3 reasons why Social Security shouldn’t be your only source of retirement income
Are you considering relying on Social Security to fully cover your living expenses? If so, you are not alone. Many older people regularly rely on these benefits to cover all of their bills, not realizing how wrong it is. Here are some reasons why you absolutely need income outside of Social Security during retirement.
1. The average profit is probably lower than you think
The amount of money you collect from Social Security may not be the same that another beneficiary receives. This is because these monthly benefits depend on factors such as the amount of money you earn throughout your career and the age at which you apply for benefits.
But still, the average Social Security recipient today receives about $ 1,559 a month. On an annual basis, this represents an income of $ 18,708.
Meanwhile, an individual income below $ 1,094 is considered below the federal poverty line in all US states except Alaska and Hawaii. And while Social Security pays the average senior citizen more than that, it’s not much more.
2. Benefits may be reduced
Social Security expects to owe more money in the years to come than it collects in income as baby boomers leave the workforce and start collecting benefits. The program has trust funds that it can plunder to fill this gap, but once those trust funds are depleted, benefit cuts may be considered.
Meanwhile, Social Security administrators predict that the program’s trust funds will be cash-strapped by 2034. At this point, the average monthly benefit of $ 1,559 could end up being worth much less, coming dangerously close the elderly who live on social security alone. the threshold of poverty.
3. The advantages have lost purchasing power
Next year’s social security increase will be the biggest in decades. But over the years, these increases have failed to keep up with inflation, and program beneficiaries have consistently lost their purchasing power as a result.
We don’t know what inflation will look like in the years to come, but lately it is rampant. And relying solely on Social Security might mean not keeping up with the growing expenses of your seniors.
Don’t bet too much on these benefits
It is perfectly normal to rely on Social Security to provide you with retirement income. But that shouldn’t be your only source.
A good bet is to put money in an IRA or 401 (k) so that you have your own savings to tap into during retirement. If you set aside $ 100 per month in one of these 40-year savings plans and invest that money at an average annual return of 7% (which is several percentage points lower than the stock market average) , you will end up with a nest egg of $ 240,000.
You can also aim to work part-time during retirement or rent out part of your house as a source of income. You have many options for getting your hands on money outside of Social Security during your retirement years, but the key is to provide income on top of these benefits.