Why I Look at Social Security as Bonus Money for Retirement — and Nothing More

Many seniors routinely rely on Social Security as a major source of retirement income. Some seniors depend on those benefits as their only income source.

I, on the other hand, am not counting on those benefits to get me through retirement. That doesn’t mean I’m not expecting any income from the program at all. There are rumors going around that Social Security is running out of money, but the reality is that right now, the worst-case scenario in that regard involves benefit cuts — not the program disappearing completely.

But even so, I’m taking a very specific approach to Social Security. In a nutshell, I refuse to count on those benefits to pay my senior living costs. Rather, I regard Social Security as a source of bonus money only. Here’s why.

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Too many shortcomings and unknowns

Social Security is a well-intentioned program. But when it comes to sustaining seniors by itself, it falls glaringly short.

To be fair, the program wasn’t necessarily meant to serve as retirees’ sole income source. Years back, workers were commonly awarded pensions in exchange for years of service at the same company. These days, that practice has largely dried up within the private sector. Now, it’s on employees individually to build nest eggs to supplement their Social Security income.

Either way, if you’re an average earner, you should only expect Social Security to replace about 40% of your pre-retirement wages, and if you’re an above-average earner, those benefits will replace even less. Meanwhile, seniors commonly need a good 70% to 80% of their former earnings to maintain a lifestyle they’re apt to be happy with. That makes relying heavily on Social Security a potentially dangerous idea.

Then there are the benefit cuts that I alluded to earlier. Those are a solid possibility and could happen in a little over a decade if lawmakers don’t intervene or find a way to address Social Security’s financial woes. If benefits are slashed, they’re apt to provide even less replacement income.

These are among the reasons why I refuse to bank too heavily on Social Security for my retirement. Also, I prefer to take an active role in planning for that milestone, which means working my hardest to earn money I can sock away in my 401(k) plan.

Saving money is something I can control. I can take on extra work and make smart spending choices that allow me to free up cash for my retirement plan. The future of Social Security is something I get no say in — so I can’t let myself fall back on those benefits too much.

That’s why I prefer to make the assumption that any cash I get from Social Security is bonus cash — not money I need for essentials. My plan is to establish a retirement budget based on the amount of money I feel I can safely withdraw from my nest egg each year and the amount I think I can earn via part-time work.

If I end up with a larger Social Security benefit than expected, great — that’s money I can use for leisure. Maybe I’ll donate some of it if I don’t need it or gift it to loved ones.

But I don’t want to land in a position where I’m left to worry about benefit cuts or changes to the program that are outside my control. If I decide that I’m not really counting on Social Security, it actually takes the pressure off.

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