Senior woman with dog
, , , , , , , ,

Is Social Security Running Out?

Social Security represents an important source of income for millions of Americans who paid into the system during their working years. Despite contributing thousands of dollars to the program on average, many people have concerns about the future of the Social Security Administration. Estimates from the SSA itself suggest the trust funds used for benefits payments could be depleted as early as 2033 unless changes are made to the program’s funding structure.

Key Takeaways

  • Social Security is a program that uses taxes to fund a benefits program for individuals who contributed to the program during their working years.
  • Two trust funds hold the funds raised through these taxes, but they are estimated to be depleted by around 2033.
  • The government has acted decisively in the past to make the necessary changes to keep Social Security afloat.
  • Social Security should be just one part of your overall retirement plan, alongside investments, savings and lifestyle changes.

How Does Social Security Work?

Social Security is a taxpayer-funded program designed to supplement income for retired individuals and certain other groups. A great number of American workers—184 million people, according to the Social Security Administration—pay taxes into the Social Security system which funds benefits for current Social Security recipients. When those workers retire or otherwise qualify for Social Security themselves, they will receive benefits equal to a percentage of the amount they contributed in taxes.

While many people think of Social Security as a benefit entirely for retired individuals, that’s not the only group receiving regular benefits from the SSA. Other recipients of Social Security benefits include:

  • People with qualifying disabilities
  • Spouses and children of workers who died
  • Dependent parents of workers who died
  • Spouses and children of Social Security recipients

Is Social Security Running out of Money?

To understand the current state of Social Security, it’s essential first to comprehend how your Social Security taxes are allocated to current beneficiaries.

The tax money collected for Social Security is distributed into one of two trust funds—the Old-Age and Survivors Insurance (OASI) trust fund and the Disability Insurance (DI) trust fund. The funds are then used to pay benefits to their corresponding recipients, with any leftover money invested by the government.

According to estimates released by the SSA, these trust funds are shrinking and could reasonably be expected to be depleted entirely within approximately 15 years. If these trust funds are depleted, the annual income from taxes would only be sufficient to cover 79 percent of the total benefits needed.

If nothing is done to prevent this from happening, Social Security beneficiaries may see a decrease in the percentage of their contributions returned as benefits drop. Benefits would be lower, but they would not disappear entirely. 

It’s also important to note that the trust funds have come close to depletion in the past, but the government has successfully intervened to prevent it. In 1982, Congress was forced to enact emergency legislation to prevent the collapse of the OASI fund. The crisis was averted, and better funding mechanisms were created for the fund to reduce the likelihood of a future crash.

While it is still unclear if or how the federal government might intervene on Social Security’s behalf, even in the worst-case scenario, recipients would still receive a return of some percentage of their investment into the program.

How to Financially Plan Around Social Security?

Regardless of whether or not the Social Security trust fund remains financially solvent, it’s important to have a healthy investment portfolio to prepare you for retirement. Many financial planners recommend aiming for 80 percent of your pre-retirement income from a combination of investments, savings, and Social Security benefits. For the average earner, Social Security benefits are typically between 40 and 50 percent of pre-retirement income.

Many types of investments can help you navigate your retirement more comfortably.

Set up a retirement fund

A retirement fund is a long-term investment account designed to provide certain tax benefits if the money is left untouched for a specified period. They can be created by people of any age, and are a very common tool for those wishing to invest in their retirement.

Max out 401K employer Contributions

Many companies offer matching funds for employee contributions to a 401K retirement account. These accounts function in a similar way to retirement funds, but employers will match employees’ investments up to a certain amount from each paycheck. These matching funds are paid in addition to your paycheck, and it’s a good idea to invest at least enough to reach your employer’s maximum contribution.

Open an IRA

An individual retirement account, or IRA, is another type of account set up to maximize tax benefits for long-term investments. Taxes aren’t paid on funds invested in an IRA at the time they’re placed in the account, making them an appealing target for investment.

Leverage Health Savings Accounts (HSAs)

Medical expenses can be significant at any age, and as you near retirement age, you might find yourself needing to increase your spending on healthcare. An HSA allows for tax-free contributions and growth while the funds are in your account, and those funds can be spent tax-free if they are used for qualifying healthcare products and services.

