The Color of Money

The simplest savings plan for retirement: Have little or no debt on the books

By Michelle Singletary
August 21, 2011

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During one of my recent online discussions, a lot of people had thoughts about retirement. One had me laughing out loud.

“I think my wife and I have found the answer to having enough money at retirement,’’ a reader wrote.

The gentleman went on to write: “Experts say you need 70 percent of your working income in retirement. So I am quitting and letting my wife work. Now we need $35,000 less a year in retirement and our savings are now enough.’’

“That’s just my way of saying no one knows for sure what you need and there are no magic formulas,’’ he added. “Save, and be debt-free when you retire.’’

What I loved about his humor is the recognition that all the scrambling to save for retirement is driving many of us nuts. Save what you can. But most importantly, retire with as little debt as possible. Anyway, here are my answers to a few retirement questions that came up.

“I got some sort of yearly statement from Social Security listing my years of employment, how many quarters I had contributed, and an estimated amount I’d be eligible for. . . . Upon examination, I notice that I’m only being credited with about a third of the years I actually worked. Is it possible to [correct] this?’’

People have been getting statements from Social Security and many have probably ignored them.

You should know that beginning in April, the Social Security Administration stopped mailing the statements. Social Security says it could save $30 million a year by suspending the mailings.

For fiscal 2012, Social Security will resume mailing statements to people 60 and older. For all others, the agency is looking into online statements. You may be able to get an estimate of your benefit by going to

OK, so what if you find that the information on the statement you did get is incorrect? You should be checking. If your earnings record is inaccurate, this could mean lower benefits.

One of the reasons your record could be incorrect is that you got married or divorced and changed your name but never reported the change.

If you discover income information missing, you will need to find some proof of what you earned. This could be a W-2 form, an old tax return, or a pay stub. Then contact Social Security. If you can’t find proof, you may still be able to get the record corrected.

Finally, a reader wanted to know about using retirement money to buy a car. “I will soon need to buy another vehicle. I have a 1997 Toyota Camry. I am a retired federal employee. I . . . am thinking about getting funds from my 401(k) to pay for it. Is this a good idea?’’

I’m back where I started. Remember, the less debt you have the better. So I wouldn’t borrow to buy a car. Depending on your tax situation, I would first use other savings. If the 401(k) money is your only savings, use some of that money and get the most affordable and reliable used car you can find.

Michelle Singletary is a columnist for The Washington Post.

SOURCE: Bloomberg News