Can Social Security Save Your Pension? – The Motley Fool
If retirement storage was easier, more people might do it. But it is difficult to put money on a consistent basis when life throws more immediate expenses our way. Add to the fact that many Americans take on debt obligations on top of their bills, and it is no wonder that an estimated 33% of workers 55 and over have less than $ 10,000 set aside for the future.
For those without much in the way of retirement savings, social security often functions as a solution of a stroke. But if you lack money in the IRA or 401 (k) and expect social security to sweep in and save the day, it's time to rethink that strategy.
IMAGE SOURCE: GETTY IMAGES.
Social Security is Limited Purchasing Power
The average privacy currently receives $ 1,461 a month, or $ 17,532 per year, in benefits. If you are an above average earnings, your social security benefits can come significantly higher. Nevertheless, the maximum benefit this year is $ 3,770 per month, or $ 45,240 per year. It may be enough to buy some people a good lifestyle in retirement, but if you are right about it a lot based on your income history, chances are you've become accustomed to living much longer.
But let's assume your benefits mimic those that most older people collect: between $ 700 and $ 1800 per month. Even the top end of that spectrum is not much money to live on.
In fact, only Social Security will replace about 40% of the average employee's retirement income. However, most seniors need somewhere in the ballpark of 70% to 80% of their previous income to live comfortably. It is certain that you can cut down on some living expenses to get by at less, but do you really want to land in a position that you live in a non-cable apartment as a pensioner because you lack the revenue to do better? Probably not.
Therefore, even if you can and should factor Social Security into retirement income, you should not count on these benefits alone to make up for a lack of savings. Doing so is likely to make you pay money and be disappointed at a time when you deserve to enjoy life.
Ramp up and change your plans
Although many older Americans are approaching retirement without much in terms of savings, As long as you have a few working years left, you can strengthen your egg. Start by reducing the cost of living, getting a new job, or doing what it takes to free up money to save. If you manage to spend $ 600 a month for your retirement over the next seven years and you invest your money on a relatively conservative 5% average annual return, you'll end up with nearly $ 59,000. There is not a lot of money, but it is better than none.
At the same time, one pays to consider expanding your career so as not only to increase your nesting, but to leave your existing savings alone. Scissors in Point: Save $ 600 a month for 10 years instead of 7, will give you almost $ 91,000, assuming the same 5% return.
You may also have to come on board with the idea of working in some capacity during retirement. Doing so may not be ideal, but if you work 10 hours a week, adding extra $ 600 a month in your pocket, combined with savings and social security benefits, can be enough to help you live comfortably.
While social security may deviate from playing a major role in the pension, it cannot keep you in the absence of any other income. Be aware of what you create a strategy that lets you enjoy your golden years.
