Ever since it was first developed during FDR’s administration with the New Deal, Americans have been relying on Social Security for much of their retirement. It may coincide with investments, retirement accounts and pension funds, but it makes up at least a portion of the income seniors live on after they retire.
If you are one of many who have long heard the dire predictions that Social Security will not be around when you retire, then you may be concerned, especially as you grow closer to that age. It is important to get past the hype and learn the truth when planning for your retirement.
How Much You Will Earn
You first must understand how much you will qualify for in retirement. The Social Security Administration uses some complex formulas to arrive at a specific amount, but it is based off the highest earning years. You can go online to the Social Security website to get an estimate of what you will receive based on past earnings and projected future income. (Your Social Security Questions: 5 Answers Everyone Needs to Retire Richer)
Your amount will also depend on when you choose to take your payments. While you are eligible for Social Security after age sixty-two, you would receive a reduced amount, which is about thirty percent less than your full amount. You will get the maximum amount allowed once you reach full retirement age. For people born after 1959, that is age sixty-seven. (Retirement Planner: Full Retirement Age)
What If Social Security Is Not Around
One of the concerns facing the American people is the Social Security Trust Fund running out of funds for retirees. Statistics show currently that will not happen until 2033. However, there is no reason to panic if you will be retiring after that date or expect to still be receiving the income. Experts say the program will still be around, but it will only pay out about three-fourths of the planned benefits. While this is still reason to be concerned, you won’t be completely without funds.
For most people to live comfortably in retirement, they cannot rely on Social Security alone. They must use retirement funds, such as 401k programs and other income to supplement Social Security. If anyone is worried about the continued solvency of the program, they must begin now to increase their supplemental income.
- Increase contributions to 401k plans
- Use a more aggressive portfolio which can increase the return on your investment
- Buy into assets which increase in value over time, such as real estate
- Consider working part-time to increase your income after retirement
- Plan to delay your retirement and work longer
These are all viable options to help you have the income you need as you get older. Investing is often the smartest move, but it may not be enough to sustain you if you are older now. Delaying retirement by one or two years can increase your benefits. (Your Social Security Questions: 5 Answers Everyone Needs to Retire Richer)
It is never a good idea to rely on one method of income for your retirement. No matter what age you are now, begin planning for that time by figuring out what you need to do to have enough money once you are no longer working. As a realtor, realtist, broker, businessman, and father, I worry about retirement, but I know that through careful planning I can utilize social security to supplement my savings and assets. Have you planned for retirement yet? Get to it now, because the power is now!
Eric Lawrence Frazier, MBA
President and CEO