Why Fixating on Social Security Isn’t the Most Secure Path to Retirement

If you want a more financially secure retirement, you may decide to take steps to increase your Social Security benefits.

There are indeed things you can do to boost the income these checks provide. For example, you could aim to earn more throughout your career, work for at least 35 years to avoid reducing average wages that benefits are based on, and delay claiming your Social Security checks.

But while raising the amount of your monthly Social Security payment is possible, it shouldn’t be the focus of your retirement planning efforts. Here’s why.

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Why optimizing Social Security benefits only gets you so far

Optimizing Social Security benefits has a limited impact on the income you’ll end up with as a senior.

See, there’s a cap on how much you can raise your benefits. And some of the steps you’d need to take to make a substantial impact can be a challenge.

If you hope to increase your Social Security payments by delaying benefits, you’ll be able to boost your standard benefit by 2/3 of 1% per month for each month you delay claiming it after hitting full retirement age.

However, you can only raise your benefit this way until you turn 70. Full retirement age is between 66 and four months and 67, depending on your birth year. If your FRA is 67, the best you can do is raise your check amount by 24% if you wait until 70 to start benefits. Not everyone can wait that long because they may be forced out of the workforce sooner and need their Social Security income to live on.

Increasing income and boosting your average wage can potentially have more of an impact. But since Social Security determines benefits based on average income during the 35 years you earned the most, you’d need to raise your income pretty early in your life and continue to earn a high salary for decades to make a noticeable impact.

Even in a best-case scenario, there’s a limit each year on how much income counts toward determining your benefit. Further, Social Security benefits are designed to replace around 40% of pre-retirement income in general, but higher earners actually get a lower replacement rate because the benefits formula is progressive. So, these benefits can only serve as one of several sources of retirement income if you want to maintain your living standard.

What should you do instead of focusing on increasing Social Security checks?

Although it doesn’t hurt to take steps to raise your Social Security check, this isn’t the foundation of a secure retirement. Instead, your focus should be on saving as much as possible.

Unlike Social Security, there’s no maximum limit on how much monthly income your savings can provide or how much you can boost the amount you save. If you invest enough money and invest wisely, your retirement investments could produce far more money each month than Social Security ever could.

That means if you want the best chance for a secure retirement, you should:

Save as much as you can afford to. While the standard rule-of-thumb was to save 10% of your income for retirement, it’s best to bump up that amount to a minimum of 15% to 20% since people are living longer and projections for future returns are lower. If you can do even better, you’ll be able to enjoy a higher quality of life as a retiree.
Invest wisely. This means building a diversified portfolio of investments you’ll hold for the long term. Depending on the type of retirement account and your level of investing knowledge, this could involve buying ETFs or individual stocks.
Start investing as early as possible. The younger you are when you begin investing, the more compound growth will help your portfolio balance grow.

These three steps can have a far greater impact on your life as a retiree than any decisions you make regarding Social Security. They should be the focus of your retirement planning efforts.

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