Let’s test your knowledge. Which of the following statements are myths and which are facts?
- The chance of a coin landing on heads is 50/50.
- Three wise men visited Jesus.
- Bats are blind.
- Social Security payments will be enough to live on when you retire.
If you answered myth to all of these, you’re correct! Unfortunately, a lot of people still believe they can rely on Social Security when they retire. And believing that myth could be costly.
Social Security Is Still in the Plan
In 2016, Ramsey Solutions commissioned a survey of more than 1,000 adults to evaluate the state of retirement in America, including the sources of income people think they’ll have when they retire. So how do people plan on funding retirement? It depends.
Baby Boomers who are still working say they’ll rely mostly on Social Security, personal savings, and their 401(k). Gen Xers have the same plan. Only the youngest group—Millennials—say they’ll rely more on their 401(k)s and personal savings than Social Security. But across the board, people plan on Social Security to provide at least some of their income in retirement.
Here’s something else that worries me: People who aren’t currently saving for retirement think they’ll rely mostly on Social Security, combined with personal savings and income from continuing to work. That’s not a good plan!
Here’s the truth: Planning to rely on Social Security alone for your retirement income is a big mistake.
The Truth About Social Security
Right now, the average monthly Social Security benefit is around $1,340. Do the math! That adds up to just over $16,000 a year. That’s the same as the poverty line for a family of two. Do you really want to live at the poverty line in retirement? Me neither!
Unfortunately, those numbers aren’t likely to get any better. That’s because the Social Security Administration is paying out more money than it’s collecting, and as more Baby Boomers retire, that gap will just keep getting bigger.
If Congress doesn’t fix the problem, the amount you are supposed to get at retirement could actually go down. And I don’t know about you, but I am not leaving my future in the hands of the federal government. If you’re relying on Social Security to fund your retirement years, you’re setting yourself up for disaster.
Think of Social Security as the icing on the cake rather than the cake itself. It would be a nice bonus, but don’t count on it.
The Truth About Your Future
Mama Hogan used to say, “If it is to be, then it’s up to me.” In other words, your retirement is in your hands. Even if you’re a Baby Boomer close to retirement, you can still take steps to put you in a better place financially. Here are three basic things you must do if you hope to change your future.
1. Get on a Budget
If you don’t have a spending plan each month, money is leaking out everywhere. Collected and directed in the right place, that money could be working for you.
2. Get Allergic to Debt
It’s retirement quicksand. Before you invest your money, use it to pay off your debt. Then put everything toward retirement savings. Can you imagine how much you could be saving for retirement if you weren’t paying off debts? Cha-ching!
3. Get Professional Help
When you’re sick, you go to a doctor. They have the skills and training to diagnose and treat the problem. The same applies to your retirement fund. Use the skills and training of an investing pro to get you closer to your retirement dream.
Here’s another fact: You will retire someday. And for 60% of people, retirement comes earlier than they thought. That means you need to get on the ball now. This is your wake-up call! The sooner you decide to take action, the better prepared you’ll be for that chapter of your life—and the better retirement dream you’ll get to enjoy.