(Maurie Backman)
Social Security might end up paying you a pretty generous retirement benefit. The average beneficiary today receives $1,657 per month, and if you earn a higher average salary than the typical worker, you could be in line for a much higher benefit down the line.
Additionally, there are steps you can take to increase your Social Security benefits. Delaying your deposit beyond full retirement age, for example, will leave you with a more generous monthly benefit for life.
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But even if you have high hopes for Social Security, the reality is that relying too much on it could end up hurting you financially. In fact, there might be one facet of Social Security you’re neglecting, and it could lead to a world of financial upheaval in your senior years.
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Will benefits be cut?
Social Security is facing a fairly significant shortfall. In the years to come, he does not expect to collect enough income to meet the planned benefits.
Once its cash reserves (known as trust funds) are depleted, Social Security may have no choice but to implement deep benefit cuts. So what about that average monthly benefit we just talked about? It could be reduced by 20% or more over time.
That means you can’t afford to rely too much on Social Security in your retirement. Instead, it’s important to ensure you have a viable stream of income in case Social Security ends up paying you less than expected.
And while you might consider starting a small business or earning money in retirement by participating in the gig economy, a safer bet is to work on building a solid nest egg.
If you contribute funds to a retirement plan consistently throughout your career, you can accumulate a good amount of wealth through wise investments. And that, in turn, could protect you in the event of widespread cuts to Social Security.
Imagine being able to set aside $500 per month in an IRA or 401(k) plan for 40 years during your career. If you were to invest that money at an average annual return of 8%, which is a little below the stock market average, you would end up with a nest egg worth just over $1.5 million. . It could be a solid safety net in case Social Security ends up letting you down.
It is important to plan for the worst
To be clear, the Social Security cuts are by no means set in stone. But they’re also absolutely on the table at this point. If you want to avoid a perpetually cash-strapped retirement, be sure to build a nest egg to offset any reduction in Social Security benefits.
Even if the Social Security cuts don’t happen, those benefits will only replace about 40% of your old earnings if you bring home an average salary. And while delaying your deposit may increase that percentage, you’ll still need your own savings to enjoy the retirement you’ve always dreamed of. The sooner you start focusing on building your nest egg, the more likely you are to amass enough wealth to cover your retirement needs and more.
The $16,728 Social Security premium that most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help boost your retirement income. For example: a simple trick could earn you up to $16,728 more…every year! Once you learn how to maximize your Social Security benefits, we believe you can retire confidently with the peace of mind we all seek. Just click here to find out how to learn more about these strategies.
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