# Resources: Calculate your retirement needs

From staff reportsSeptember 1, 2013

Learn how to apply for Social Security and calculate your retirement needs.

RICK NEASE — MCT

The average working household has virtually no retirement savings. In fact, when all households are included – not just those with retirement accounts – the median retirement account balance for all working-age households is just \$3,000, according to the National Institute on Retirement Security.

The institute’s report, “The Retirement Savings Crisis: Is It Worse Than We Think?” also reveals that near-retirement households aren’t faring much better. Their median retirement account balance is \$12,000.

Two-thirds of working households age 55 to 64 with at least one earner have retirement savings less than one times their annual income.

All told, working households are collectively \$6.8 trillion to \$14 trillion short of target retirement savings, the study.

How are you doing? Do you know if you have enough to retire. There are numerous online calculators and worksheets to help you figure out where you stand.

Here are a few:

• The CoRI Retirement Index, www.blackrock.com/cori-retirement-income-planning: Provides a daily measure of how much annual income your current savings could generate beginning at age 65. According to BlackRock’s website, the tool is designed to be used only by people age 55 to 64 because “the required calculations for each CoRI Retirement Index is based on precise information for this age group.”

At the site, click on the CoRI Retirement Index link and move the slider to your current age, and the index will tell you how much savings it would take to provide one dollar of annual retirement income. For example, if you want an annual income of \$1 and you’re now 60, it would take a current amount of savings of \$15.81 to generate this income.

If you click on “calculate retirement income,” you’ll be asked current level of savings. If that 60-year-old now has \$100,000 in savings, his estimated retirement income at 65 would be \$6,325 per year.

The index assume you invest conservatively from your current age until retirement at age 65, and then bought an inflation-adjusted immediate annuity to generate retirement income. You can’t invest in the index and it’s not intended to provide retirement planning advice. It is updated daily to reflect current bond rates and annuity purchase rates.

• The Employee Benefit Research Institute, http://www.choosetosave.org/ballpark/: The Ballpark Estimator is a two-page worksheet that helps you identify how much you need to save.

• Department of Labor, http://askebsa.dol.gov/retirementcalculator/ui/Expenses.aspx: The government’s “Taking the Mystery out of Retirement Planning” is an extremely thorough look at where your money goes now and what you’ll need in retirement. Be prepared to not only input savings information but budgeting data as well. That means utilities, food, clothing, medical costs, loans, hobbies and even parking costs. This information is valuable to everyone. However, the booklet, which includes worksheets, is specifically designed to help those who are about a decade from retirement.

While you’re at the Department of Labor site, poke around. The “Publications and Reports” page links to consumer information on health benefits and retirement planning; the “Retirement Savings Toolkit” link has publications on saving for retirement in English and Spanish, while the MyMoney.gov page links to a variety of retirement planning tools, including a Medicare Eligibility Tool.)

• The AICPA ( https://www.360financialliteracy.org/Topics/Retirement-Planning/Retirement-Planning-Basics/Retirement-Planner): This tool from the American Institute of Certified Public Accountants is a simple tool that lets you see how long your savings might last. You fill in your age, age at retirement, current annual household income, current savings, savings rate, expected income increase between now and retirement, years you expect to be retired and percent of current income you expect to need in retirement (most people say expect 80 percent). Once you fill it in, hit calculate, and you’ll see how far your current savings will go. Click on view report and you’ll get some suggestions on how to make money last longer.

Navigating Social Security?

The average monthly retirement benefit in June of this year was \$1,222.43, according to the Social Security Administration. People born in the 1943 to 1954 group who are eligible for that amount at age 66 will get just \$916.82 a month if they retire at 62.

If they live to age 90, that’s a total of \$308,052. By waiting just four years, they’ll net an additional \$44,007.

Don’t know what to expect in Social Security benefits? Go to www.ssa.gov and click on “estimate your benefits.”

You’ll need to type in your full name, date of birth, the state where you were born, your mother’s maiden name and your Social Security number. Then click “submit.” Next you’ll need to fill in your last year’s wages or net self-employment income. Click “submit” again, and you’ll be given an estimate based on your earnings history.

You can check the estimates for reduced benefits at age 62 and full benefits at your normal retirement age and your maximum benefits at age 70.

The site also has a life expectancy calculator, which shows the average number of years a person can expect to live based on gender and birth year.

You must be at least 61 years and 9 months old to apply for retirement benefits. If you are already age 62, you may be able to start your benefits in the month you apply. You should apply for benefits no more than four months before the date you want your benefits to start.

Benefits are paid the month after they are due. (If your benefits start in April, you will receive your first benefit payment in May.)

The documents you may have to provide:

• your original birth certificate or other proof of birth (or a copy of your birth certificate certified by the issuing agency);

• proof of U.S. citizenship or lawful alien status if you were not born in the United States;

• a copy of your U.S. military service paper; and

• a copy of your W-2 form(s) and/or self-employment tax return for last year.

Even if you don’t have all the documents you need, go ahead and sign up and submit any documents you do have. You can provide the missing documents later or the agency may be able to help you get them.

You can sign up online at www.ssa.gov, by calling 1-800-772-1213 or if you’re deaf or hard of hearing at TTY 1-800-325-0778.

If you’re 65 or older, you can receive Medicare. The program helps with the cost of health care, but it does not cover all medical expenses or the cost of most long-term care. You should sign up for Medicare three months before your turn 65.

Hospital insurance (Part A) helps pay for inpatient care in a hospital or skilled nursing facility (following a hospital stay), some home health care and hospice care. Part A is free if you have worked and paid Medicare taxes long enough. Most people have.

When you sign up for Medicare, you will be asked if you want to enroll in Medical Insurance (Part B).

Part B helps pay for doctors’ services and many other medical services and supplies that are not covered by hospital insurance.

Anyone who is eligible for free Medicare hospital insurance (Part A) can enroll in Part B by paying a monthly premium. Some beneficiaries with higher incomes will pay higher monthly Part B premiums.

There’s another enrollment period, this one for Part D and Medicare Advantage. It runs from Oct. 15 to Dec. 7 each year and during that time you can change your Part D or Advantage plans.

Part D covers prescription drug costs. It also has a monthly charge, but that charge varies depending on the plan you choose.

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