Lower Housing and Living Expenses, If Possible

Many people find themselves downsizing from much larger homes as they near retirement age. As children grow up and move out, a smaller, lower-upkeep residence becomes appealing to many people. Reducing your footprint, and thereby your costs, is a great way to supplement your savings and investments as you enter retirement. Lower overhead means the percentage of pre-retirement income necessary to sustain your lifestyle stays low as well.

Bottom Line

While there do appear to be some changes on the horizon for Social Security, there’s no need to panic about an unexpected loss of benefits for future recipients. Even without government action, the program will still be able to operate at around 80 percent capacity. With appropriate government intervention, the program can remain totally solvent and continue supporting retired workers, disabled individuals and many other people and families for years to come.

No matter what happens to the SSA, it’s smart to maintain a balanced set of investments as you plan your retirement. Social Security is a crucial component of the retirement puzzle for many individuals, but it should never be viewed as the sole source of income for retirees. 

Horizons Wealth Management can help you with your financial future, even if Social Security is a bit tumultuous. Schedule a call today and start planning for your retirement.

Social Security FAQ

H3: What happens if Social Security runs out of money?

If the Social Security trust funds run out of money, benefits will likely be reduced to match the level of funds coming into the program from taxes. The SSA estimates it could operate Social Security at around 80 percent capacity if this were to happen.

At what age do you get 100% of your Social Security?

You will receive the full amount of your Social Security benefits if you begin drawing them after you reach the full retirement age. This age has increased slightly over time, but is currently 67 years old.

 Do RMDs Affect Social Security?

Required minimum distributions don’t directly impact your Social Security benefits, but they can affect your tax liability. The amount of taxes you must pay on your benefits is determined by your income bracket, and RMDs are treated as income for tax purposes. If your RMD increases your tax bracket, you might have to pay more taxes on your SSA benefits.

How do I know if I’m ready to retire?

Retirement looks different for everyone, and the age at which you’re able to stop working is largely dependent on your pre-retirement income, your overhead, savings and investments. Many planners recommend creating a strategy to access around 80 percent of your pre-retirement income, but this number can be much lower or higher for certain individuals.

/by
50th birthday
, ,

How to Build Wealth in Your 50’s

Key Takeaways

  • Focus on eliminating high-interest debt to free up resources for savings and investments, setting a solid foundation for retirement.
  • Trim excess expenses to increase funds available for investing in your retirement fund, laying the groundwork for financial security.
  • Maximize “catch-up” contributions to tax-advantaged accounts, enhancing your nest egg with the help of professional financial advice.

Navigating your 50s can be a critical period for financial planning, standing at the crossroads between active employment and impending retirement. This decade is an opportune time to assess, adjust, and accelerate wealth-building strategies to ensure a secure and comfortable future. In this guide, we will explore essential tactics for enhancing financial health in your 50s—from maximizing retirement savings with strategic contributions to diversifying income streams beyond traditional means.

Reduce Debt

In your 50s, paying down debt is crucial for building wealth and securing a financially stable future. This period marks a strategic shift from accumulating to eliminating debts, recognizing that each dollar paid off not only increases net worth but also frees up more resources for investments and savings. Reducing debt not only bolsters financial health but also alleviates the stress tied to high liabilities, paving the way for a smoother transition into retirement.

A strategic approach to managing debt starts by targeting high-interest obligations first—such as credit card balances or personal loans—which can lead to substantial interest savings over time. Additionally, consolidating debts into a lower-interest option can simplify repayment and help reduce overall costs more effectively.

A targeted debt strategy focuses on eliminating high-interest debts first—like credit cards and personal loans—to minimize long-term interest payments. Consolidating multiple debts into a lower-interest loan can also simplify your finances and lower your overall repayment burden.

Expenses Review

At this stage, fine-tuning your budget becomes crucial, as identifying and trimming unnecessary spending can free up significant funds for saving and investing. It’s time to critically evaluate your lifestyle habits—consider downsizing services you no longer need, shopping smarter by seeking discounts, or even switching to more cost-effective brands or providers.

