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Are You Relying Too Heavily on Social Security for Retirement? If So, Then Here’s What You Need to Know

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How important will Social Security be in your retirement? If you said “very important,” you’re not alone. Half of all Americans say Social Security will account for anywhere from half to all of their retirement income. Considering how critical this program is to the majority of retirees, there are certain things every soon-to-be retiree needs to know.

To shed some light on important topics relating to Social Security, we’re turning your attention to this enlightening article from the GOBankingRates website.   In the report, GOBankingRates reporters talked to Social Security experts to find out whether those millions who are placing their trust in future benefits are making a safe bet – or heading for a future retirement crisis.

Americans Mistrust Social Security – but We Rely on It

The article starts with a bleak assessment. “The majority of Americans don’t have much faith in the future of Social Security,” it says. “A recent GOBankingRates survey found that 46 percent of Americans believe the program will offer a lot less than it does today by the time they retire, and 23 percent believe the program won’t exist at all by the time they retire.”  With that lack of confidence, you would think most Americans would be looking elsewhere for future retirement security. 

However, that’s not the case, says GOBankingRates. In spite of their deep doubts in the viability of the program, “most Americans plan to depend on Social Security to fund at least some of their retirement — 26 percent said they plan to use Social Security to fund less than half of it, but 51 percent said they plan to depend on it to fund more than half (31 percent) or all (20 percent) of their retirement.” The question is, is this a safe bet? 

To find out what you need to know about relying on Social Security to fund your retirement, GOBankingRates turned to the experts. Here’s what they had to say.

Is Social Security Reliable as it Stands?

The article makes it clear that the future could look challenging for retirees who put all their eggs into the Social Security basket. “One-fifth of Americans plan on using their Social Security income to fund their whole retirement,” says GOBankingRates, “but even if the program continues to exist in its current form, this will likely be difficult for most retirees.”

The reporters raised this question with financial planner Frank Murillo. He expressed skepticism. “With the rise of inflation and the overall cost of living, unless you can truly stick to a budget — which in my experience most people don’t — Social Security is not sufficient for most retirement expenses,” he said. Murillo says that future retirees often find the results “eye-opening” when they see the disconnect between the amount they thought they could spend and the amount they can actually spend.

Retirement expert Wade Pfau agrees that Social Security was never meant to provide all of a retiree’s income, or even half of it. “It is meant to replace about 40 percent of the average indexed lifetime earnings of someone who worked and earned an average wage over their lifetime,” he said. Nevertheless, “many retirees will seek to replace a higher percentage than this.”

The Goal: Retire on 70 Percent of Pre-Retirement Income

“Most experts suggest aiming to plan for retirement income that is at least 70 percent of your pre-retirement income,” says the GOBankingRates article. That demands a comprehensive approach to financial planning.

“Since Social Security is likely to make up only a portion of your retirement income, it is important to have a well-rounded strategy to meet your income needs in retirement,” Katherine Tierney of Edward Jones advises. “If you’re unsure where to start, a financial advisor can help you outline your goals, develop a strategy to meet them and measure your progress along the way.”

This is where we pause to suggest that you should pick an advisor who will develop a planning tool for you called a financial dashboard. With a dashboard in place, you’ll be able to compare a wide range of financial strategies and adjust your spending, saving and investing to meet your needs and achieve your goals. Contact us at AgingOptions and we’ll refer you to a professional who can assist in this important step.

The Reality: What to Do if Social Security Funds Most of Your Retirement

As we said above, although financial experts do not recommend living on Social Security alone, that’s the reality for millions. “For many Americans,” says the article, “this is their only source of retirement income. The GOBankingRates survey found that 25 percent of Americans have not started saving for retirement and that 36 percent have less than $10,000 saved.”

Colleen Carcone of the financial services firm TIAA says that, even if Social Security plays a disproportionate role in funding your retirement, you still have important options. “Some people can live on Social Security only,” she told GOBankingRates. “If your only source of income is Social Security, remember that continuing to work and delaying the start of your Social Security benefits can close the gap [between your retirement income and your needs] because a delay would mean a bigger check when you do start.”

This delay has a huge impact, since benefits increase by roughly 8 percent for each year you delay between 62 and 70 (check your Social Security records for the actual figures that apply in your case). Also, the longer you work at a higher income level, the higher your benefits can be, since Social Security uses your 35 highest-paid years to determine your eventual benefit.

The Future: What Will Social Security Look Like?

We’ve written extensively here on the AgingOptions blog about the future of Social Security, and it turns out that people’s perception might be unrealistically gloomy. “As the survey found, most Americans believe that Social Security benefits will be reduced or cease to exist in the coming decades,” GOBankingRates reports. The fact is that, while the Social Security trust fund is now set to run out in 2034 or 2035, the program will continue – but unless changes are made, a benefit reduction of around 24 percent is possible.

“Most experts believe Social Security will continue to exist, but to keep it going will likely require some changes in the current program,” says the article. The three most often-reported suggestions:

  • Eliminate the earnings cap so that all income above $147,000 is taxed for Social Security;
  • Increase the full retirement age – for example, adjusting the law so that those born after 1970 may not able to get full benefits until age 68 or 69;
  • Increase the payroll tax on Social Security – the amount paid by both employer and employee to fund Social Security, currently 6.2 percent (up to $147,000 earned).

The problem is that any or all of these require Congressional action, which has been in short supply in our divisive political era. For that reason, financial experts quoted by GOBankingRates are skeptical. “I would not advise clients to make their Social Security decisions based on what the government may do,” one said.

In a worst-case scenario, our society will lumber towards the point in just over a decade when Congress has failed to act and benefits have to be cut across the board – an unlikely prospect but not an impossible one, the article implies. That, say the experts, is a major reason why over-reliance on Social Security can be risky. “The uncertainty surrounding the future of Social Security should be taken into account when retirement planning,” the article concludes.

My Life, My Plan, My Way: Get Started on the Path to Retirement Success

At AgingOptions we believe the key to a secure retirement is the right retirement plan – yet statistics show that 70 percent of retirement plans fail. That’s why for nearly two decades we’ve been dedicated to the proposition that a carefully-crafted, fully comprehensive retirement plan is the best answer to virtually any contingency life may throw your way as you age.  Our slogan says it all: My Life, My Plan, My Way.

When it comes to retirement planning, most people focus on one fairly narrow issue: money. Financial planning is an important component of retirement planning. However, people heading towards retirement often make the mistake of thinking that a little financial planning is all that’s required, when in fact most financial plans are woefully inadequate. What about your medical coverage? What if you have to make a change in your housing status – will that knock your financial plan off course? Are you adequately prepared legally for the realities of retirement and estate planning? And is your family equipped to support your plans for the future as you age?

The best way we know of to successfully blend all these elements together – finance, medical, housing, legal and family – is with a LifePlan from AgingOptions. Thousands of people have discovered the power of LifePlanning and we encourage you to the same. Simply visit our website and discover a world of retirement planning resources.  Make certain your retirement planning is truly comprehensive and complete with an AgingOptions LifePlan.  Age on!

(originally reported at

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