Jean Chatzky sends strong message on 401(k), Social Security

As many Americans are aware, planning for retirement inevitably involves assessing several critical financial checkpoints regarding one’s age to ensure long-term financial stability and to uphold one’s desired lifestyle. 

Daily living expenses — including essentials such as food, utilities, phones and  transportation — shape U.S. workers’ budgets and influence how much they can save and invest. 

Evaluating Social Security benefits and reliance on personal savings, such as 401(k) plans, is equally crucial. Key challenges also include managing rising health care costs, countering inflation’s impact on fixed income, and ensuring that one’s assets are set to last throughout retirement.  

Jean Chatzky, former NBC “Today Show” financial editor and current AARP (American Association of Retired Persons) understands these concerns — and steps in to help Americans make some sense out of ways to maximize monthly Social Security paychecks and employee-sponsored 401(k) plans.

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Chatzky advises people to carefully consider when to claim Social Security, cautioning that early withdrawals lead to reduced monthly benefits. 

For those expecting a long retirement, she emphasizes the advantages of waiting until age 70 to maximize Social Security payments. In the case of couples, she recommends that the higher-earning spouse delay distributions if one partner anticipates a longer lifespan, ensuring greater financial security.

She also points to the benefits of working while receiving Social Security, noting that some people do so out of financial necessity, while others value the engagement and sense of purpose employment provides in retirement.

Related: Shark Tank’s Kevin O’Leary warns Americans on 401(k)s

In addition to Social Security, Chatzky warns about the risks and rewards associated with retirement savings accounts such as 401(k) plans.

She stresses the fact that Americans face a significant possibility of exhausting their funds during retirement. To address this concern, she offers strategies designed to improve financial longevity and reduce the likelihood of running out of money.

Jean Chatzky looks beyond Social Security to 401(k) plans

Because Social Security monthly paychecks alone are not enough to provide retired people with enough income on which to live, it is of vital importance that, during their working years, Americans put money away in retirement savings accounts.

Employer-sponsored 401(k) plans are a great place to start, especially if one’s company matches employee contributions — as those funds are essentially free money.

More on retirement:

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• Dave Ramsey strongly cautions U.S. workers on Social Security

Chatzky emphasizes the benefits of automated 401(k) contributions and of gradually increasing the percentage with each pay raise to accelerate retirement savings. 

She advises that those new to saving and facing financial constraints start with 3% of their income, while individuals in a better financial position begin at a higher rate. Chatzky suggests raising contributions by 2% annually until reaching the maximum limit. 

Her goal is for people to save 10% yearly if they begin before their mid-thirties, including employer matches, or 15% if they start later. 

Chatzky explains her view that simply enrolling in a workplace retirement plan reduces the likelihood of depleting funds in retirement to 20%.

Related: Jean Chatzky sends strong message to Americans on Social Security

Jean Chatzky explains a key to maximizing 401(k) contributions

Chatzky emphasizes the point that saving money consistently is the key to freeing up more of one’s income to contribute to a 401(k) plan. 

“When I hear people suggest that you ‘live on what you make,’ I always shake my head,” Chatzky wrote in “Money Rules,” her book on personal finance tips.  

“If you’re living on what you make, you’re spending every dime. The key is to live on less than you make,” she added. “This is non-negotiable. Why? Because if you do it consistently, you’re automatically saving consistently.”

Chatzky advises Americans to be proud of their step-by-step achievements in planning financially for their future. 

“With the same enthusiasm you brought to watching your lima bean plant take root in grade school — watch that stash start to grow,” Chatzky wrote. 

“Take pride in it. You’re accomplishing something very few people can. And that will inspire you to set aside more.”