Will Millennials Be Able to Use Social Security?
Retirement planning is an essential part of good financial management. Now is the time to get serious about your retirement planning to determine what you need to save and how much you should set aside. The Social Security System is changing and the payout amounts and the eligibility age is different each year. If you are a millennial, you may be wondering just how much you should rely on Social Security and if you should include it in your overall retirement planning.
What Is Happening With Social Security?
The difficult thing with the Social Security system is that it is going to have a much more difficult time to continue funding retirement over the years as the larger older working population moves into retirement. This means that benefits may be adjusted to help fund a larger population. The age to begin to draw on Social Security has already changed, as have the amounts that are paid out each month. Social Security may continue until you retire, but at this point, it is difficult to determine exactly what benefits will be available and at what age you will be able to access them. You should pay attention to the changes that are made to the Social Security system as the changes can impact your retirement.
You will receive a Social Security report every five years that will list your estimated monthly benefit, as well as the benefit for your spouse or children if you were to pass on, and the amount you would receive if you became disabled.
The amount that you make each year and the number of years that you contribute to the system can also affect the amount that you will receive. You should receive this report every five years starting at 25 years old. You need to pay attention to the amounts listed and note changes from year to year.
Should I Rely on Social Security as Part of My Retirement?
At this point, it does not seem to be a good option to rely on Social Security as the primary way to fund your retirement. Even now many seniors that are living only on Social Security income have a difficult time making ends meet. If you want to retire comfortably, you need to save for retirement separately from the Social Security system. You may include your Social Security as part of the overall amount that you are going to save or look at it as bonus income that may be there when you retire.
How Should I Plan for Retirement?
The easiest way to save for retirement is to work your way up to saving 15 percent of your income for retirement each year. This would include your employer match if you have one. You can invest in the retirement plan through your job, which will likely be a 401(k) or a 403(b). You should invest at least up to your employer match. After that, you may want to make out a Roth IRA. The Roth IRA will come out after taxes, but you will not be taxed on your withdrawals when you reach retirement age. This means you may be less in taxes since your contributions will be less than your withdrawals. The maximum amount you can contribute in 2017 is $5,500.
This is about $458 a month. Once you have maxed that out, you can up the amount that you contribute to your 401(k) until you reach the goal of 15 percent.
What If I Want to Retire Early?
If you want to plan to retire early, then you will need to save for retirement outside of your retirement savings accounts. You will not be able to draw on your Social Security until you reach the official retirement age which is currently 67 for people born after 1960. You will not be able to withdraw money from your retirement accounts until you are 59 ½. Saving for retirement outside of your retirement accounts will allow you to stop working at an earlier age. It helps to talk to a financial adviser to determine the best way to invest so that you can generate a good retirement income at an earlier age and determine how much you will need to retire by a specific age.
Why Should I Keep Paying Into the Social Security System?
You are legally required to pay Social Security. Additionally, the Social Security will help people who have deceased parents or who disabled and are not able to work. It can be frustrating to pay into a system that may not pay you back in the same way that it currently is but it is actually helping people who need it. Additionally, many people who are currently retired rely on Social Security as their primary income source. Even if the benefits change before you reach retirement age, it is helping people who do need your help.
You can also look at Social Security as a benefit that can reduce the amount you need to help support your parents as they get older. The Social Security benefits can help them cover some of their expenses. The Medicare benefits can help cover their health care as they get older. This will give you additional income that you can use to save for your retirement. Your parents can still depend on the Social Security system while you have the time to save and plan without depending on it too much for your retirement.
What Other Benefits Are Available Through the Social Security Program?
Medicare is the other benefit that you may take advantage of once you retire. Medicare can be used in conjunction with your health insurance, although some people rely on it as their primary health insurance. Medicare can help you deal with the increased health costs that come as you age. In fact, this may become a large portion of your monthly expenses and Medicare can help keep those costs down. You may want to look into additional insurance options such as disability or long-term care insurance especially if dementia or other diseases run in your family. This can usually wait until you are closer to retirement age in your 40s or 50s.