We often hear that it’s not a good idea to plan your retirement solely on Social Security. And the advice is spot on.
Social Security only replaces about 40% of your pre-retirement income if you are an average wage earner, and older people tend to need higher levels of replacement income to live comfortably. There is. Moreover, this 40% threshold could be waived in a little over a decade if Social Security cuts plummet.
Many workers fear that they will be without social security altogether after retirement. In a recent Allianz Life survey, 74% of his respondents said they can’t count on Social Security when planning their retirement income.
But should Social Security be written off? Or has it gone too far?
Social Security will never go away
It is true that Social Security is in danger of having to cut benefits. The problem is that the program derives most of its income from payroll taxes. But as the workforce shrinks over the next few years, with the expected mass retirement of baby boomers, Social Security’s primary source of income will follow suit.
Social Security has a trust fund that can be used to maintain scheduled benefits even if payroll tax revenues begin to decline. However, once these trust funds run out of funds (now he is expected to occur as early as 2034), a reduction in benefits could be considered.
As such, it’s easy to see why the majority of Americans believe they can’t rely on Social Security for their retirement income. But while it’s important to account for future benefit cuts, it’s also important to recognize that Social Security isn’t about to disappear.
Even with reduced benefits, current Social Security beneficiaries should continue to receive about 80% of their previous salary. Future retirees can also expect to be paid about 80% of what they qualify for. So while benefit cuts aren’t great news, they also don’t mean the end of Social Security.
provide other sources of income
You don’t have to write off Social Security completely during the retirement planning process. But should other sources of income be listed?
absolutely. In fact, in the aforementioned survey, 88% of his respondents said it was important to have another source of income besides Social Security after retirement.
That could mean building a nest egg and setting yourself up an investment that pays dividends in retirement, like a real estate investment trust (REIT). It can also mean planning to work in some capacity when you’re older, depending on whether you’re joining the gig economy or starting a business.
Social Security is certainly not in the best financial position. However, once you’re ready to start collecting the rewards you’ve earned, it’s important to realize that this program is still available.And there’s nothing wrong with relying on programs Several senior income.