You'll need More than just Social Security

Today's younger generations are noted for claiming that Social Security will be completely out of money by the time they're ready to retirement. Actually, those complaints have been heralded for the last thirty or forty years, and the Social Security system is still going strong. Nevertheless, when you do your retirement planning, don't depend on Social Security alone to fund those Golden Years. If you do, they won't be 'golden' at all.

Social Security taxes are deducted from your paycheck on a weekly, biweekly or monthly basis – depending on how your employer pays you. This money is being used to fund the system that pays benefits to workers that have reached a certain age and are eligible to retire if they so choose. But here are a few reasons why Social Security benefits alone will not be nearly enough for you to live on:

  • Each year, the Social Security Administration sends a statement of benefits to each person who works and has paid Social Security taxes. The statement lists the benefits that they'll receive if they continue at their current level of earnings until age sixty-two. Depending upon your current job, this amount can be rather meager. The average Social Security benefit is around forty percent of what you earned before you retired. Do you think that you could live on forty percent of your current income?
  • With the current rate of inflation, by the time you retire Social Security benefits will pay for a considerably smaller percentage of your living expenses than they would today. Your home may be paid for by then, but you'll still have to pay for utilities, groceries, gas, taxes and other expenses. The money simply won't stretch that far without quite a bit of help.
  • According to federal law, you're eligible to start receiving your Social Security benefits at age 62. Unfortunately, doing so would mean that you'd only receive three-quarters of your full benefit throughout your retirement. You must be ten months past your 65th birthday or age 66 to qualify for full benefits.
  • Unfortunately, you may die. If this happens, your spouse (if you have one) will only be entitled to a portion of your benefits. Even as a single person, it would be extraordinarily difficult (if not impossible) to live on the benefit that you'll receive from Social Security. Life insurance proceeds and funds from savings may be needed to bury you, which could leave your spouse with little or nothing to live on afterward.
  • No one wants to live life confined by their circumstances. Every eventuality can't be planned for, but you can plan to be ready financially when they do arise. It's just not prudent to hang all of your hopes on one plan for retirement. Diversity is the key. Put the money that you've worked hard for back to work for you. Contribute to your employer's retirement plan, invest wisely, and put money away in a savings vehicle of some sort. Plan diligently for your financial future. You can never have too much money once you stop working; in fact, you may need more.

Wise and prudent people hope for the best but plan for the worst. Don't rely solely on Social Security as your means for retirement. It's only once small slice of what should be a much larger pie.

blog comments powered by Disqus