Social Insecurity: 3 Reasons Retiring Might Be Tough

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Prepare to work part-time or scale back your standard of living in retirement.

More people plan to rely on Social Security as a source of retirement income at a time when retirees are receiving smaller Social Security checks, recent studies show.

These facts are part of a combination of factors that indicate it’s more important than ever to invest in retirement accounts. They are:

1. More people are relying on Social Security

Gallup’s annual Economy and Personal Finance survey, conducted last month, found that 36 percent of people who have yet to retire expect Social Security to be a “major source” of their retirement income. That’s up from 28 percent a decade ago.

Another 48 percent expect Social Security to be a minor source of retirement income, with only 14 percent expecting not to rely on it at all.

2. Few people are getting the maximum benefit

Statistics from the U.S. Social Security Administration show that as of December 2013, 73 percent of the 37.9 million retirees on Social Security received reduced payments because they opted to receive benefits prior to reaching full retirement age.

This was true of more women (75.4 percent) than men (70.3 percent).

MarketWatch reports that a person due to receive $1,000 a month in Social Security benefits at a full retirement age of 66 would receive only $750 at age 62. By contrast, they would get $1,320 if they waited until age 70 to start receiving benefits.

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3. Social Security is less secure

The Social Security Administration is currently using interest to pay beneficiaries, MarketWatch reports. But soon, SSA will have to start tapping the program’s actual assets — which are currently expected to run out in 2033.

The good news, according to Gallup, is that retirement investment accounts, specifically 401(k)s, continue to be a major source of retirement income for the greatest percentage of workers.

This year, 49 percent said such accounts would be a major source, although that’s exactly the same percentage that said so a decade ago.

As stated above, thirty-six percent expect Social Security to be a major source of retirement income. The next four major sources of income mentioned are:

  • Certificates of deposit (27 percent)
  • Work-sponsored pension plans (25 percent)
  • Part-time work and home equity (both 21 percent)
  • Individual stocks or stock mutual funds (20 percent)

The Gallup survey concludes:

To the degree nonretirees’ savings are not sufficient to fund their retirement, nonretirees will have to make up the shortfall somehow. The guaranteed Social Security benefit is an obvious way to do that, if not by also seeking part-time work or scaling back their standard of living considerably.

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