Will Social Security be part of your retirement income?
Programs like Social Security and defined benefit (pension) plans will help in retirement, but the uncertainty surrounding funding of these programs means that you may have to fill a gap in your retirement income.
In fact, Social Security is funded by taxes that are taken from your paycheck and in 2014 represented one of the largest portions of the U.S. budget at 24 percent.1 Plus people are living longer, meaning more years for retirees to receive Social Security benefits. Social Security can provide a foundation for retirement income, but for most retirees it will only make up 30-40% of their total retirement income.2
Starting in 2008, millions of baby boomers began to retire. It is expected that every year through 2025 another group of boomers will reach the early retirement age of 62 and begin to take advantage of Social Security payments. Boomers comprise the largest generation to pay into social security, which means more people will be taking money out while fewer people are paying money in. The result? Social Security benefits may gradually be depleted.
You may not want to rely fully on Social Security to support you financially in retirement. While benefits still may be available, they might not be enough to support your standard of living.
To find out how much you might receive from Social Security, you can use the Social Security Online Retirement Estimator. You can compare this estimate to your current income and project how much more you may need in retirement. Then, enroll in your defined contribution plan today to potentially fill the gap.
Talk with a Retirement Specialist if you have questions, and to get started investing for your future.
1Policy Basics: Where Do Our Federal Tax Dollars Go?, http://www.cbpp.org/research/policy-basics-where-do-our-federal-tax-dollars-go, accessed 01/06/2016
2”The Retirement Income Reference Book,” 2012 LIMRA