You’ve probably heard that the future of Social Security may be uncertain – it is a frequent topic of discussion among those currently working and Washington lawmakers alike. You may not have the full picture on how Social Security fits into your retirement plan and how you’ll need to supplement it in order to have the retirement lifestyle you want. Let’s take a look at some of the important facts about Social Security.
The Social Security Act was signed in 1935 in order to ensure that working Americans would have an income to support them in retirement. As you probably know, it does this by deducting tax from most salaried income in the United States. What you may not be aware of is its changing role. At the time of its inception, the Social Security System was well-equipped to pay out all of its beneficiaries, as there were over a hundred people paying into the system for every person receiving benefits. Over eighty years later, due to ever-increasing life expectancies and earlier retirements, there are less than three. As a result, the system appears to be unsustainable and may change drastically or disappear altogether in the near future.
Let’s say that you plan on retiring soon, though, and can reasonably count on having a Social Security check for the duration of your retirement. Will it be enough to sustain your lifestyle? The odds are that it won’t. Let’s take a look at an expense everyone has to deal with: food.
Assume for a moment that you spend roughly $15 per day on food. If you live for another twenty years after retiring, you’ll need to spend $109,500 over the course of that time in order to keep the refrigerator stocked. That may not sound like a lot, until you look at the average Social Security payout in 2015: about $1335 per month for retired workers. Over the course of twenty years, that will pay you a total of $320,400. That means you’d be spending slightly over a third of your income (34.1%) just to eat! Once you factor in the myriad other expenses that everyday life carries – rent or property tax, insurance, healthcare, and leisure activities, just to name a few – it becomes increasingly clear that Social Security may not be enough for the average person to remain independent in their retirement years.
Fortunately, there are a number of ways you can supplement your retirement income with some forethought and planning. A financial professional can assist you with setting money aside to draw on when retirement day comes. The sooner you put some safety measures in place, the easier you can rest knowing that your financial future is secure.
This information is provided as general information and is not intended to be specific financial guidance. The information and opinions expressed herein are from sources believed to be reliable; however, we make no representation as to its accuracy or completeness. Before you make any decisions regarding your personal financial situation, you should consult a financial, legal or tax professional to discuss your individual circumstances and objectives.
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