Embracing frugality isn’t about sacrificing joy but rather choosing financial health over temporary pleasures. Many people use budgeting tools to gain insight into monthly expenditures, making it easier to spot areas ripe for reduction. For example, consolidating trips to save on gas, opting for home-cooked meals over eating out frequently, and canceling underused memberships can all contribute toward enhancing your financial situation. Investing the money saved from these strategies not only bolsters your retirement fund but also brings you closer to achieving lasting financial security. In essence, conscientious spending in your 50s lays down a solid foundation for wealth that supports both current needs and future aspirations.

Maximize Retirement Contributions

Maximizing retirement contributions in your 50s is crucial for building wealth as you edge closer to retirement. As you get closer to retirement, you enter into a period that allows for “catch-up” contributions in tax-advantaged accounts, offering a chance to increase your savings and benefit from compounding interest significantly. By prioritizing these additional deposits, you can enhance the growth of your retirement fund substantially.

Adjusting your budget to boost these contributions is essential. Whether it’s through an employer-sponsored 401(k) or an individual IRA, increasing your savings now can make a profound difference in the size of your nest egg. Consulting with a financial advisor could also optimize this strategy, ensuring that you’re making the most out of every opportunity to secure a financially comfortable future.

Carefully Manage Risk

Managing risk becomes increasingly important as you navigate through your 50s. This phase requires a strategic reassessment of your investment portfolio to ensure it aligns with your current risk tolerance and retirement goals. As retirement nears, the focus should shift toward preserving capital while still achieving reasonable growth. Diversifying investments across different asset classes—such as stocks, bonds, real estate, and possibly precious metals—can mitigate risk and reduce volatility in your portfolio.

In addition to diversification, consider adjusting the allocation of assets in your investment mix. While equities offer higher growth potential over time, they come with increased volatility. Gradually increasing the proportion of fixed-income securities can provide more stability as you approach retirement age. Regularly reviewing and rebalancing your portfolio ensures that it remains consistent with your evolving risk appetite and financial objectives, which is a critical step toward safeguarding wealth during this pivotal decade.

Establish a Retirement Plan

Creating a comprehensive retirement plan in your 50s is an essential step toward securing financial stability and building wealth as you approach the golden years. This process begins with a clear assessment of your current financial situation, including savings, investments, debts, and expected income streams in retirement. Understanding these elements allows you to set realistic goals for retirement living expenses based on your desired lifestyle. It’s also crucial at this stage to account for unforeseen costs such as healthcare, which can significantly impact spending needs.
To effectively make a retirement plan:

  • Evaluate Your Financial Status: Start by listing all sources of income (pensions, savings accounts, investment portfolios) and anticipated expenses.
  • Set Clear Retirement Goals: Define your retirement age and the lifestyle you wish to maintain—traveling, hobbies, and relocation plans should be considered here.
  • Calculate Expected Retirement Income Needs: Estimate how much money will be needed annually during retirement, considering inflation rates over time.
  • Develop A Savings Strategy: Determine how much must be saved from now until retirement to meet future income needs. This may involve maximizing contributions to tax-advantaged accounts like IRAs or 401(k)s.

A critical part of creating this plan involves regularly reviewing it—preferably annually—to adjust for any changes in personal circumstances or financial markets that could affect long-term objectives. Engaging with a professional financial advisor can provide valuable insights into complex areas such as tax planning and investment management tailored specifically towards achieving your individualized goals efficiently while navigating through the complexities of preparing for a comfortable retirement life.
Horizons Wealth Management can help you navigate your financial questions, no matter your age. Get in touch today to learn more about our wealth management, financial planning, retirement planning and managed portfolio services.

/by
Retirement Ahead
, , ,

Are you Ready to Retire?

Key Takeaways

  • Achieving financial stability for retirement requires a thorough review of savings, investments, and debt management to ensure you can sustain your desired lifestyle without financial stress.
  • Regular health assessments and planning for future medical needs are crucial in ensuring that health issues do not hinder the quality of life during retirement.
  • Clearly defining personal interests, hobbies, and travel plans helps create a fulfilling retirement experience by allowing you to enjoy activities you love while staying within budget constraints.

Retirement is a significant milestone, marking the transition from years of dedicated work to enjoying a more leisurely and fulfilling chapter of life. But how do you know when you’re truly ready to take this step? Deciding on retirement isn’t just about reaching a certain age or hitting financial targets; it’s also about emotional readiness, lifestyle planning, and personal goals.

