The younger generation always claims that there won’t be any social security money when they retire. They have been saying that for the last thirty or forty years. Well, the social security system is still going strong. However, if you are planning for your retirement, don’t depend on social security alone to fund those golden years.
Social security is a part of the taxes that are deducted from our checks on a monthly or biweekly basis – depending on how the payroll works at your job. This money is being used to fund the system that pays benefits to workers who have reached a certain age and are eligible to stop working if they choose. Here are five reasons why social security alone may not be enough:
1. Each year, the Social Security Administration sends a letter of benefits to each person who works and has paid social security benefits. The statement lists the benefits that they will receive if they continue at their current level of earnings until age sixty-two. Depending on your current job, this amount can look meager. The average social security benefit is around forty percent of what you earned before you retired. Can you live on forty percent of your paycheck?
2. With the current rate of inflation, by the time you retire, social security benefits will not pay all of your living expenses alone. Your home may be paid for by then, but you will still have to pay taxes, utilities, grocery bills, gas prices, and other incidentals. The money simply won’t stretch that far without a little help.
3. According to law, you are eligible to receive your social security benefits at age sixty-two. Unfortunately, doing so means that you will only receive three-quarters of your full benefit during retirement. You must be ten months past your sixty-fifth birthday or age sixty-six to get the full benefits.
4. You may die. If this happens, your spouse will only be entitled to a portion of your benefit. Even as a single person, it is hard to live on what benefit you get from social security. Insurance money and some savings may be needed to bury you, which would leave your spouse with little or nothing to live on.
5. No one wants to live life confined by their circumstances. Every eventuality can’t be planned for, but you can plan to be ready financially when they come. It is not good to hang all of your hopes on one plan for retirement. Diversity is the key. Let the money you have worked hard for work for you. Contribute to an employer’s savings plan, open certificates of deposit and money market accounts, invest in stocks, and put money away in a savings account. Whatever you can do to ensure your financial future, do it. You can never have too much money when you stop working. In fact, you may need more.
Wise men hope for the best but plan for the worst. Social security is only one option for retirement. Above are five reasons why it should not be your only option.