Paychecks stop because you’re retired, you need money from somewhere. Social Security is an important source of income for many seniors because if you qualify for benefits, the money is guaranteed until you die.
So how can you use Social Security to fund your retirement? Here are three steps to take.
1. Be realistic about what Social Security can do
The first and most important part of your plan to have a secure retirement with Social Security is knowing that your benefits alone will not be cut.
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Most people replace 40% of their pre-retirement income with their Social Security check. Unless you think you can easily take a 60% pay cut — which most financial experts don’t believe is possible — you will need additional funds from other sources.
So, while you can (and should) try to get as much as you can from Social Security, you also need a plan to get money from other sources. For many people, that means investing in a 401(k), IRA, or other retirement savings account.
2. Increase your earning power
Although you can’t live on Social Security alone, the choices you make throughout your life have a big impact on how much money these benefits provide. The truth is, if your goal is to increase your retirement paycheck, you want to make sure you’re focusing on maximizing your income and earning as much as possible over as many years as possible.
Your Social Security benefit is based on a percentage of your cost-adjusted wages over the 35 years you earn the most money. So, look for ways to bring in extra cash as early as you can in your career and try to increase your earning power by asking for promotions or raises and be on the lookout for better job opportunities.
If you have been able to increase your income over time, you should also consider working longer at your higher paying job. If you do, some of these peak years can be part of the 35-year period used to calculate your benefits while pushing out some years when you have less income, so it doesn’t drag down your average salary.
3. Pay off your old retirement debts
Ultimately, there’s one thing you can do later in life that will make a big impact on how far your Social Security benefits go. You can wait to say it. You are first eligible to start taking Social Security at age 62. However, every year you delay the start of your paychecks until you’re 70, you end up increasing the amount of money coming in.
You have a full retirement age, based on when you were born. If you start checking early, benefits are reduced – up to 30% if you receive your first paycheck at 62 or 67 if your FRA is 67. If you delay, on the other hand, benefits can increase for each month you wait until 70. So, you can raise payments by up to 24% if you have an FRA of 67 and you wait.
Delaying filing for benefits as long as possible ends up being the best option for many seniors, even if it means missing out on early checks. So, consider procrastinating if possible for you.
By taking these steps, you can expect to ensure that your Social Security benefits provide you with enough money to live on, along with the savings you’ve put aside for your future.
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