The tricky thing about retirement planning is that it’s hard to predict what the cost of living will look like in 15, 20 or 30 years. You may end up spending $1,000 a month on healthcare due to higher costs and multiple medical issues. Or maybe you won’t even spend half that amount.
But while it can be difficult to estimate your retirement costs when that achievement is decades away, there are steps you can take to plan for your senior years, such as making money from savings and developing an income strategy. And part of the latter should include knowing what role Social Security might play in retirement.
Now many seniors rely on Social Security for the bulk of their retirement income. Some even rely on these features to pay everyone of their living costs once they stop working.
It may be possible for you to get Social Security alone. But whether or not that makes retirement fun is a different story.
How do you want to retire?
The average senior on Social Security today collects $1,663 a month. Now your monthly benefit may be higher, lower or comparable. How much Social Security pays you each month depends on factors including:
- Record your salary, including the number of years worked.
- The age of registration for Social Security.
If you’re a high-income earner, you might be willing to get a more generous monthly benefit of $1,663. Furthermore, if you delay your filing beyond your full retirement age, you can increase your monthly benefit by 8% annually in the process, until age 70.
So, let’s say you are entitled to a $3,300 monthly benefit because you are getting higher salaries and because of the application delay. If you have modest retirement goals, a paid home, and no major health issues, you may be able to live comfortably on that amount.
But if you’re looking for a monthly benefit that’s closer to what the average life collects today, that’s a different story. Even if you’re content to stay close to home and are mortgage-free, limiting your $1,663 a month could mean having to skimp on basic luxuries, like cable, to cover your basic bills. This is the opposite of what is comfortable.
Thus, the important point is that while it may be possible for some people to maintain a decent standard of living using only Social Security as a source of income, this is generally not recommended. Your best bet is to make an effort to build your own nest egg so that you have an income to supplement these benefits with.
If you were to make $300 a month in a retirement plan over a 30-year period, and your investments were supposed to generate an average annual return of 8%, which is just below the stock market average, you would end up with about $544,000. And that, combined with your average Social Security benefits, can leave you with enough money to enjoy the comfortable senior’s lifestyle you deserve.
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