This is the average social security benefit in 2022 | Personal Finance – Community News
Social Security

This is the average social security benefit in 2022 | Personal Finance

With a traditional IRA or 401(k), you get a tax break on your contributions. Then your money grows on a tax-deferred basis and you pay tax on the money you withdraw from your savings.

With a Roth IRA or 401(k), there is no upfront tax benefit on contributions. But investment gains in your retirement plan are tax-free, as are withdrawals.

How much savings should you aim for? A good rule of thumb is to expect that you will need 70% to 80% of your pre-pension during your final years. Social Security will replace about 40% of your former salary if you are an average earner, so your savings should provide the rest.

Now suppose you throw away $300 a month in an IRA or 401(k) over a 30-year period. If your investments in that account yield an average annual return of 7%, you’ll end up with $340,000. That 7% is slightly below the stock market average, so it’s a reasonable assumption for a 30-year investment window.

Of course, the more money you can save for retirement, the better. But either way, the key is to have access to savings so you’re not just dependent on Social Security.

While the average monthly benefit will rise in 2022 and could rise in the coming years, seniors retiring from Social Security alone are often short on cash. If you’d rather not join their ranks, do your part to ensure you have extra income.