JACKSONVILLE, Fla. – If you’re banking on Social Security funding your retirement, you are in for a rude awakening.
Despite the fact that Social Security covers just 40% of retirement income, Transamerica Center for Retirement Studies discovered that 24% of workers have no retirement strategy beyond counting on Social Security, while 67% of workers said they don’t have a written retirement plan.
Retirement planning requires a lot of educated guesswork about what will happen in the future, but it’s important to make sure you’re making informed decisions.
Here are some common misconceptions:
First, Social Security will fully support you. Experts say this is far off the mark. Retirees need to replace around 80% or more of pre-retirement earnings to avoid a major decrease in quality of life. Social Security is designed to only replace 40%, leaving you with half the money you’d need.
Another misconception: 65 is the standard retirement age. When Social Security was first created, retirees could get their full standard benefit at age 65. Seniors also become eligible for Medicare at 65. But now, people aren’t eligible for their Social Security until at least 66 and as late as age 67. If you plan to retire and start Social Security at 65, you’ll be hit with early filing penalties, which reduces your monthly check amount.
Another rule of thumb many people traditionally follow relates to how much income should be saved. Workers were told to set aside 10% of their salary to be prepared for retirement. But that could leave you with a huge financial shortfall. Instead, set a goal to see if you can save a minimum of 15% to 20% of income.