There is a reason why Social Security is a huge part of so many people’s retirement plans. These benefits can be an important source of income for you later in life.
A recent survey by the Employee Benefits Institute shows that 87% of workers currently expect to rely on Social Security for their retirement income. Also, 94% of current retirees identify it as their primary source of income.
However, while it’s safe to count Social Security as a source of retirement income, we don’t want to rely heavily on these benefits. Doing so could overturn your plan and create a world of financial stress for you.
Are you too dependent on Social Security?
If you work and pay Social Security for your entire career, then you may qualify for benefits after you retire. And while it’s money you can rely on to some extent (with in mind that Social Security cuts are still on the table), you don’t want to rely on it too much.
So how do you know if you’re outboard? It’s easy. If you expect Social Security to make up a large portion of your retirement income, you are potentially making a mistake. If you think social security is provided all Your retirement income, you are definitely making a big mistake.
In the best case scenario, if no social security cuts occur, we can expect monthly profits to be replaced by 40% of wages. This assumes you get an average salary and not a particularly high income.
Most seniors inevitably need around 70-80% of their previous income to live comfortably once they quit their job. And although there are some wiggle rooms on either side of this formula, most of the time it’s not a very enjoyable thing to live in 40% of what you were making.
Certainly, if you’re someone who makes $100,000 a year and lives on a daily basis at $40,000 a year, you’re the exception. (And hey, congratulations for mastering the art of living under your means.)
However, it is common to spend most of your salary while you work. If that’s what you tend to do, you cannot retire yourself on Social Security alone. And you should not necessarily allow these benefits to constitute a large portion of your retirement income.
Except for resigning now to increase flexibility later
When you retire, you don’t want to pinch a penny. Rather, they want the flexibility to enjoy life and cover bills without worrying about all the costs.
If that’s your goal, build your savings to compensate for your profits. That way you can make sure you’re not too dependent on social security. If you end up throwing away enough money so that half of your retirement income comes from Social Security and the other half comes from your individual retirement account (IRA) or 401(k) plan, you’re probably in a good place.
Equally important, you can get a Social Security benefit estimate well before your retirement and see your monthly payments, assuming there are no widespread reductions. You can obtain that information by creating an account on SSA.gov. The more you know what to expect from Social Security, the more efficient you can map your income needs and position yourself to meet up later.
Motley Fools have a disclosure policy.
The Motley Fool is a partner at USA Today, providing financial news, analysis and commentary designed to help people control their financial lives. The content is produced independently of USA Today.
Most retirees with the $23,760 Social Security Bonus are completely overlooked
A miscellaneous fool’s offer: If you’re like most Americans, you’re a few years (or even more) behind your retirement savings. But it’s not well known “The Secret of Social Security”It will help you to ensure a boost in your retirement income.
One easy trick can pay you an additional $23,760…Every year! Once we learn how to maximize Social Security benefits, we can retire with confidence in the peace of mind we want. participateStock AdvisorFor more information about these strategies, see
See “Social Security Secrets”»
