One of the biggest questions Americans face when thinking about retirement is: will Social Security exist when I retire? According to the government, Social Security is on track to be depleted by 2034, at which point they will begin paying a portion of the benefits from ongoing tax revenue. The Social Security Administration has been relatively vague about this, and that makes many investors uneasy for good reason.
Yet, according to a survey conducted by Personal Capital in partnership with ORC International, a quarter of Americans surveyed expect Social Security to be their primary source of income during retirement. Social Security, in fact, remains the number-two source of income our respondents expect to support their retirement, lagging only slightly behind those who say they will depend most on employer-sponsored plans (27%).
But what about those somewhat dire predictions for Social Security? How can the 15% of Millennials and 29% of Gen Xer respondents who say they will depend on Social Security for their primary source of income actually plan for a retirement if this benefit is greatly reduced – or gone altogether?
Save in Other Ways
This is a predicament that grows as younger generations approach retirement age. A little more than half of those surveyed (51%) and 62% of Millennials plan to retire at 65 or younger, which means that saving for retirement in alternative ways – that is, not depending on Social Security – is all the more important.
The good news is, Americans are still turning to other sources to drive their retirement savings, like employer-sponsored retirement plans and cash savings (though don’t forget the dangers of having too much cash). Despite this, far too many – 23% of Baby Boomers, 34% of Gen Xers, and 39% of Millennials – say they have no money saved for retirement.
4 Steps to Decrease Your Dependence on Social Security
So what’s a person to do? You’ve worked hard, but in the absence of Social Security and, in some cases, any retirement savings at all, how can you expect to enjoy financial security during what are supposed to be your golden years? A few quick tips:
- Evaluate your money habits: Understand where your money is going and use tools to see how much taxes impact what you actually make. Identify what your saving and spending patterns are and adjust accordingly. The great news is, you can start right now.
- Invest in other retirement vehicles: Social Security may be around when you retire. It may not be. It also may exist in an entirely different form by the time you retire. By having multiple retirement savings vehicles – and taking advantage of employer-sponsored retirement plans and employee equity compensation – you don’t have to bite your nails over what will happen to Social Security by the time you retire.
- Use the experts: Accurate forecasting for retirement involves distribution, income events, growth assumptions, tax optimization, and much, much more. A financial advisor who is a fiduciary to you can help you navigate these complexities while setting you up for a confident future.
- Start now: It’s easy to get overwhelmed in the days of doom-and-gloom retirement forecasting, but there’s still a light at the end of the tunnel. There’s a saying: “every passing minute is another chance to turn it all around,” and this rings true for your retirement. Start prioritizing your retirement, create a plan, stick to it – and know that it’s not too late to catch up.
The Social Security blind-spot can be a major issue as younger generations approach retirement age. But it is possible to succeed with your retirement goals without depending solely on Social Security. Starting now is crucial for this, and longer you wait to take action, the more difficult the process will become. Planning is crucial for a successful, diversified retirement nest egg. While the situation with Social Security may be tenuous, having the retirement you want within your grasp doesn’t have to be. Start prioritizing your retirement, create a plan, and stick to it.
To learn more, read our Retirement Survey conducted in partnership with ORC International.
Michelle Brownstein, CFP®
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