Many Americans are anxiously awaiting the day when they can finally claim Social Security benefits, and for good reason. You contribute to the system to earn retirement benefits throughout your career, so it’s only natural to want to reap the rewards and enjoy a life of leisure in your later years.
Sadly, far too many workers will have a shocking surprise the day they can finally claim their first check. And if you’re one of them, it could ruin your retirement if you don’t learn the truth early.
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The harsh reality of social security benefits
Millions of Americans will likely find that their benefits will pay them much less than expected.
A recent study by TransAmerica Center for Retirement Studies found that 21% of Americans plan to rely on Social Security as their primary source of income during retirement. And that could be a huge problem if they don’t have some savings to supplement their benefits.
Social Security was never intended to be a stand-alone source of support for the elderly or even to provide the bulk of the income retirees need. The benefits were meant to work in conjunction with an employer’s pension and with the savings the worker has accumulated over the course of his or her career. Together, these three sources of income were supposed to replace around 80-90% of pre-retirement funds, which most experts suggest retirees need to maintain their standard of living.
However, Social Security benefits alone will simply not reduce it as a main source of income because on their own they replace only 40% of pre-retirement income. And while you might feel like you can absorb a huge drop in pay once you run out of travel expenses and can stop saving for retirement, the reality is, you probably don’t. likely. Many of your fixed costs, such as expenses for food and shelter, are unlikely to change drastically after you quit your job. And some of your expenses, such as health costs, can go up dramatically.
Be prepared for retirement despite lower-than-expected social security benefits
If you’re a long way from retirement, the good news is that you have time to put things right if you anticipated that Social Security would provide the bulk of your retirement support. You’ll want your savings to replace around 40% of pre-retirement income to top up the 40% that Social Security replaces, so set a goal to save a nest egg who will do it to a secure withdrawal rate.
If you are already nearing retirement, it helps to overfill your savings, but you may also need to take other steps, such as postponing your Social Security claim to increase your benefits or working a few extra years to build up your savings even more. nest egg.
The important thing is to realize before you quit work and claim on social security that you will need money outside of what these benefits offer so that you do not face a huge financial deficit after leaving the world of work. The sooner you come to terms with this, the sooner you can start taking the steps you need to get the secure retirement you deserve.
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