What's Happening
18 minutes ago

Prediction: Buying Enbridge Today Will Set You Up for Life

foolfool.com
28 minutes ago

Uber CEO Hints At Potential Tesla Partnership For Robotaxis: 'No One Wants To Compete Against Tesla Or Elon'

benzingabenzinga.com
32 minutes ago

If You Invested $100 In Bitcoin Last Valentine's Day, Today It'd Be Worth More Than What An Average American Spends On Their Significant Other On The ...

benzingabenzinga.com
34 minutes ago

Want $1 Million in Retirement? 9 Simple Index Funds to Buy and Hold for Decades.

foolfool.com
38 minutes ago

Retirees in These 9 States Could See Their Social Security Checks Taxed

foolfool.com
43 minutes ago

At Home Restructured Bonds Offer Asymmetric Opportunity Via High Yields, Potential Capital Appreciation

benzingabenzinga.com
45 minutes ago

3 Reasons to Seriously Consider Using a Living Trust to Pass an Inheritance to Your Family

foolfool.com
48 minutes ago

These 2 AI Stocks Are Vying to Be the Next Palantir. Are Either of Them Buys?

foolfool.com
54 minutes ago

Dow Jumps Over 300 Points Following Recent Inflation Data; Investor Sentiment Improves, Fear & Greed Index Moves To 'Neutral' Zone

benzingabenzinga.com
54 minutes ago

Palo Alto Networks, Moderna And 3 Stocks To Watch Heading Into Friday

benzingabenzinga.com
55 minutes ago

TikTok Returns To Apple And Google App Stores After A Month-Long Hiatus

benzingabenzinga.com
56 minutes ago

Prediction: 2 Stocks That'll Be Worth More Than Bank of America 10-15 Years From Now

foolfool.com
57 minutes ago

US Stocks Set For A Volatile Start: Analyst Dismisses Chances Of 20%+ S&P 500 Gain For Third Year In A Row, But Says 'Investors Should Be Optimist...

benzingabenzinga.com
1 hour ago

Should You Buy Nvidia Stock Before Feb. 26?

foolfool.com
1 hour ago

Here's How Many Shares of Enterprise Products Partners You Should Own to Get $5,000 in Yearly Dividends

foolfool.com
1 hour ago

Stock-Split Watch: Is Meta Platforms Next?

foolfool.com
1 hour ago

The Ultimate Healthcare Stock to Buy With $500 Right Now

foolfool.com
1 hour ago

Sony's Outgoing CEO Kenichiro Yoshida Calls This $4 Billion Deal The 'Most Impressive' In Company History

benzingabenzinga.com
1 hour ago

Think American Express Is Expensive? This Chart Might Change Your Mind.

foolfool.com
2 hours ago

Will the "Trump Put" Save Nvidia?

foolfool.com

Far Too Many People Make This Social Security Mistake in Retirement

If you’re not yet retired, you probably know someone who’s collecting Social Security each month. You may have a relative, neighbor, or former colleague who relies on those benefits to cover their retirement expenses.

But there’s a big mistake retirees commonly make when it comes to Social Security. And if you’re not yet retired, it’s a major blunder you can do your part to avoid.

A person at a laptop covering their face.

Image source: Getty Images.

Don’t try to retire on Social Security alone

The average retiree on Social Security today collects about $1,920 a month, or about $23,000 per year. But think about what your life in retirement might look like if that’s pretty much all the income you have.

Will you be able to comfortably cover your property taxes on a paid-off home? Will you have enough money to maintain your home?

What about transportation? Will you be able to swing car payments if your current vehicle runs out of steam? Will you be OK to manage your auto insurance premiums if they rise following a minor accident?

Then there’s healthcare to consider. Fidelity says that a 65-year-old person retiring today might spend $165,000 on healthcare throughout retirement, taking various out-of-pocket costs on Medicare into account. If you retire on Social Security alone, you risk having to resort to drastic measures, like skipping medication doses because you can’t afford your prescriptions.

To be clear, relying too heavily on Social Security is something far too many people do already. The Social Security Administration says that among beneficiaries ages 65 and older, 12% of men and 15% of women count on Social Security for 90% or more of their incomes.

A good way to avoid financial struggles in retirement

Not only will Social Security only replace a relatively small portion of your pre-retirement paycheck (generally, about 40% if you earn an average wage), but you might also end up getting less money out of the program if there are benefit cuts in the future. The program’s Trustees project that benefit cuts may occur as early as 2035, which is when Social Security’s combined trust funds are expected to run out of money.

For all these reasons, you don’t want to retire on Social Security alone. And if you make an effort to save for retirement, you shouldn’t have to.

It doesn’t necessarily take a lot of money on a monthly basis to end up with a decent-sized nest egg that supplements your Social Security checks nicely. If you have 30 years between now and retirement, try contributing $250 a month to an IRA or 401(k) plan if you have access to one through your employer. The benefit of opting for a 401(k) over an IRA is that there may be an employer match that pads your contributions.

If you save $250 a month over 30 years at an average annual 8% return, which is a little bit below the stock market’s average, you’ll have about $340,000 to work with once your retirement kicks off. If you then withdraw from your savings at a rate of 4% per year, as many financial experts recommend, that will give you a $13,600 supplement to your Social Security income each year. And that buys you a lot more breathing room.

You might think that the biggest Social Security mistake you can make in retirement is signing up for benefits too early. But actually, the biggest mistake is assuming you can live on Social Security alone and making little effort to save because of that.

If you attempt to retire on just Social Security, your senior years may be downright miserable. So it’s best not to put yourself in that situation.

The $22,924 Social Security bonus most retirees completely overlook

If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $22,924 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Simply click here to discover how to learn more about these strategies.

View the “Social Security secrets” »

The Motley Fool has a disclosure policy.

Related Posts

Social Security is an essential piece to most American’s retirement plans. Without their monthly benefits, some 16.3 million seniors U.S, would be living below the

The average retirement age in the U.S. was 62 in 2023, but that number’s been slowly ticking up over time. Rising life expectancies and rising

While the stock market is still thriving, some investors may be feeling wary about the future. Spiking inflation could cause the Federal Reserve to shift

There are plenty of ways to become a millionaire, like starting a successful business, being a professional athlete, or becoming a movie star. For most