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Middle Class Retirement Security in Peril

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Wednesday, November 17, 2021

Most Americans look forward to their retirement, but two recent studies warn that the middle-class vision of a comfortable retirement is under threat.

What is the middle class? Pew defines it as a person earning between two-thirds and twice the median American household income, which in 2019 was $68,703, according to the United States Census Bureau.  You can use this calculator to determine if you qualify as middle class.

The biggest problem with middle-class and retirement is the lack of transitioning from active income to passive income that will fund your later years. Once you retire, you are no longer generating income, and you n need a solid stream of income that can fund your needs as you grow older.

The book Rich Dad Poor Dad, by Robert Kiyosaki, does a great job of helping you understand the difference between working for a living at a job versus working toward building a business and an investment portfolio that can generate ongoing passive income. 

Social Security is one part of your retirement income but relying heavily on Social Security isn’t ideal and could lead to worry further down the line. Research shows that taking earlier retirement could end up slashing your benefits by up to a full 30 percent permanently. 

Filing as soon as possible gives you a monthly windfall, but by doing so your benefits take a significant hit. Social security plays a part in how your retirement shapes up for the rest of your life. It deserves to be thought through thoroughly.

“Your retirement should be as secure as you can make it,” advises Richard Lerner, Senior Vice President, Investments at David Lerner Associates. “Taking retirement benefits before your full retirement age might not be the best thing for you to do if you can afford to wait. For each year you hold off, your benefit will grow by eight percent.”  

Another important factor is making sure that your healthcare is in order. Healthcare should be a priority. For an average 65-year-old couple who start receiving Social Security payments at 65, healthcare expenses will consume 68% of their benefits. 

While most 65-year-old couples retiring in 2021 can expect their retirement healthcare costs to fall between $156,208 and $1,022,997, factors such as the state in which they retire, coverage choices, and chronic health conditions can have a significant impact on where within that range they may fall, highlighting the importance of personalized healthcare cost planning.

Saving for retirement is one thing, but creating a passive income by leveraging the sensible middle ground of investing is the better goal. Talk to your financial advisor and figure out a plan that will give you a stress-free retirement.

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. 
Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC.

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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 800-367-3000 Visit our website: www.davidlerner.com

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