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If you want to live comfortably as a retiree, you must have all the income you need. Unfortunately, some Americans are planning for retirement based on a dangerous myth about Social Security that could leave them far short of covering the necessities.
You owe it to yourself to understand the reality of what Social Security can do for you, and not fall victim to this common misconception that’s apparently shared by the majority of workers.
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Believing this Social Security myth could be costly
The Insured Retirement Institute, a trade group, published results from its Retirement Readiness Research Series last August showing that 62% of current workers believe that if they run out of savings during retirement, they can downsize and get by on Social Security benefits alone.
The problem with this belief: It will be difficult, if not impossible, to downsize enough to pull this off. That’s because Social Security isn’t meant to be the sole source of support for retirees — it won’t pay enough to cover even the basics for the vast majority of retired Americans.
The program is designed to provide about half of the minimum amount of income most seniors need. Experts generally advise replacing 80% of pre-retirement income after leaving the workforce, and Social Security is intended to replace around 40%. So without supplementary income from savings, retirees would need to live on less than half of what they were once earning.
Look at your budget and you’ll likely find that you couldn’t cut costs enough to make that work — even if you downsized fairly dramatically by moving to a cheaper house and cutting out most entertainment expenditures.
And you might end up even worse than that since chances are good your healthcare costs will go up substantially as a retiree. In fact, older Americans on average end up spending just over 30% of their Social Security on healthcare alone, according to a recent AARP report.
It’s easy to see why you can’t make the numbers work when considering that statistic — especially since you also must factor in the taxes on your Social Security benefits, as well as inflation, which is eating away at their buying power.
You simply can’t live on Social Security alone
Every worker needs to realize that you cannot just downsize and depend on Social Security if your investment account is too small. Make sure you don’t put yourself in that position, since your quality of life is likely to be very poor if you do.
Instead, treat investing for your future as a priority — a bill that you can’t miss any payments on. That’s exactly what it is, since you owe it to your future self to be able to cover the necessities after your paychecks stop coming.
The $18,984 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 $18,984 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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