Social Security has been one of hottest topics among baby boomers and retirees this year here in the Retirement Income world. We are constantly getting questions here at Retire Think Tank about the future of the Social Security System, how to maximize Social Security Benefits, how to avoid extra taxes on Social Security, and everyone wants to know the ideal time to turn on their Social Security Income.
Over the past several years, especially given the volatile market and increased life expectancy, the number one fear of retirees and pre-retiree is that of outliving their money - even more so than the fear of death.
Today, the recent economic crisis has shown that simply accumulating an ample amount of savings for the future will not guarantee a secure retirement. In fact, the accumulation of assets throughout one's working years is just one piece to the retirement income puzzle. It is in the "decumulation," or income-taking phase, where retirees must bring in at least a guaranteed minimum amount in order to maintain their lifestyle once their employer's paycheck stops.
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Why Social Security Is Not Enough
Today, many people claim their Social Security retirement benefits at age 62 - which represents the first year of eligibility to access such funds. However, due to the reduced amount of benefit from this early access, these individuals are only receiving about two-thirds of their full benefit as versus waiting until their full retirement age to begin collecting.
Yet, even for a person who waits until his or her full retirement age to access these benefits, in 2013, the maximum amount of monthly Social Security income is just over $2,500 - with the average overall monthly benefit amount for all retired workers hovering at closer to $1,260.
This amount may seem low - and it is. But the truth is that Social Security was never meant to be the only source of income for people when they retire. On average, this program replaces approximately 40 percent of an average wage earner's income after retiring - although most financial planners advise that many retirees will need closer to 70 percent or more of pre-retirement earnings in order to live comfortably.
In addition, due in large part to funding issues and the sheer number of Baby Boomers moving through the Social Security system, there may well be some changes to this program in the future, likely leading to even less reliance on this program for an ample amount of retirement income.
While some may believe that Social Security will disappear altogether in the future, what is more likely is a reduction in overall benefits. Plus, Social Security retirement income benefits are not guaranteed to increase with inflation - and in fact, in 2010 and 2011, there were no increases in retirees' checks. The way that Social Security benefits are initially calculated are also likely to see some drastic changes in the future.
So what is the best supplement to Social Security Income that has so many retirees happy they found out about it?
Find out by downloading the free report here. It only takes a few seconds.