as the worker has been paying the equivalent of Social Security taxes for a decade and/or earned 40 credits in the system.
If the worker dies, their kids and their spouse can qualify for benefits too.
Divorced Individuals Might Qualify for Social Security
Social Security and divorce is often not well understood by most people. But experts state that a divorced person might qualify to collect Social Security retirements based on their ex-spouse’s earning’s history.
The key to the divorce/Social Security situation is said to be timing. In order to qualify the marriage has got to have lasted for 10 years or more. Survivor benefits and spousal benefits can result in thousands of tax advantaged dollars for those who can qualify to collect.
On top of this, the payments of the benefits to a divorced spouse does not reduce the Social Security benefits the other spouse will eventually collect.
If you are thinking about getting a divorce and are very close to the ten years of marriage mark, it might pay to wait since the financial difference during your retirement years could be significant.
Being Out of the Workforce Will Impact Social Security Benefits
If our have been out of the workforce for a short or even long time, you might consider returning to it. Social Security retirement benefits are said to be “based on a general average of 35 years of your highest, but not consecutive, years of earning.” If you have goose eggs in the mix of earnings, your average will naturally decline.
Any year that contains a zero in earnings will mean your Social Security benefits can be dramatically less for the entire span of your retirement years. But by reentering the workforce, you can “remedy this issue.”
Every year you work you will replace a year you earned nothing. That means your retirement benefits will go up accordingly.
It’s Important to Keep Saving for Retirement
For many if not most millennials, Social Security alone can not be relied upon to pay all the bills during their retirement years. Millennials (along with Gen Xers and Boomers) will need to cover the inevitable financial gaps that will occur after retirement. That’s why saving for retirement while you’re young is of paramount importance.
Financial experts strongly recommend utilizing your employer’s retirement plan should they have one available. If you don’t have one to access, you can open a Roth IRA and max out your contributions every year.
You should also save at least 10 percent of all your earnings. If you find saving ten percent is impossible in your younger years, then start with a lower percentage but then set up a reminder in your email or even your phone to increase it every six months.
Keep increasing it as time goes on and also utilize a retirement calculator to keep on the right retirement track.