When was the last time you looked at your paystub? Yes, I realize that there is no paper stub attached to your nonexistent paper paycheck, but that doesn’t mean it went away. It is probably available online, or you can ask your employer for a copy. Due to the absence of physical paystubs, most people fail to examine details of their hidden expenses or paycheck withholding.
Realizing exactly what is being paid out prior to “take-home pay” can be enlightening. Withheld earnings paid out to taxing authorities, insurance carriers, and company-sponsored retirement plans, all add to what we call the Invisible Cost of Living. “Off the grid” workers (those who work for cash only) have no paystub, real or electronic. In all cases, “out of sight, out of mind” applies to the true cost of living our daily financial lives.
Far too many Americans have no idea exactly how much they actually earn in a pay period, or over a year. When asked, a common response is, “I take home X dollars a year.” That does not answer the actual question. Similarly, many people do not know their gross monthly Social Security benefit, as they look simply at the deposited amount. Establishing an online account at socialsecurity.gov allows a recipient to see how much is being withheld for Medicaid B and Federal Income Taxes, if any.
For the dwindling group of Americans accruing Traditional Pension benefits, they should all comprehend the personal economic value of their employer's pension contributions. Understanding the total cost of living, including the invisible portion, is vital for everyone, including job changes, as well as anyone considering gig work for a period of time.
Preparing for retirement and beyond is a years-long process, and therefore cannot be hurried. Like all insurance plans, Social Security and Medicare require payments (essentially insurance premiums) to be made into these Plans for a minimum of 40 calendar quarters. Lifetime credited earnings by each individual are available on the Social Security website, and should be checked occasionally.
Failure to understand the true cost of living, including the invisible portion, can result in disastrously underestimating retirement needs. Today, visible components of inflation are “in your face” at the gas pump, grocery store, and in the stack of unpaid bills on your desk at home. Invisible components are inflating as well, and changes in your Total Cost of Living must be understood in order to plan for eventual Financial Independence.
Like it or not, many people will be working longer than anticipated.
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