Social Security:
3 reasons your retirement shouldn't hinge on Social Security
By Maurie Backman, The Motley Fool
Many workers don't save for retirement (or don't save payment might be easily offset a lot) because they're planning to fall back on Social
by the additional housing costs
Security. And while it's not a bad idea to factor those
you'll face -- which is why you really do need roughly
benefits into your retirement plan, your finances
80% of your former income once you retire.
should by no means revolve around them. Here's why.
2. Social Security might get cut in the future There are rumors abounding that Social Security is on
1. Those benefits aren't designed to sustain retirees
the verge of bankruptcy, but thankfully, they're false.
Social Security, at its core, is designed to keep
Since the program is funded by payroll taxes, it can't
seniors out of poverty.
run out of money as long as we have a workforce.
It's not, however, designed to pay for retirement by
What is happening, however, is that the program is
itself. This year, the average recipient collects just
facing a financial shortfall that might cause it to cut
over $17,500 a year in benefits -- hardly enough to
benefits as early as 2034. In fact, recipients might see
support a comfortable lifestyle. In fact, Social Security as much as a 21% reduction in monthly payments -is only designed to replace about 40% of the average
unless, of course, Congress intervenes with a fix,
worker's preretirement income, but most seniors
which may or may not happen. The point, therefore,
need close to double that amount to cover their
is that while Social Security today might replace 40%
expenses.
of the average earner's preretirement income, it might represent an even smaller percentage in the
If that figure sounds off, think about the things you
future.
spend money on during your working years, like transportation, food, clothing, utilities, and
3. You may be forced to take benefits early
healthcare. Those expenses aren't going away in
You're eligible to collect your full monthly Social
retirement. If anything, you might spend more in
Security benefit once you reach your full retirement
certain categories, like leisure (since you'll have more age. Depending on your year of birth, that age will be time on your hands), healthcare (since medical
66, 67, or somewhere in between. You also have the
problems tend to creep up as we age), and utilities (since you'll be home more). And while you might pay off your mortgage in time for retirement, remember that property taxes tend to climb over time, and homes tend to cost more to maintain as they get older. In other words, whatever savings you reap from not having a mortgage Today’s BoomeR 5