Social Security is a very important source of retirement income for millions (and more millions) of older Americans, there are people who have been contributing to Social Security since they were 15 years old and should receive a good monthly benefit as soon as you finally decide to make the application.
The fact that you are anticipating receiving a Social Security benefit after retirement does not mean that you should count exclusively on it, or even that it represents the majority of income during your retirement, here we explain why and two significant details that you should take into account to ensure that you have the kind of financial flexibility during retirement that you want.
Reason 1: Social Security Was Not Designed to Be Your Only Source of Income
Social Security is designed to replace about 40% of the pre-retirement income of the average American worker, while retirement planners usually suggest that you need about 80% of your income to maintain the same quality of life right after retirement, that is, Social Security should cover about half of your retirement income needs.
Reason 2: The Future of Social Security Is Uncertain at the Moment
Wait, don’t misunderstand us: we are not claiming that Social Security will still exist when you retire in about 20 or 25 years, however, there is a great possibility that some changes will be made in order to maintain the solvency of the program, according to the most recent report of the Social Security trustees, the trust funds containing the Social Security reserves are expected to reach 2035.
Reason 3: Rising Costs After Retirement
As a last reason, although it is possible to live only on Social Security after retirement, in the case of many Americans, it is not possible for that to result in true financial freedom, the goal is not only to retire while still young and productive enough to enjoy your time, but also to be able to do things that cost money, such as going out, traveling and getting to know new places.
It is very important to value Social Security as a component for your retirement, after all, Social Security will be your biggest source of inflation-protected retirement income, but it is critical that you consider that Social Security is only one piece of the puzzle when it comes to creating a secure retirement.
There are two major retirement strategies in the works
The first is the most obvious, saving in retirement accounts. You can use a SEP-IRA to save for retirement and contribute about 10% and 15% of your income to it.
Another component for a good retirement strategy is to pay off your debts as much as possible, a very important point is to keep in mind that it is not only about how much you have saved or how much retirement income you have, it is also about how much is your cost of living, if you do not have to worry about mortgage payments, your financial comfort level will be significantly higher.
Needless to say, while Social Security is one of the major income of millios (and you’re one of them, of course, since you’re here), it’s not a good idea to rely solely on it. Think of Social Security as a component of a complete retirement plan.