This guide will help you explore key indicators such as financial stability, health considerations, personal aspirations, and social connections that signal your readiness for retirement. By examining these factors comprehensively, you’ll be better equipped to determine if now is the right time for you to embrace this new phase with confidence and excitement.

Financial Stability

Achieving financial stability is the most critical factor in determining your readiness for retirement. This involves a thorough evaluation of various financial aspects to ensure you can maintain your desired lifestyle without the worry of running out of funds.

  • Savings and Investments: Review all your savings accounts, including 401(k)s, IRAs, Roth IRAs, and any other investment portfolios. Ensure these accounts are well-diversified to mitigate risks while maximizing returns. It’s also essential to calculate how long these funds will last based on current withdrawal rates.
  • Retirement Accounts: Understand the rules governing withdrawals from different types of retirement accounts, such as required minimum distributions (RMDs) for traditional IRAs and 401(k)s starting at age 73.
  • Emergency Fund: Maintain an emergency fund that covers three to six months’ worth of living expenses to cushion against unexpected costs or market downturns.
  • Pension Plans: If you have access to pension plans through previous employers or government jobs, get detailed information about payout options—whether lump sum or monthly payments—and how they fit into your overall income strategy.
  • Social Security Benefits: Calculate when you should start claiming Social Security benefits since this decision significantly impacts your monthly benefit amount over time.
  • Inflation Impact: Consider inflation’s impact on purchasing power; plan accordingly by investing in assets that are likely to outperform inflation rates over time.

It’s best to consider consulting a financial advisor to evaluate your retirement readiness from a financial perspective. Luckily, Horizons Wealth Management can help answer the right questions. 

Debt Management

Effectively managing debt is crucial for a stress-free retirement. Here are key considerations to help you assess and manage your debt before retiring:

  1. Current Debt Inventory: List all existing debts, including mortgages, car loans, credit card balances, personal loans, and student loans.
  2. Mortgage Status: Evaluate how many years remain on your mortgage and consider paying it off early or refinancing for better terms.
  3. Credit Card Balances: Aim to pay off high-interest credit card debt quickly to avoid costly interest charges that could burden limited retirement income.
  4. Car Loans: Pay off vehicle-related debts ahead of time, reducing monthly expenses.
  5. Consolidation Options: Explore consolidating multiple high-interest rate accounts under one lower-rate agreement, reducing overall payment obligations and freeing up cash flow opportunities elsewhere within budget constraints imposed otherwise.

By systematically addressing each aspect—mortgage status, credit cards, car loans, consolidation options, budget adjustments, and seeking professional advice—you’ll enter retirement free from financial burdens. This will allow you to fully enjoy your newfound freedoms and pursue your passions with peace of mind and contentment.

Health Status

Assessing your health status is a critical factor in determining your readiness for retirement. Good health not only impacts your quality of life but also influences financial planning and lifestyle choices during retirement. Here are key considerations to help you evaluate and plan around your health as you approach this significant milestone:

  1. Current Health Assessment: Begin with a comprehensive evaluation of your current physical and mental health. Regular check-ups, screenings, and consultations with healthcare providers can provide insights into any existing conditions that might affect your retirement plans.
  2. Chronic Conditions: If managing chronic illnesses like diabetes, hypertension, or arthritis, ensure they’re under control through consistent medical treatment and monitoring adherence to prescribed regimens.
  3. Future Healthcare Needs: Consider potential future medical needs and anticipate the costs associated with ongoing treatments, medications, therapies, interventions, surgeries, and possible rehabilitation. Be prepared for unforeseen emergencies that could arise unexpectedly and significantly impact your overall well-being. Each case should be individually assessed to tailor a plan specific to your unique personal context, ensuring you are well-prepared both now and moving forward.
  4. Long-Term Care Planning: Explore options for extended-care scenarios that may require assistance with daily living activities. Consider home-based services, assisted living facilities, and nursing homes. Evaluate the coverage provided by insurance policies specifically designed for such eventualities, including Medicaid, Medicare, private insurers, supplemental plans, and hybrid plans that combine various types of protections. This approach helps maximize benefits while minimizing gaps in coverage and reducing exposure to risks.

By addressing these areas comprehensively, you can ensure a well-prepared transition into retirement with minimized risks and maximized benefits.

