Most Americans lack confidence in the future of the Social Security program. According to a recent survey, 23% of Americans think the program won’t exist by the time they retire, and 46% think it will offer far fewer benefits than now.
Despite this, most Americans say they will rely on Social Security to pay for at least some portion of their retirement. While 26% said they would use Social Security to cover less than half of their retirement expenses, 51% said it would cover more than half (31%) or all (20%) of their expenses.
However, is this a sure bet? The survey team consulted experts to learn what you should know about relying on Social Security to pay for your retirement. Here is what they said.
Can Americans rely on Social Security to fund their retirement in its current form?
One-fifth of Americans intend to finance their whole retirement with Social Security benefits. Still, even if the program is kept in place, most retirees will probably find it challenging to do so.
Frank Murillo, a partner and managing director at the Snowden Lane Partners, says, “Unless you can actually stick to a budget, which in my experience most people don’t, Social Security is not enough for most retirement needs.”
There are differences in what people expect to spend in retirement and what they do. “Recreating the Dollar is an exercise I undertake with the clients I deal with where we put together sources of income to look like what they had throughout their working years. The findings of how much they can genuinely spend after stretching it over a respectable amount of time are eye-opening.”
According to Wade Pfau, the Retirement Income Center co-director at the American College of Financial Services, Social Security was never intended to be a retiree’s sole source of retirement income.
He said the benefit “is intended to replace around 40% of the typical indexed lifetime income of someone who has worked and earned an average pay over their career.” Many retirees will aim to replace a greater proportion than this.
Most financial gurus advise saving at least 70% of your pre-retirement income for retirement.
Katherine Tierney is a CFA senior retirement strategist at Edward Jones. She said, “Since Social Security is probably only going to make up a percentage of your retirement income, it’s crucial to have a well-rounded approach to satisfy your income demands in retirement.” We advise you to take action right now to learn what you must do to realize your dream retirement. A financial advisor can help outline your objectives, create a plan to achieve them, and track your progress if you are unclear on where to begin.
What to Do If Social Security Is the Only Retirement Income Source You Have.
Although financial experts do not advise relying only on Social Security for retirement income, this is the case for many Americans. According to another poll, 36% of Americans have less than $10,000 saved, and 25% have not yet begun saving for retirement.
Colleen Carcone, head of wealth planning solutions at TIAA, said, “Each scenario is unique. Some people can live wholely on Social Security exclusively.” Continuing to work while delaying your Social Security benefits might help you narrow the gap between the amount you need to retire successfully and the amount you have saved. A delayed start will result in a larger check when you start receiving benefits.
The Future of Social Security: What Will It Look Like?
According to the survey, most Americans think Social Security benefits will be cut or eliminated in the coming years. Are these worries justified since the Social Security trust fund is projected to exhaust in 2035?
Most analysts anticipate that Social Security will endure, but doing so will probably necessitate significant modifications to the current scheme.
A few straightforward fixes will probably be implemented, according to Jeremy Finger, CFP, founder of Riverbend Wealth Management. “First, we can remove the Social Security tax earnings cap, making any income over $147,000 subject to tax. The Social Security trust fund might be extended as a result. The second option is to raise the full retirement age, which would be similar to a salary reduction. For instance, persons born after 1970 could not be eligible for full benefits until they were 68 or 69 years old. Third, they might raise the Social Security payroll tax.”
According to Finger, the Social Security trust fund should be in balance using one or a combination of these remedies. However, Finger does not advise relying on Social Security to finance your retirement because there are enough unknowns.
I wouldn’t suggest that clients base their Social Security decisions, he said, “on what the government might do.”
There is a high possibility that payments will be cut in the upcoming years, regardless of how the Social Security trust is ultimately funded (and most experts think this will happen before it gets emptied).
Carcone says, “Social Security may be cut to match incoming cash from people and their companies.”
When preparing for retirement, Social Security’s uncertain future should be considered.
You will be less dependent on Social Security benefits the more you save over time through pension schemes and portfolio building.
Conclusion
Social Security isn’t going anywhere for the time being, and there are hopes that the government acts to replenish the reserves or pass relevant laws like those advised above.
But before then, you must have other retirement savings since Social Security covers less than 40% of an individual’s retirement income.
Contact Information:
Email: [email protected]
Phone: 8007794183
Bio:
For over 20 years, Jeff Boettcher has helped his clients grow and protect their retirement savings. “each time I work with my clients, I’m building their future, and there are few things that are more important to a family than a stable financial foundation.”
Jeff is known for his ability to make the complex simple while helping navigate his clients through the challenges of making the right investment decisions. When asked what he is most passionate about professionally, his answer was true to character, “Helping my clients – I love being able to solve their problems. People are rightfully concerned about their retirement income, when they can retire, how to maximize their financial safety and future income.” Jeff started Bedrock Investment Advisors for clients who value a close working relationship with their advisors.
A Michigan native, Jeff grew up playing sports throughout high school and into college. While Jeff is still an ‘aging’ athlete, Jeff will take more swings on the golf course than miles running these days. He creates family time, often with weekly excursions to play golf, a hobby he shares with his three young children.
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