Many retirees rely heavily, if not completely, on Social Security benefits. However, Social Security might not be enough to live on for many of us. As U.S. News & World Report points out, “Social Security was designed to supplement income, not replace it entirely.”
To complicate matters, some experts wonder just how stable the Social Security system is. Unfortunately, this means Social Security may not be around to serve as the safety net you’d hoped for.
What Is the State of the Social Security Program?
About 65 million Americans receive Social Security checks every month, according to U.S. News & World Report.
Workers pay Social Security taxes based on their earnings, up to a certain amount, which then goes directly to beneficiaries, U.S. News & World Report explains. Over the past 40 years, more money has been left over from payroll taxes than what was needed to pay out current benefits. This extra cash goes into Social Security’s trust funds.
The roughly $2.9 trillion in reserves now go toward current benefits, U.S. News & World Report says. But these surpluses are expected to be drained by 2034.
Can You Live on Social Security?
According to AARP, one of five married couples and two of five singles who are 65 and over receive at least 90 percent of their income from Social Security. So millions of Americans are living on Social Security.
However, living primarily on Social Security benefits “can be difficult,” AARP says. Furthermore, Social Security benefits might not support the lifestyle that you’ve become accustomed to.
AARP’s suggestions for making Social Security livable include:
- Eliminating debt.
- Delaying Social Security. AARP emphasizes that the monthly amount you receive will be 76 percent higher if you wait to start benefits at age 70 rather than age 62, the earliest possible age.
- Relocating to someplace where the cost of living is lower than where you live now.
How Can You Fill the Social Security Gap?
You can depend on Social Security (as long as the system remains solvent) to cover some retirement expenses. But if you do, there might be a gap between what you can afford and what you want to afford.
What can you do now to bridge a potential income gap during retirement?
- Put money into your workplace retirement plan. If your employer offers a 401(k) or another workplace retirement plan, be sure to maximize your contributions. And if you’re not contributing a single penny to your workplace retirement plan, it’s not too late to get started.
- Take advantage of catch-up contributions for retirement accounts. The IRS allows you to boost contributions to your 401(k) or IRA in the year that you turn 50. The dollar amount of catch-up contributions often changes from year to year. For 2022, the extra money you can put into a 401(k) is $6,500; the extra IRA contribution is $1,000.
- Cut back on spending. Find ways to reduce expenses so you can earmark more money for your golden years.
- Slash your debt. Getting rid of debt enables you to shift more money to your retirement savings.
- Consider alternatives. Aside from a 401(k) or an IRA, don’t forget to look at other options that can allow more freedom in dictating your financial future. For instance, you might look into buying a life insurance policy. Or you might open a self-directed IRA that can let you hold assets like real estate and precious metals.
Don’t bank solely on Social Security. Bank on yourself. Take control of your financial future and download our free guide to precious metals IRAs.