Should I Factor Social Security Into Retirement Planning?


Millions of seniors receive Social Security today, which for many is their only or primary source of income. Unfortunately, it’s these same people that end up cash-strapped after retirement. It’s crucial to understand what Social Security will pay so you can avoid this fate.

What can you expect from your benefits plan?

Different factors will affect the monthly Social Security benefits you receive during retirement. These include:

  • How many years of work experience do you have
  • Your career earnings
  • The age you apply for benefits

Your Social Security benefits should replace approximately 40% of your preretirement income. You can also expect benefits that replace 30% of your earnings if benefits are cut (a possibility due to a financial shortfall).

Seniors often need 70% to 80% of their preretirement income to live comfortably. Of course, there are exceptions to this rule. Some retirees can live off less than that, while others need more. Nevertheless, the 70%-80% replacement income goal is reasonable, especially considering that most of your expenses will not drop after retirement.

What does this mean for Social Security? First, it should put you in a position where you can pledge not to rely on these benefits too much and instead save for retirement.

You’ll need $4,000 per month to be eligible for $2,000 monthly benefits. The $2,000 remaining will have to be paid by you.

To be clear, your nest fund doesn’t need to be your only source of retirement income. For example, part-time work is possible to earn income, or you can rent out a portion of your home. However, knowing how Social Security can help you with your senior living expenses is important so you can plan and not be cash-strapped.

There are many ways to reap the benefits.

Although Social Security will not provide all your retirement income, it is worth increasing your benefits. You can increase your benefits by:

  • Minimum 35 years of work
  • Throughout your career, fight for raises
  • Side work can help you increase your earnings during your career
  • You can delay your claim until you are 70

It’s fine to plan to rely on Social Security for retirement income. However, it would help if you didn’t assume that you can live on these benefits only. You could find yourself in a difficult situation as you try to reduce your expenses as a senior.

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