Many people in the United States are looking forward to the day when they will collect Social Security payments, and for a good reason.
Considering that you have contributed to the system to receive retirement benefits over your whole career, it is only reasonable that you would want to reap the advantages and live a life of leisure in your next years.
Sadly, far too numerous employees will be in for a rude awakening when it comes time to collect their first paycheck on the designated day. And if you’re one of them, you may find that if you don’t find out the truth soon enough, it may wreck your retirement.
The brutal reality regarding Social Security benefits
A large number of Americans will very certainly learn that their Social Security payments will give far less money than they expected.
According to recent research conducted by the TransAmerica Center for Retirement Studies, 21 percent of Americans expect to depend on Social Security as their primary source of income during retirement.
This may be a significant difficulty if they do not have sufficient resources to augment their retirement payments.
Social Security was never planned to be a stand-alone source of assistance for seniors, nor was it intended to provide the majority of the income that retirees demand.
The benefits were meant to be used with an employer-provided pension and any savings that the worker had accumulated over their working life.
Together, these three income streams were expected to replace around 80 percent to 90 percent of preretirement savings. Most experts believe retirees need to maintain their quality of life when they leave the workforce.
On the other hand, Social Security payments will not suffice as a primary source of income since they only replace 40% of preretirement wages.
And although you may believe that you will be able to tolerate a significant wage drop once you no longer have commuting expenses and can stop preparing for retirement, the fact is that this is unlikely to be the case.
Many of your fixed expenditures, such as food and housing bills, are unlikely to alter much due to your decision to leave your employment. Furthermore, certain of your expenses, such as healthcare bills, may increase significantly as a result.
Also read: Ways to Extend Your Social Security Checks Also in Retirement
Be prepared for retirement despite smaller-than regular Social Security benefits.
If you’re still a long way away from retirement, the good news is that you still have time to make adjustments if you had expected that Social Security would provide the majority of your income in retirement.
Set a goal to save enough money to replace about 40% of your preretirement income, in addition to the 40% that Social Security will replace. Save at a pace that will allow you to achieve this objective while maintaining a safe withdrawal rate.
If you’re already on the verge of retirement, boosting your funds might be quite beneficial. Nonetheless, you may need to take other efforts, such as delaying your Social Security claim to increase your payments or working for a few more years to increase your nest egg even more.
Before you quit your job and file for Social Security, it’s critical to recognize that you’ll want additional funds beyond what these benefits provide so that you don’t find yourself in the position of having to deal with a significant financial shortage after leaving the workforce.
Once you accept this, you can start taking the efforts necessary to ensure that you have the secure retirement you deserve.