Counting too heavily on Social Security can be a recipe for financial disappointment during retirement. Yet, 40% of baby boomers expect the federal program to be their main source of income during their golden years.
The 22nd annual Transamerica Retirement Survey of Workers found that baby boomers are much more likely to say they expect Social Security to be their primary source of retirement income than those in Generation X (25%), millennials (17%) or those in Generation Z (16%).
Expecting too much from Social Security can be a big mistake. The program was never intended to be the only source of income for retirees, the Social Security Administration (SSA) notes.
And in fact, for higher-earning folks, it’s implausible to expect Social Security to replace much of their on-the-job income. Many experts project that retirees need about 70% of their annual preretirement income to live well in retirement. But as the SSA notes:
“The amount of your average wages that Social Security retirement benefits replaces varies depending on your earnings and when you choose to start benefits. If you start benefits in 2022 at your ‘full retirement age’… this percentage ranges from as much as 75% for very low earners, to about 40% for medium earners, to about 27% for maximum earners.”
The SSA says that if you start benefits after reaching your full retirement age, these percentages would be higher. By contrast, starting benefits earlier lowers these percentages.
Planning for retirement the right way
As you can see, counting on Social Security to carry too much of the retirement load is a risky bet. You’re far better off taking steps to generate savings today, so you will have them to tap into tomorrow.
Looking for more tips on building a healthy nest egg? Consider enrolling in Money Talks News’ retirement course The Only Retirement Guide You'll Ever Need. It’s a 14-week boot camp with everything you need to plan the rest of your life, know you’ll have enough money and make your retirement dreams a reality.
The course is intended for those who are 45 or older, but even younger folks can benefit from the wisdom to be gleaned from these lessons.
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