Lifestyle Goals

When considering if you’re ready to retire, defining and planning for your lifestyle goals is crucial. Retirement offers the opportunity to pursue passions, hobbies, and activities that you may not have had time for during your working years. Here are key aspects to consider when evaluating your lifestyle goals:

  1. Personal Interests and Hobbies: Reflect on what activities bring you joy and fulfillment. Whether it’s traveling, gardening, painting, golfing, or volunteering—ensure these interests can be sustained financially and logistically in retirement.
  2. Travel Plans: If exploring new places ranks high among your priorities, map out the destinations you envision visiting. Estimate the costs involved for the duration of stays, transportation, accommodation, food, and other related expenses. Plan accordingly to fit within your budget constraints comfortably without overextending resources unnecessarily or unwisely.

Thoroughly defining and planning for your lifestyle goals is essential when determining if you’re ready to retire. By identifying personal interests and hobbies that bring you joy and carefully mapping out travel plans while considering financial sustainability, you can create a fulfilling retirement experience. Proper preparation ensures that your post-work years are spent enjoying the activities you love without the stress of overextending resources.

Bottom Line

In conclusion, preparing for retirement involves more than just financial planning; it encompasses evaluating your health status, managing debt effectively, and defining clear lifestyle goals. By thoroughly assessing each of these areas—ensuring financial stability through diverse savings and investments, maintaining good health with proactive medical care, addressing outstanding debts to reduce stressors, and planning activities that bring joy—you can confidently transition into this new chapter of life. A comprehensive approach allows you to embrace retirement fully equipped to enjoy newfound freedoms while pursuing passions with peace of mind and contentment. At Horizons Wealth Management, we can help you reach your financial goals through our various services, such as wealth management and portfolio management. Let us help you kickstart your financial future today. 

/by
South Carolina State House
,

South Carolina Tax Guide

South Carolina State Taxes

Nestled among the lush landscapes and historic charm of South Carolina lies a complex tapestry of tax regulations residents and businesses must navigate. From the sandy shores of Myrtle Beach to the mountain town of Greenville, understanding South Carolina’s tax system is essential for anyone living in or considering moving to the Palmetto State.

This article delves into the intricacies of South Carolina taxes, shedding light on its graduated state income tax rates, unique sales tax nuances, property taxes and other fiscal obligations that define life within this vibrant southern enclave. Whether you’re a long-time resident looking to demystify your annual tax responsibilities or a newcomer trying to grasp how these laws might affect your financial landscape, our comprehensive guide serves as your roadmap through the multifaceted world of South Carolina taxation.

South Carolina state income tax 

South Carolina employs a graduated structure for its state income tax with rates spanning from 0 percent to 6.5 percent—a slight reduction from the previous top rate of seven percent. To account for inflation, the state adjusts these tax brackets each year and anticipates further rate reductions in future years.

The breakdown of these tax brackets is as follows:

  • $0—$3,200 at 0 percent
  • $3,201—$16,040 at 3 percent
  • Above $16,040 at 6.5 percent

Sales Tax in South Carolina

South Carolina has a basic 6 percent sales tax on most items, but local taxes can increase it to a maximum of 9 percent. The state does not charge this base rate on essential goods like groceries, making everyday expenses more affordable. However, prepared foods, hotel stays and certain services are taxed at the total rate of both state and local taxes.

For big-ticket items like cars, South Carolina applies its regular sales tax rates but limits the tax amount to $500 for each vehicle sold. This approach aims to keep taxes fair for larger purchases and balance the need for public funding with the need to keep living costs reasonable.

South Carolina Property Tax

South Carolina’s property tax system encompasses two main categories:

  • Real Estate Taxes: Applied to homes, land and buildings with rates varying by county. Owner-occupied residences benefit from a reduced rate of 4 percent on assessed value, compared to higher rates for non-owner occupied properties. 
  • Personal Property Taxes: Target vehicles, boats and airplanes, taxing them based on fair market value.

Additionally, the state offers exemptions aimed at lessening the burden for certain groups, including seniors over the age of 65, disabled individuals and veterans, as well as providing favorable conditions for agricultural lands actively used in farming. These efforts are designed to balance fiscal responsibility with support for South Carolina residents’ varied needs.

