100 Million People Got This Social Security Basic Fact Wrong — Do You? – Community News
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100 Million People Got This Social Security Basic Fact Wrong — Do You?

Nearly 100 million people make a big mistake when it comes to retirement planning. A recent Nationwide Financial survey found that about 40% of adults across America believe that Social Security benefits alone should be enough to live on.

The millions of Americans who hold this belief are likely to be in trouble if they base their savings goals on this misconception. This is why.

Two adults looking at financial documents together.

Image source: Getty Images.

Americans Overestimate the Role of Social Security in Retirement

Future retirees who expect to rely solely on Social Security will likely be surprised to find how low their benefits eventually get once they start getting their checks.

See, even though the maximum Social Security benefit is $3,895 in 2021, very few people receive close to that amount. The median benefit is just $1,558 for retired workers. And the average benefits will be much lower for those who apply for Social Security checks early, which is very common because most people need these benefits while they are still in their early 60s. Claiming early reduces Social Security income because while benefits become available as early as age 62, retirees who claim as soon as possible face early filing penalties and miss the opportunity to earn deferred retirement credits.

Obviously, if you’re probably getting less than $19,000 in Social Security retirement income, it should quickly become apparent that it’s not going to work on these retirement benefits as your sole source of income.

However, the reality is that they were never intended to be your only source of money. Social Security is designed to support you in combination with savings and a pension, so it only replaces about 40% of pre-retirement wages.

How to supplement social security

You don’t want to be among the 100 million Americans who are rudely awakened trying to live off Social Security alone. So it’s critical that you understand the truth about these benefits and start making plans to supplement them as soon as possible.

One way to do that is to find an employer that offers a defined benefit plan. That’s a retirement plan that guarantees you as a retiree a steady income, with your monthly benefit based on factors such as how long you’ve worked for the company and how much you’ve earned. However, it can be very difficult to find a job that offers this type of retirement. If you’re hoping for it, it’s best to seek government employment because you’re more likely to receive a pension from a state or federal employer than from a private sector company.

The better bet may be to start investing as soon as possible to get your own retirement nest egg. You can do that by putting money into a workplace 401(k), if your employer offers one, or by investing in an individual retirement account (IRA) with a brokerage firm of your choice.

You need to figure out how much income you need, log into your Social Security account to get a realistic idea of ​​what these benefits will bring, and then plan to save enough to cover the shortfall. By taking these steps, you can ensure that you as a retiree do not face any financial problems.