Are you worried about having sufficient income in retirement? These steps can help

When it comes to retirement income, a looming question for most people is how much money is enough?

While the answer to this question is never in black and white, recent headlines on Social Security solvency may inject more fear into this dilemma.

Last week, the Social Security Administration released its annual report on directors. His new projections brought forward the depletion date of the fund that pays retirement benefits to 2033, when 76% of the promised benefits would be payable.

Lawmakers are expected to look at the program’s creditworthiness at some point. But the question is when. And, when they do, the changes should generally include benefit cuts, higher taxes, or a combination of both.

Polls show that many Americans already have a faltering faith that Social Security will be there for them when they retire.

A recent Nationwide survey found that 71% of Americans fear Social Security will run out in their lifetime.

Another survey from the Transamerica Center for Retirement Studies found that 73% of workers agree with the statement, “I’m afraid when I’m ready to retire, Social Security won’t be there for me.”

Many social security experts say the system is unlikely to disappear completely in our lifetime. After all, in 1983, when the last major reforms were enacted, the system was only three months away from bankruptcy.

However, instead of waiting for changes that might affect your eligibility for life later, experts say the best approach is to have a plan to build your retirement income through other means.

As simple as it sounds, the first step is to have a retirement plan.

“Most people don’t have a plan,” said Joe Elsasser, certified financial planner and president of Covisum, a social security claims software company in Omaha, Nebraska.

“In order to test your plan under pressure, you have to start with a plan,” he said.

Assess whether you are reasonably on track with a full Social Security benefit, then ask yourself what would happen if cuts were put in place, Elsasser said.

Also, don’t underestimate the positive effects of working a year or two longer or saving more, he said.

Ted Jenkin, CFP and CEO of Atlanta-based Oxygen Financial, said he was asking people to run their plan without using Social Security income. This total tells you how much you will need on the day you retire to maintain your standard of living.

This amount also shows you how much you need to save in your 401 (k) plan or your individual retirement accounts to be successful in retirement.

You may not need to maximize your 401 (k) once you figure out how much you need to save and how much return you need to earn on that money in order to maintain your standard of living, Jenkin said.

Any changes to social security are unlikely to affect current or near retirees. But the younger generations might feel a pinch of any change.

Therefore, it always helps to delay benefit payments if you are nearing retirement and are in good health, Elsasser said.

By receiving checks too early, retirees could forfeit 25 to 30% of that monthly income, depending on the age of their full retirement (typically 66 or 67, depending on the year they were born).

Also consider supporting other ways that could increase your income in the event benefits are reduced or other unforeseen expenses arise.

Dividend-paying stocks are often seen as a source for this.

However, other investments can also diversify your sources of income, Jenkin said. By acquiring rental property now, you could create a passive income stream later. Certainly, these investments are not guaranteed and come with risk, he said.

Additionally, investing in or running a business could help generate more monthly income. It could be a side activity that you are running away from home. Or you could become a part owner of a business that makes regular money.

While delaying Social Security retirement benefits until age 70 is the best annuity one can buy, Elsasser said, there are times when you might want to consider professional products where you pay a premium. lump sum and get regular income over time in return.

“Annuities can be a good supplement to Social Security for people who don’t have a lot of guaranteed income,” he said.

But with so many annuity products available – and the various motivations for selling them – understanding and investigating what you are buying is essential.

Be sure to check with an agent who sells you an annuity about the total commission and fees they will earn by selling the product and how that would compare to what they would earn by managing your portfolio in such a way. more traditional.

For many annuities, the advisor will earn an amount similar to what they would earn if they simply managed your portfolio, Elsasser said.

When used correctly, annuities can help you build your own pension, Jenkin said.