South Carolina Estate Tax

South Carolina does not levy an estate tax, following the federal government’s 2005 elimination of the state death tax credit. This means residents face no state-level estate taxes when transferring or inheriting property. The lack of a state estate tax simplifies inheritance matters, allowing South Carolinians to plan their estates without worrying about additional state taxes on top of federal obligations.

This policy reflects South Carolina’s commitment to creating a taxpayer-friendly environment, easing financial and legal processes for residents dealing with inheritances. By removing this layer of taxation, the state aims to promote economic stability and growth by reducing fiscal burdens during inheritance transitions.

South Carolina Retirement Tax

South Carolina offers a tax-friendly environment for retirees, highlighted by:

  • Social Security Benefits: Completely exempt from state taxes.
  • No Estate or Inheritance Tax: Enhances the state’s appeal by allowing retirees to pass on their financial legacy without additional taxes.

These policies collectively create an appealing setting for seniors looking to enjoy their retirement years with minimal taxation burdens.

To make sure you’re not overpaying on taxes, it’s smart to consult with a professional. A financial advisor can answer your tax questions and help ensure you pay only what’s necessary. At Horizons Wealth Management, we help you navigate your financial future with expertise behind you.

/by
, , , ,

How to wean grown kids off your payroll, freeing up more retirement cash

Are your adult children still relying on you financially? Here’s how to help them find independence.

Just because your kids have moved out of the house doesn’t mean they’re out of your financial life. Six out of 10 (61 percent) parents with at least one adult child over 18 said they provided them financial help, according to a Pew Research Center survey.

But, eventually, empty nesters face the delicate job of shifting the bill-paying burden to their grown children. Covering your kids’ cellphone bill, car payments, credit cards and other monthly costs can’t last forever. Doing away with those bills, if possible, is a budget-friendly move.

Learn how here.

/by
, , , , ,

A New Benefit: Some Companies Help Workers Pay Down Student Loans

Many companies now help employees pay off their student loans. Is this the wave of the future?

 

Student loan debt has not only become more common, but the size of the average loan has nearly doubled over the past decade or so. Collectively, Americans carry more than $1.5 trillion in student loan debt.

Learn more here.

/by
, , , , ,

How to Think Like a Billionaire, No Matter How Much Money You Have

If you truly want to join the ranks of the super-rich, you’ll need to start thinking like you’re already one of them.

Many ultra-wealthy people seem to share a few common traits. What do you think?

Click here to read more. 

/by
, , , , , ,

The #1 Tip to Help Maximize Your 401(k) Investing

Investing is the most important element of our financial future.  Tony Robbins and Clark Howard recommend that people who have yet to invest in the stock market should ‘get in the game.’  Experts believe the financial market is still ‘winnable’. We agree.  Don’t wait to invest. Get started with whatever you have.

You can put off some small things in life without consequence, but when it comes to investing, sticking your head in the sand simply won’t cut it. If you don’t know how to start investing, when to start investing or why you should invest, now’s the time to learn. The sooner you get started, the more time and interest can help grow your money.

To learn more click here.

/by
, , , , , , , ,

When Is It Time to Cut Your Kids Off From Your Finances?

Deciding when to let your children stand on their own can be tough, especially when they’re contending with student loans, underpaying jobs, or sky-high rents. But easing your kid’s entry into adulthood could be undermining your own financial security.

According to a December survey from CreditCards.com, three-quarters of parents are providing financial support for their adult kids.

But at a time when the majority of Americans haven’t socked away nearly enough for retirement—the median retirement savings for all working families in the US is just $5,000, according to the Economic Policy Institute—it makes sense to do a little less for our offspring, so we can think a little more about ourselves.

So, how do you figure out when and how to cut your kids off financially?  Learn more below.

Source: https://www.thebalance.com/when-to-cut-your-kids-off-from-your-finances

/by
, , , , , ,

Don’t bother wondering why your friends seem to have nicer homes, cars, and vacations — there’s only one measurement that matters

Basing your spending off how your friends spend their money is a huge mistake to make.  Large spenders may also be building crippling debt.

You won’t find a real answer to how you’re doing in a Federal Reserve survey or a social media feed.  You will find it by measuring yourself against rules of thumb, refined over decades and endorsed by financial pros  that point the way toward true financial health.

Start with these:

Source: http://www.businessinsider.com/why-you-should-ignore-others-when-setting-personal-finance-goals

/by