Since its inception on August 14, 1935, Social Security has been instrumental in providing a foundation of income for many American retirees. Not only are Americans falling behind on savings for retirement, but Social Security was truly designed to replace only 40% of the average pre-retirement wages. In 2019, the average Social Security income paid to a retired worker was $1,471 per month or $17,652 for the year.1 As much as it benefits retired workers, there are reasons why one shouldn’t rely solely on Social Security during their retirement:
- You may face persistently high healthcare costs. Healthcare continues to be one of the largest expenses in retirement. It was estimated that a 65-year-old couple in 2019 would spend $285,000 in healthcare and medical expenses throughout their retirement.2 And if you think you have Medicare to fall back on, think again. It doesn’t cover most dental care, vision, or long-term care which all can quickly add up. Around 70% of people turning 65 today will need some type of long-term care services, and it’s not cheap.3 To prepare yourself for such costs ahead, consider opening a health savings account (HSA) to pay for qualified medical, dental, and vision expenses and investing in a long-term care insurance policy for possible nursing home or assisted living care.
- There could be cuts to Social Security in the future. There are much uncertainties surrounding the longevity of the program. At a rate of 10,000 baby boomers retiring a day, there aren’t as many young workers generating payroll taxes. To simply put it, there’s more money leaving the pot than there is going in. A report is expecting the program’s trust funds to run dry by 2035 with a possible 20% reduction in benefits.4 Though there’s quite some time until then, you’ll want to be prepared and supplement your Social Security income with additional sources such as an annuity that can provide you guaranteed income for life.
Social Security can help bolster savings, but purely relying on it could be detrimental to your retirement. In our role as stewards, we offer tailored strategies and professional advice to help ensure your golden years are successful and fulfilling. Contact us today and let’s discuss all of your options.
This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results. Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.
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