59% of future retirees worry about social security, according to the data

Retiring can be a daunting prospect, given the many financial unknowns involved. And there is just something unsettling about giving up a steady salary and living off savings and social security instead.

The latter is particularly worried about older workers. In fact, 59% are concerned that social security will not have the funds to pay for their benefits, according to a recent survey conducted by Nationwide.

If you share this concern, know that it is valid. But you must also know that there is an important step to take to lighten it.

Save for your own future

The latest report from social security administrators painted a somewhat bleak picture of the program's financial future: once trust funds are exhausted, which could happen as early as 2035, beneficiaries could benefit from a reduction. up to 20% of the planned benefits. This is bad news for current seniors, but also for those who expect to be able to count on these benefits once retired.

The solution? Do not rely too much on these benefits. Save for your own future. You can do this by regularly contributing to an IRA or 401 (k), and the sooner you start, the better.

Currently, IRAs do not exceed $ 6,000 per year for workers under 50 and $ 7,000 for those 50 and over. The annual contribution limits are much higher: 401 (k) s – $ 19,000 for workers under 50 and $ 25,000 for those aged 50 and over. But you do not need to make a maximum of 401 (k) to build a considerable nest egg for the future. You simply need to save consistently from a very young age and invest your savings in ways that allow for reasonably aggressive growth. In most cases, this means accumulating inventory, especially when you are younger.

Suppose you are able to earn $ 500 per month for your retirement in an IRA or 401 (k), and your savings generate an average annual return on investment of 7%, which is a few percentage points less than the stock market. average. Here's what your savings balance will look like, depending on how long you make contributions:

TABLE AND CALCULATIONS BY THE AUTHOR.

As you can see, the more time you have to save for retirement, the less you need to rely on Social Security. Of course, if you're already older, you may need to set aside more than $ 500 a month to try your luck with some of the numbers above. But if you are 50 years old without money and you maximize your 401 (k) at the current limit of $ 25,000 for 17 years, you will get $ 771,000, assuming the same 7% return.

Do not forget that to maximize a 401 (k) level, you will need to make some serious adjustments in your lifestyle, which could include a reduction in the size of your home, hobbies or even obtaining of a second job. But in exchange, you will buy more financial security for your golden years.

Although it's too early to tell if Social Security will be forced to apply discounts, one thing is certain: these benefits are not designed to keep you in the absence of others. income. Social security will only replace about 40% of your income before retirement if you earned an average salary, and most seniors need double that amount to live comfortably. If you want to enjoy your retirement, focus less on social security and focus more on building savings and investing that money wisely for increased growth.