One of the most common dilemmas, which he faces almost retirement, is whether to start collecting social security or postpone it to a higher monthly benefit. However, postponing social security often means relying more on other resources, such as 401 (K) or other savings to fill the gap. Is it worth it?
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“When it comes to money decisions, you need to feel control over and not feel anxious or stress,” said Trevor Houston, CEO of ClearPath Wealth Strategies, Frisco, Texas. “One of the most common questions is whether you need to wait for social security benefits or to withdraw money from the 401 (K) plan early.”
Here’s what to consider before taping 401 (k).
By delaying their social insurance pension benefits not exceeding the full retirement age (FRA), the amount of monthly benefits increases by up to 70 years.
“If you postpone social security, the monthly inspection will increase by about 8%each year before you get 70 years. This is equivalent to an increase in every year’s salary,” Houston explained. “It’s pretty nice, right? But the waiting strategy makes sense only if you have enough savings, investment or your 401 (k) to cover your accounts while you wait.”
Here are some important factors to consider:
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Life probability: Do you have serious health problems? Has your parents and grandparents lived a long life? If you are in good health, wait could provide a larger monthly check. On the other hand, Houston explained that if your health or family history shows a shorter life expectancy, it may make sense to demand early social security and use money before you can.
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Monthly subsistence costs: How much money do you need every month to pay the main cost of living? “If you start to take your 401 (K) too early, you could later, especially if the market is shrinking,” Houston said. This is called a sequence risk that can disrupt your retirement plan. 2024. The Vanguard report shows that the average balance of 401 (K) for those 65 years of age and older is $ 272,588. However, the average is often distorted by large earning workers and the average balance is $ 88,488.
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Taxes: Money from you 401 (K) is taxed as a normal income. According to Houston, by removing large amounts of money, you can encourage you to a higher tax group.
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Security and Security: Stable monthly income gives a sense of security and security. “Some people like that every month their account includes a social security check. It looks like a regular salary, and it gives a lot of peaceful retirement,” he stressed.