It’s Monday so let’s catch up on news that can affect your wallet. Today lets focus on Social Security and a myth that I though was disappearing but in talking to some people this weekend, I found is still around. And, that’s the belief that you can live off of Social Security when you retire. That was never the intention and it certainly is not true today.
Your Social Security benefits are calculated based on your earnings record. Specifically, your top 35 years of earnings are averaged and adjusted to come up with a monthly payment amount you’ll be eligible for upon reaching what’s known as full retirement age. However, the amount you actually receive will be based on your age in comparison to your full retirement age when you apply for benefits. So, applying early at age 62 for example will mean that you will receive less and applying later, after your full retirement age will mean more benefits.
However, no matter when you request your benefits, even in the best case scenario, Social Security only provides about 40% of your previous earnings and most people just can’t live that, they need more, a lot more. Beyond that the future of Social Security and the amount it will provide is uncertain. So many things are on the chopping block and it could be only a matter of time before you see pieces of it chipped away.
So instead of relying solely on Social Security to take care of you, build your own retirement stash. There are lots of tools to help you. Things like 401(k)s if you’re employed, SEP-IRAs if your self-employed and IRAs that anyone with income can use. Starting today, if you haven’t already started, set something aside (no matter how small) but keep it out of site so you won’t be tempted to spend it. Then over time increase the amount. Retirement is coming and it will be here before you know it. Don’t get caught with a bad case of if onlys!
And that’s it for today. Got a question? Send it to me at email@example.com and follow me on Facebook @MindingYourMoney.
Thanks so much for listening and as always remember that minding your money really is the path to a richer life!