Kevin O'Leary offers inportant advice on social security and retirement
Kevin O'Leary, the prominent entrepreneur and Shark Tank's star investor, has shared an important message on Social Security and the amount of revenue people need in retirement along with the federal program's monthly checks. He has highlighted that 'Social Security payments were never designed to fully support retirees as their sole source of income.'
With the average monthly payment of $1,900, it doesn't ensure a comfortable retirement for the senior citizens that they want. To have a financially stable future, workers often turn to employer-sponsored 401(k) plans that allow them to make annual contributions up to a specific limit and invest that money for their later years after working days are over. It has added company-matching contributions which offer an added incentive.
In the plan, traditional Individual Retirement Accounts (IRA) are made with pre-tax dollars, so retirees owe taxes on withdrawals during retirement. However, Roth IRAs require taxes to be paid upfront on contributions, which allows retirees to make tax-free withdrawals later in life.
O'Leary has provided additional guidance on Social Security checks and other income during retirement, saying, 'First of all, you need less than you'd imagine, and panicking helps nothing. The best antidote to panic is realism. If you hit the age of sixty-five in good health, life is just going to be a lot cheaper to live. If you're realistic.'
In O'Leary's book 'Cold, Hard Truth on Men, Women & Money,' he cited experts who suggested that retirees need about 65% of their gross salary after retirement. For instance, if an individual earns $100,000 annually, they would require $65,000 in the first year of retirement to cover their expenses. As the average annual Social Security benefits are about $23,000, any retiree would require an additional $42,000 per year to sustain their comfortable retirement, assuming that one will want to maintain roughly the same standard of living that they enjoyed before retiring.
O'Leary said, 'Of course, you ate out a lot, bought hardcover books to read on the subway, and got a brand-new coat every winter. But in retirement, you won't need to finance your lifestyle in the same way. There will be no commuting, fewer lunches out, and lower dry-cleaning bills.'
'If you don't think you can go days without spending money on useless crap like magazines, gum, or coffee, then you're going to be in trouble a few years into retirement,' he added. 'If you're healthy and happy, being old is cheap. Walking, working part-time, and living a life of purpose and meaning don't require a lot of money, just planning and discipline.'
O'Leary also pointed out the importance of getting out of debt before retiring, saying, 'If you're heading toward retirement with debt, now's the time to budget like you've never budgeted before. I mean it.'
He added, 'Don't retire until you can afford it. Throw out your plan for freedom at fifty-five or even sixty-five. If you have debt, you need your job, so you have to do everything in your power to keep it. Get a part-time job, too, while you're at it and while you're still spry enough to handle it.'
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