For many retirees, Social Security is a staple component of their monthly income. Social Security enables millions of seniors nationwide to receive the benefits of their earlier efforts. But, as times change, Social Security has begun to slide into an ever-more-precarious position. Although many seniors rely heavily on this source of income to remain financially stable, the dire reality surrounding Social Security paints a perilous picture for future generations and boomers alike. If you’re wondering how changing circumstances are affecting this program and what it might mean for your personal retirement strategy, read on to understand such issues in depth.
Is Social Security Enough?
Depending on all sorts of factors such as your age, income bracket, and past contributions to the Social Security system, your benefits may or may not play an important role as part of your retirement strategy. However, for most retirees, Social Security simply won’t cover enough of their costs to rely on it alone. According to the Social Security Administration, the average monthly payment for a retired worker is $1,404. Unfortunately, this doesn’t come close to covering basic necessities in many cases. The stark reality of Social Security is that, by itself, it simply isn’t enough for most folks. If you intend on traveling, starting side projects, or pursuing other hobbies, you’ll certainly need more sources of income than just one government program.
While this may seem bleak, it doesn’t have to feel depressing; rather than worry about the lackluster nature of Social Security, you could more adequately prepare for it by learning about its problems sooner rather than later.
Working Through Retirement
If your savings seem spotty, keeping your job or part-time position isn’t a bad idea. Lots of people plan on remaining in the workforce to supplement their Social Security checks. In many cases, this works well; but for many others, this plan simply doesn’t come together. The future is hard to predict. When everything goes according to plan, it’s easy to look back and say that the correct decision was made, but if a single snag – such as an unexpected layoff, health issue, or family problem – disrupts your goals, you may begin to regret your decision instead.
Tips for Maximizing the Value of Social Security
Many seniors are eager to cash in on their Social Security benefits as soon as possible. However, for those looking to get the most out of this asset, delayed gratification will prove far more useful in the long run. Seniors who choose to delay receiving Social Security could earn significant increases. However, there are multiple factors to consider. For example, once your Social Security benefits reach a particular level, you’ll need to pay taxes on these benefits.
That said, delaying Social Security is generally quite beneficial. Although you’re technically able to start collecting Social Security at age 62, waiting until the age of 70 will increase the amount you are eligible to receive with each year that goes by. In some cases, delaying your benefits until age 70 could increase what you receive every month by a third. If waiting eight years sounds like too long of a period to go without any supplemental income from Social Security, consider getting a reverse mortgage to lessen your financial burdens while waiting for Social Security or other assets to come to fruition. Patience pays off, in this case.
The Future of Social Security
As the problems plaguing this institution continue to grow, it’s a very real possibility that Social Security will run dry in the coming decades. Though the program probably won’t run out of money entirely, retirees will likely see reductions in the future. With thousands of baby boomers retiring each day, there simply isn’t a sufficient number of younger workers to fund the program to its fullest. Combined with increasing life expectancies and other factors, some would estimate that the few trillion dollars in reserved assets will be depleted by 2034. Keep in mind that this doesn’t mean that the program will be gone by that year – it will just be a shadow of its former self.
Saving for retirement is a challenge for many retirees. Given the eventual reductions in Social Security and the decreasing effectiveness of the program, many seniors are now reevaluating their retirement strategies. As bleak as these revelations may seem, this information may serve as valuable motivation for positive change. No matter what your aims are regarding your Social Security benefits, being well-informed will enable you to better reach those goals.