Avoid This Big Social Security Misunderstanding

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Subscribe to MONEY Magazine I love writing about retirement, but sometimes I need to fight the urge to scooch under the covers and call it a day. Because there’s plenty of discouraging news in the world of retirement planning. This week’s installment comes courtesy of a Nationwide survey that found a quarter of high-earning households think they can live comfortably off Social Security alone in retirement. This isn't the case! Social Security will replace only about 27% of the income of above-average earners. Survey respondents were age 50 and over, and it’s possible their overly optimistic projections have influenced how much (or little) they’re socking away. Check out these calculators to estimate how much you’ll receive in benefits, and understand that while Social Security is an important source of guaranteed retirement income, it’s not going to pay all your bills. Best wishes, Elizabeth P.S. If you like this newsletter, please pass it on to a friend! And if you got it from a friend, sign up here for email delivery to make sure you don’t miss the next issue. TIMELY RETIREMENT NEWS, INSIGHTS AND ADVICE 25% of High Earners Have a Huge Misunderstanding About Social Security Relying on it alone will not be enough for many people. At 35, This Mother Saves $85,000 a Year and Plans to Retire at 40 And a third child is on the way. 3 Secrets You Need to Know About Redoing Your Kitchen Learn which improvements give you the most bang for your buck. ASK A READER We have a special guest this week! Sally Brandon, senior vice president of client services and advice at Rebalance IRA, has kindly agreed to answer your questions about investing, and what you should do (and not do) to grow your retirement savings. Please send your questions for Sally to me at retirewithmoney@moneymail.com. I will forward them to her and then run her responses in an upcoming newsletter. Thanks to all those who responded to Heather Jones’ question about using Roth IRA funds for college expenses. Here are the responses: Tak Chan, 66, of Haverford, Pa., says, “A 529 plan is a much better choice as contributions could be state-tax deductible and it allows for higher contributions per year.” What’s more, he notes, Roth funds would have to be skewed towards bonds as the child approaches college, which limits their growth potential. John Barthel, 70, of Monticello, Minn., and his wife are designating their Roth IRAs to their grandchildren. “When they start college, we will give them a monthly ‘gift’ allowance that won’t affect their FAFSAs [federal student loan eligibility]. We plan to divide it over about 8 years, so that they will have time for at least a master’s degree. Whatever is left will be theirs to do with as they choose. Hopefully, they will use the remainder to fund their own Roth IRA.” Kathy Weise, 61, of Stratham, N.H., says contributions to her sons’ Roth IRAs funded their last year of college. She opened the accounts when they were around 13 years old and contributed their earnings from part-time jobs in high school and college.The year after they graduated, she gave them a Christmas gift of $3,500, which contained the leftover earnings in their Roth account. “They have consistently added to it every year since, along with their work 401(k)s, so they are well on their way to financial success,” she writes. RETIREMENT NEWS FROM AROUND THE WEB Restaurants Are Too Loud. This App Can Help A new app has a decibel reader that allows users to crowd-source the noise volume in restaurants, which can help the hearing impaired. VOX Retirees Get a 401(k) Withdrawal Headache Even relatively well-off retirees are anxious about their withdrawal strategies, but some planning can help quash their fears. SQUARED AWAY BLOG 7 Common Estate Planning Disasters and How to Avoid Them Neglecting to plan for possible future incapacity is one of several estate planning disasters you should avoid. MARKETWATCH States and AARP Petition Court to Defend Fiduciary Rule California, New York, and Oregon have banded together to save the imperiled fiduciary rule, an Obama-era regulation to protect retirement savers. INVESTMENT NEWS ABOUT ELIZABETH Elizabeth O'Brien is a senior writer at MONEY, covering retirement and health care. You can email her at elizabeth.o'brien@moneymail.com and follow her on Twitter at @elizobrien. To Unsubscribe You have received this e-mail because you are subscribed to this newsletter from MONEY.com. Unsubscribe here. Update Email Click here to update your email address. Privacy Policy Please read our Privacy Policy. MONEY may receive compensation for some links to products and services on this website. Offers may be subject to change without notice. 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