More than 64 million Americans will receive some kind of social security in 2019, according to the Social Security Administration. And of those who receive benefits, almost half of married couples and about seven out of 10 unmarried beneficiaries depend on those benefits for at least 50% of their earnings.
In other words, benefits related to social security schemes can make or break your pension.
Now, depending on your benefits in a certain capacity, not necessarily a bad thing. While you should not trust the money as a primary source of income, it acts as a nice cushion to supplement your own retirement savings. The problem is that most people have no idea how much they should receive in the benefits of retirement.
If you're still a few decades away from retirement, you may think you don't have to worry about social security right now. But because your benefits will be at least part of your retirement income, to find out how much you need to save for retirement, you need to know how much you will receive from your social security number.
Figuring Social Security in Your Pension Number
Before you can start saving for retirement, you need a goal in mind. Enter your pension number – or the total amount you should have saved when you retire. The easiest way to find this number is to play around with a retirement calculator, which gives you a ballpark estimate of how much you need. (Note that no calculator will give you a 100% accurate answer, so try a few different to get a number of possible numbers to aim for.)
Another quick and easy way to get tough. Estimating how much you need is to apply the rule of 25. It is based on the 4% rule, which in a nutshell says you can withdraw 4% of the Pension Fund the first year after you retire and then adjust the number every year after counting on inflation. The rule of 25, so lets you basically work backwards. So, if you know you need around $ 50,000 a year in retirement, it multiplies by 25, and you will need a nest egg worth around $ 1.25 million.
It's a scary number, even for super savers. However, the figure is only for the total amount you need to receive a pension – it does not count for the portion of the income that comes from privacy.
For example, say you estimate that you will receive around $ 1800 per month – or $ 21,600 per year – in social security schemes. Knowing that you need around $ 50,000 every year to cover all your expenses and Social Security will cover $ 21,600 for it means you only need to take out the remaining $ 28,400 per year alone. Multiply it by 25 to get a new pension number and it comes out to about $ 710,000. While there is still a lot of money, it is much less overwhelming than $ 1.25 million.
When you should not count on social security
All that is said, it is still a good idea to save as much as you can on your own, so that your dreams do not extend if You do not receive as much as you want in social security benefits – because there is a good chance that can happen.
Because baby boomers move in, there is more money flowing out of the system in benefits than what comes in the form of tax. As a result of this deficiency, the benefits may have to be cut by about 20% by 2034, according to the Social Security Administration.
Does that mean you can't rely on social security at all? No. The system will not collapse completely (assuming everyone continues to pay their taxes) and you will still get some benefits – it may not be what you expected. So when you calculate your pension number and figure out how much you need to save, remember that you might receive less than you had planned from privacy.
Also, checking your social security statements can act as a wake up call for those who do not do enough to save. If you set aside savings because you expect social security to take care of all your financial needs when you retire, you may be unlucky when you see that your estimated monthly benefits are probably not close enough to cover all of your expenses.
Storage is difficult enough as it is, but Social Security makes it a little easier. While it's not the wisest idea to rely on your benefits for a majority of your retirement income, there's no harm in being strategic about how to plan your retirement, maximizing your savings.