We are told that we are supposed to save independently for our retirement in order to avoid struggling during our golden years, but data from the US Government Accountability Office tells us that nearly half of the workers aged 55 and over are slowly moving towards this goal without any personal savings to demonstrate. for. And while this may partly result from mismanagement of money, excessive reliance on social security could also be questioned.
Many workers mistakenly think that social security will be enough to cover their bills in retirement. But that is a misconception that could cause millions of Americans to run out of money during their golden years.
You can not live alone social security
Social security is not designed to support the elderly. These benefits will replace about 40% of the average retirement income of an average employee. For high earners, this will replace an even smaller percentage. Meanwhile, most seniors need about 80% of their previous income to live comfortably. Those with ambitious goals that involve many trips and nightlife may need a lot more. In any case, relying solely on social security is a very bad idea, which may cause you to lose money once you have stopped collecting a paycheck.
If you are still not convinced, consider this: The average social security recipient now receives $ 17,532 a year. It's barely above the poverty line and certainly not enough to support a comfortable retirement. Therefore, if you want to take advantage of your golden age, consider the following: Social security, at best, will only pay half of your retirement. The rest of your income will have to come from you.
Increase your savings
If you have neglected your savings up to now, consider this as your wake-up call: social security alone will not reduce it to retirement. It is rather up to you to save enough to enjoy your years of the year. The good news is that you make have the opportunity to catch up, even if you are an older member and retirement is not that far away.
Workers aged 50 and over can currently contribute up to $ 7,000 a year to an IRA and $ 25,000 a year to a 401 (k). Now, if you do not have the habit of backing up anything, you probably will not be able to snap your fingers and start maximizing a maximum of 401 (k) overnight. What you can do, however, start saving Something immediately, and then increase your savings rate as you make lifestyle changes that allow you to do it.
This is good: you will seriously consider reducing your expenses and saving the difference if you want to succeed in retirement. But think this way: if you do not If you are making efforts to save today, you will probably have to dramatically reduce your retirement expenses, like cable TV and other luxury items that you currently enjoy.
What is the reduction of your expenses and the banking of the difference will do for your nest egg? Imagine that you can save $ 500 a month for the next 12 years. If you invest that money with an average annual return of 7% (which is more than feasible when you are buying shares), you will get $ 107,000. Now, frankly, it's not a ton of money with which to retire. But this is a beginning. In addition, if you are able to set aside $ 1,000 per month over the next 12 years, you will accumulate $ 215,000, assuming the same 7% return.
At the same time, if you are an older worker without a large economy, you may have to embark on the idea of working at a certain level during retirement. A part-time job that supplements your income by about $ 300 a week can offset a minimal or no retirement plan balance. And you do not have to do something you hate – you can take a hobby you like and turn it into a revenue-generating opportunity.
Although social security is now an essential source of income for many older people, it can not pay for your retirement alone. If you are an average employee, you can probably count on him to provide about half of your retirement income, but no more. The balance will have to come from you in one form or another.