WASHINGTON (6/25/13)--Workers trying to navigate the murky waters of Social Security, Medicare and Medicaid have a new tool, thanks to a collaboration among the Department of Labor (DOL), the Social Security Administration (SSA), and the Centers for Medicare and Medicaid Services (U.S. Department of Labor
The online toolkit helps workers understand the important decisions they need to make before retirement and includes a timeline for retirement planning--what to do starting at age 50 through age 70 1/2. You'll find general guidance about savings plans, Medicare, and prescription drug coverage, as well as Social Security what-if's. The toolkit includes links to a variety of publications and interactive tools, many available in Spanish, on topics ranging from pensions to elder rights and protections.
The online toolkit comes at a good time. Average Americans are no better prepared for retirement than they were in 2009, according to a study released in early June by consulting firm McKinsey & Company (MarketWatch
June 6). On a scale of one to 100, where 100 indicates you could sustain your preretirement standard of living, the national average score stands at 64. That means you could afford to retire only if you cut back on essentials like food, housing, and health care.
Data from the SSA confirm we're off track. More than half (53%) of married couples and three-fourths (74%) of unmarried retirees receive at least half of their income from Social Security. Worse, nearly a quarter of married couples and almost half of unmarried retirees rely on Social Security payments for at least 90% of their income.
Before you run the numbers for your retirement plan:
Create a retirement budget. Identify expenses you may incur in retirement, including travel, hobbies, mortgage, property taxes, gifts, education expenses for you or family members, and health care, to name a few. List all sources of income, including a traditional pension if you're lucky enough to have one.
Plan for a shortfall. Social Security was never intended to cover 100% of retirement needs, so personal savings will need to make up the difference. As a general rule, you need at least $15 to $20 in savings to cover each dollar of the annual shortfall between your income and your expenses, according to SSA. For example, if your projected retirement expenses exceed Social Security and pensions by $20,000 a year, you might need a nest egg of $300,000 to $400,000 to bridge the gap.
Use several different online retirement calculators. Each has its own input requirements and assumptions. Check out the Ballpark E$timate, which is also available through the App Store, and AARP's retirement calculator.
The retirement toolkit is available on the DOL website at dol.gov
; type "retirement toolkit" in the search bar.
For more information, read "Who Goes First? For Couples, Retirement Is All About Timing" in the Home & Family Finance Resource Center.