Counting too heavily on Social Security can be a recipe for financial disappointment during retirement. Yet, 37% of baby boomers expect the government program to provide their main source of income during their golden years.
The 20th annual Transamerica Retirement Survey of Workers found that baby boomers (37%) are much more likely to say they expect Social Security to be their primary source of income than those in Generation X (26%) or millennials (17%).
Expecting too much from Social Security can be a big mistake. The program was never intended to be the only source of income for retirees, the Social Security Administration notes.
And in fact, for higher-earning folks, it’s implausible to expect Social Security to replace much of their on-the-job income. Many experts project that retirees need about 70% of annual preretirement income to live well in retirement. But as the SSA notes:
“The amount of your average wages that Social Security retirement benefits replaces varies depending on your earnings and when you choose to start benefits. If you start benefits at ‘full retirement age‘ … this percentage ranges from as much as 75 percent for very low earners, to about 40 percent for medium earners, to about 27 percent for high earners.”
The SSA says that if you start benefits after full retirement age (which ranges from 66 to 67, depending on birthdate), these percentages would be higher. By contrast, starting benefits earlier lowers these percentages.
Close to 60% of retirees claim Social Security before full retirement age, making their situation even more precarious.
Planning for retirement the right way
As you can see, counting on Social Security to carry too much of the retirement load is a risky bet. You’re far better off taking steps to generate savings today so you will have them to tap into tomorrow.
Money Talks News founder Stacy Johnson points out that there is no single approach to retirement savings that will work for every person:
“Everyone’s different and so are their retirement solutions. The important thing is to step back, look at where you are today, think about what you want your retirement to look like and try your best to hit those savings goals. The sooner you start that process, the better.”
Looking for more tips on building a healthy nest egg? Consider enrolling in our retirement course. It’s a 14-week boot camp with everything you need to plan the rest of your life, know you’ll have enough money and make your retirement dreams a reality.
The course is intended for those who are 45 or older, but even younger folks can benefit from the wisdom to be gleaned from these lessons.
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