It’s a mistake that can ruin your senior years.
If you’re not yet retired, you probably know someone who collects Social Security every month. You may have relatives, neighbors, or former co-workers who rely on these benefits to cover their retirement expenses.
But there’s a big mistake retirees often make when it comes to Social Security. And if you haven’t retired yet, that’s a big mistake you can avoid yourself.
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Don’t try to retire on Social Security alone
Currently, the average retiree enrolled in Social Security collects about $1,920 per month, or about $23,000 per year. But think about what your retirement will be like if that’s almost all your income.
Can you comfortably cover the property taxes on a paid-off home? Do you have enough money to maintain the home?
What about transportation? If my current car gets a flat tire, can I change my car payment? Will I be okay if my car insurance premium increases due to a minor accident?
Then there is medical care to consider. According to Fidelity, a 65-year-old person retiring today could spend $165,000 on health care costs over the course of their retirement, after factoring in various Medicare out-of-pocket costs. If you retire on Social Security alone, you run the risk of having to resort to drastic measures, such as cutting back on medication because you can’t afford prescriptions.
Let’s be clear: Relying too much on Social Security is something far too many people already do. According to the Social Security Administration, among recipients age 65 and older, 12% of men and 15% of women rely on Social Security for more than 90% of their income.
A good way to avoid financial difficulties after retirement
Not only does Social Security only replace a relatively small portion of your pre-retirement salary (typically about 40% if you earn the average wage), you may get less money from the program if Social Security is cut. There is also gender. future. The program’s governing board predicts that benefit cuts could occur as early as 2035, at which point Social Security’s general trust fund is expected to run out of money.
For all of these reasons, you don’t want to retire on Social Security alone. And if you’re making an effort to save for retirement, you don’t have to.
It doesn’t necessarily have to cost a lot of money each month to have a decent-sized nest egg that’s enough to supplement your Social Security check. If you have 30 years between now and retirement, try contributing $250 per month if you have access to an IRA or 401(k) plan through your employer. The benefit of choosing a 401(k) over an IRA is that there may be an employer match that will match your contributions.
If you save $250 a month for 30 years at an average annual return of 8%, just below the stock market average, you’ll have about $340,000 available for retirement. If you then withdraw your savings at a rate of 4% per year, as many financial experts recommend, you’ll add $13,600 to your Social Security income each year. And it gives you more breathing room.
You may think that the biggest mistake people make when it comes to Social Security in retirement is filing for benefits too early. But in reality, the biggest mistake you can make is assuming you can survive on Social Security alone and making little effort to save.
If you try to retire on Social Security alone, your retirement may be downright miserable. Therefore, it is best not to put yourself in such a situation.
