Will Social Security Ever Be Enough
The New-to-Medicare journey is full of people nearing retirement. Over the years, certain things remain true. In more recent years, more seniors ask will Social Security be enough to pay their way through retirement.
As people enter their golden years, the closer they get to retirement the higher emotions tend to be. Whether it’s an exciting time or a scary time depends on how much money is set aside for the future.
Will Social Security Ever Be Enough
New Medicare beneficiaries are unaware of what Medicare covers. Moreover, they don’t know what healthcare will cost during retirement. Health-care expenses are only a fraction of the cost of living.
The scariest part is, how many seniors have nothing put aside for retirement savings or plan in place. A report came out last year by CNBC about Americans close to retirement.
The findings are alarming. Reporting that most Americans only have 12% of the retirement funds they need, to live comfortably. Even scarier, one out of every five of them have nothing set aside for retirement.
For many Americans, spending their entire adult life without planning and saving for their future is common. In fact, some would call the cost of living is too expensive.
Saving for college funds for children with this income amount can easily become a priority over saving for retirement.
Parents want to provide their children with the most opportunity possible. As a result, saving for their own future becomes less important.
However, neglecting to plan can come with some major repercussions. Relying on Social Security to be enough isn’t the best idea.
Social Security isn’t an Income Replacement
Originally, Social Security benefits weren’t a sole source of income. The program was to help keep Americans out of poverty; a safety precaution, at best.
Social Security benefits never were to replace paychecks that the working class has been earning for the last several decades. Unfortunately, most people don’t understand this until it’s too late.
The way we view Social Security benefits must change. Younger generations think Social Security becomes their source of income once they retire. This is far from the truth.
The fact is that the maximum monthly amount possible for Social Security income in 2018 was $2,788. Of course, this was only for those making claims at full retirement age (65) or after.
While this may be true, the average amount a recipient receives per month is a little over $1,400. Making for an annual income of about $17k. Women had an even less annual average.
Think about surviving on less than $17,000 a year. Those that claim benefits earlier; like at the age of 62, may receive much fewer benefits than those who wait until they’re 65 or older.
As of 2019, the federal poverty level is at $12,490.
If beneficiaries solely rely on the $17K/year from Social Security, they’re basically living on the poverty line. This could be why more seniors are starting to worry about their golden years instead of anticipating them.
Another misconception seems to be that when we retire, we’ll live on less money or have fewer living expenses. Well, that’s easier said than done.
Many people don’t change their lifestyle habits and lower their daily costs due to retirement. Additionally, expenses like water, electric, or other utilities may already be as low as possible.
Cutting costs may not be an option. However, preparing for the future and having a game plan, can make retirement fun and exciting phase of life.
The plan is to own a home and have it paid off before we retire. Even still, property taxes and other fees may apply depending on where you live.
Plans don’t always work out how we want. In fact, about 15% of seniors reside in apartments or rent their homes.
The cost of rent each month can count for the majority of the $1,400 from the Social Security checks beneficiaries receive.
Social Security income benefits are no exception to taxes. Often retirees pay taxes on benefits. Individual taxpayers with a modified adjusted gross income of $25K or joint filers with $32K/year – half of SSI benefits are taxable.
Earning more may result in taxes for up to 85% of SSI benefits. Other determining factors may include, where you live; your state may tax your benefits.
Before you retire, you’ll want to know this information. This can help determine how much money you’ll have each month after everything is paid.
Another shocking discovery is how many Americans are unaware of potential healthcare costs during retirement. The working class has paid taxes to prepay for Part A coverage.
On the other hand, most must still pay monthly premium costs for Part B and D – the following enrollment.
As of 2019, Part B premium costs are $135.50 per month. Including coverage for about 80% of health expenses. Beneficiaries must also pay other expenses such as deductibles, copays, and coinsurance.
Original Medicare Parts A and B don’t offer coverage for routine dental, vision, or hearing services. As we retire, these parts of our body may need some checking up on.
Covering the costs of healthcare, groceries, insurance, car care, and payments, debt payments, entertainment, travel, emergency expenses and more, seniors simply don’t have enough in Social Security funds to cover the costs.
Long Term Care
We tend to ignore the idea of long-term care in the future. It’s important to address this topic because about half of us will need this type of care one day. Unfortunately, Medicare doesn’t pay for this expense.
The cost of monthly room rentals can total thousands of dollars. Most Americans can’t afford that expense. Medicaid will pay for long-term care in some states. However, this is after you’ve exhausted all the assets you own.
Medicaid will pay for a semi-private room, which means you’ll need to share with a stranger. When using this coverage, you don’t have the choice of the facility either. This can be problematic for family and friends coming to visit.
With expenses being so high, and the future options of long-term care are limited, what can you do to prevent this? The start begins earlier in life.
Start Making Changes Now
You don’t want to be part of the group wondering will Social Security ever be enough. The likelihood of that isn’t very promising. Start planning and making changes to prepare for a better future.
Beneficiaries can start resolving their debt, budgeting, and maybe downsizing to a smaller home.
If you had children who are living their own lives, you don’t need a house that once fit 5. If you own your home, the equity from it can go towards a retirement fund.
Downsizing to an apartment also gives you less maintenance and expenses than owning a home does. The most important thing to remember before retiring is Social Security cannot replace current income.
Get ahead of the game, start saving in any way possible. Meet with a financial advisor, write out all your expenses and cut costs where you can.
Every small saving amount can add up to a larger amount. Put all savings into an account for your retirements like a 401K or IRA.
Remember, it’s never too late to start saving. Your retirement is important, one-day working will become physically impossible.
Having some financial security during these years will make retiring a time to look forward to. After all, a smooth retirement is something we all desire.