Social Security shouldn’t be only retirement income
The latest statistics show 20 percent of people age 65 and older are living solely on their Social Security checks. And, for one-third of the elderly, their Social Security checks represent 90 percent or more of their income.
It was never supposed to be that way. Social Security was meant to provide a foundation upon which people could plan for their financial well-being.
In fact, financial planning has often been compared to a three-legged stool. One leg represents Social Security. The second leg represents pensions provided by an employer or 401(k) plans for employees and the self-employed.
The third leg represents savings and other investments. The stool will not work with only one or two legs. But it is solid enough to stand on with all three legs.
Concerned that Americans are not saving enough for retirement and other important needs, the Social Security Administration and the American Savings Education Council (ASEC) launched the “Save for your Future” campaign on May
This campaign is committed to inform Americans how vital it is to plan to save for retirement and other life stages. Most financial planners say a person needs between 70 and 80 percent of his or her pre-retirement income to live comfortably in retirement. But for the average worker, Social Security replaces only about 40 percent of pre-retirement income. The balance must come from pensions and personal savings.
A recent survey reveals 68 percent of American workers have not tried to calculate how much money they will need to save for a comfortable retirement. Yet, 45 percent of those who have done a calculation have made changes in their retirement planning.
“Planning and saving for retirement is an individual responsibility,” said James B. Lockhart, Deputy Commissioner of Social Security. “Unfortunately, many Americans mistakenly believe that Social Security alone will guarantee their financial future. The reality is, Social Security was never intended to be the sole source of income in our retirement years. Only half of today’s retirees have a private pension. And too few Americans save as much as they should.”
The Save for Your Future campaign emphasizes the importance of saving. It also guides people to easy-to-use tools that can help them craft and implement a financial plan.
Each year, the agency mails a Social Security Statement to all workers age 25 and older. The statement provides customized benefit estimates and earnings information to individuals who are not receiving benefits.
Social Security also offers a Benefits Planner (www.socialsecurity.gov/planners/calculators.htm) online that people can use to calculate their estimated retirement benefit. By clicking on the Retirement Income Estimator at the bottom of the page, people can link to ballpark estimate worksheet (www.asec.org/ballpark/index.htm). The ballpark estimate worksheet enables individuals to combine their estimate of future Social Security benefits with estimates of income from pensions and savings to determine if they are saving enough for a secure retirement. More helpful information can be found at www.saveforyourfuture.org.