Social Security is only designed to replace a part of a retiree’s income, and the buying power of its benefits doesn’t necessarily keep up with inflation. The services retirees tend to spend the most money on – housing and medical – have increased significantly. Moreover, inflation can erode your savings. One thing’s for sure, you can’t solely rely on Social Security in retirement.
First, know when you’ll claim benefits and how much you’ll receive. If you start receiving benefits at the earliest possible age of 62, you will receive reduced benefits. If you wait until your full retirement age, which ranges from 65 to 67 depending on the year you were born, you will receive full benefits. If you wait until 70, you receive a larger benefit than you would at your full retirement age. Also, one spouse can file for benefits when they are of full retirement age and suspend payments until 70. If they are old enough to receive Social Security, the other spouse can then file for a spousal benefit. This benefit is half of the other spouse’s benefit. However, it’s always important to note that your situation is unique, you have your own personal goals, and so you must have a custom Social Security strategy that works best for you.
While Social Security can help cover expenses in your retirement, it won’t necessarily fund your pre-retirement lifestyle: Social Security benefits are only designed to replace about 40% of your income, and may replace less if you are a high-income earner or want to maintain your lifestyle.
While the existence of Social Security isn’t in question, its actual purchasing power relative to major costs in retirement is. You may not know exactly how much income you will need after retirement, or for how many years you’ll need it. Knowing when to file and how to claim your Social Security benefits is crucial, along with determining how much additional income you’ll need every year.
We want to help you create a solid plan for your retirement. It can be hard to know the ins and out of Social Security benefits and how to create alternative sources of income in retirement on your own. That’s why we’re here to help. Schedule your no-cost, no-obligation financial review with us to learn about your options.