You might have heard some good news about Social Security benefits recently. It is now projected that benefits will increase 6.1% in 2022, which would be the most significant increase since 1983.1,2The official announcement is expected in October, and once confirmed, the revised payment would go into effect in January 2022.3 However, Social Security – while foundational to your retirement income – is not sufficient on its own.
A comprehensive financial plan is essential to living the kind of retirement you dream of. Without one, there’s not much chance of maintaining the same quality of life post retirement. Short of winning the lottery or getting an inheritance from a wealthy relative, you must put in the work to fund your retirement years for the way you want to live them. Most well thought out retirement plans are made up of three pillars.
The first pillar is your own personal savings such as an IRA or investments. The second is your pension if you have one. And the third pillar, sometimes over-valued, is Social Security. It’s not uncommon for future retirees to bank too much on their post-retirement benefits and not invest sufficient time in planning for the other two pillars. In most cases, Social Security benefits can cover about 40% of your retirement income needs. That can add up to a decent “salary” when annualized, which can account for most families’ basic living expenses, such as food, shelter, and clothing. So, we should not completely dismiss this valuable benefit. However, keep in mind that you don’t want to just exist during retirement; other resources must be available to fund travel, entertainment, and the experiences that make life enjoyable.
The Social Security Administration offers some great benefit calculators on their website, so you can see projections of what your future Social Security benefits could look like. Your Social Security benefits should not be your entire retirement plan but merely one of the pillars of your “retirement stool.” Enlisting the help of a tax-smart financial professional is a great way to formulate a comprehensive plan to help pursue the retirement you dream of having.
Social Security can be confusing. One survey found only 6% of Americans know all the factors that determine the maximum benefits they can receive. If you have any questions, please reach out. We have a number of resources at our fingertips that you may find helpful.4
1 Fortune.com, July 15, 2021
2 SeniorsLeague.org, May 12, 2021
3 InvestmentNews.com, July 13, 2021
4 FinancialAdvisorIQ.com, July 19, 2021
The forecasts for Social Security benefits are based on assumptions, subject to revision without notice, and may not materialize.
The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation.