Retirement should be a time to enjoy the fruits of your labor. Do you think you can do that with an income of $18,084?
For most people, the answer is no. And that’s a problem because that’s the amount of money the average monthly Social Security benefit of $1,507 would provide.
If you don’t want to end up living on less than $20,000 a year, there are a few things you can do to avoid this fate.
Here’s how to make sure you have enough money as a senior
While the average Social Security benefit is just over $1,500 a month, you can try to get a benefit that’s larger than average. You can accomplish this by doing the following:
Earning more money. Benefits are based on average wages over the 35 years when you earned the most. If you can boost your earnings above what the typical American makes, you can get a benefit that’s above average.
Delaying your benefits claim. The maximum monthly Social Security benefit doesn’t become available unless you wait until 70 to start getting your checks. If you claim any time before then, your benefit could be reduced due to a missed opportunity to earn delayed retirement credits and/or due to early filing penalties.
Unfortunately, the reality is that even if you take these steps and can boost your average Social Security benefit, you are not going to be able to survive solely on Social Security. These benefits are simply not designed to be your only support source.
Rather, they replace about 40% of what you were making before leaving the workforce, and it’s up to you to provide the rest of the money you’ll need to live comfortably.
If your employer provides a pension, this can help you supplement Social Security. But that’s not an option for most people, which means there’s just one solution to avoid living on around $18K in income as a retiree: You are going to have to invest and build a retirement nest egg that can provide you with the extra money you need.
How to invest to supplement Social Security
The good news is, there are lots of tools to help make retirement investing easy. First and foremost, you’ll want to sign up for a 401(k) if your employer offers one or open another type of tax-advantaged account, such as an IRA, if you haven’t done one of these things already.
Next, set a retirement savings goal. You can do this in a few ways. But if you know how much extra income you’ll need your savings to produce to supplement Social Security, one of the easiest approaches is to multiply that amount by 25.
For example, if you need your savings to provide $25,000 in income to add to your Social Security benefit, you’d want around $625,000 saved. That way, if you follow the 4% rule to set a safe withdrawal rate from your retirement accounts, your savings would produce the desired amount.
Investor.gov has calculators that can tell you how much to set aside each month based on your chosen nest egg and desired retirement age. Figure out what you need to save, then set up automatic contributions to your tax-advantaged account.
From there, you can pick your retirement investments — exchange-traded funds (ETFs) are usually an easy approach if you don’t want to buy individual stocks — and watch your money grow. If you stick to this plan, you shouldn’t have to live on $18,084 a year, and should have plenty of funds to enjoy your later years.
The $16,728 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $16,728 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.
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