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Millions of seniors depend on Social Security to pay the bills in retirement -- but many do so to an unhealthy degree. An estimated 21% of older married couples and 44% of older singles count on their benefits to provide 90% or more of their income. And if you're planning to follow a similar pattern, let this be a warning: Relying too heavily on Social Security could mean sentencing yourself to a life of poverty -- or near-poverty -- in retirement. And frankly, you deserve better.
Many working adults assume that once they retire, Social Security will do a solid job of footing their bills. Not so. Those benefits are only designed to replace about 40% of the average worker's pre-retirement income, but most seniors need close to double that amount to live comfortably once their careers come to a close.
The reason? Many of your current expenses are likely to stay the same in retirement, if not go up. In fact, 46% of households wind up spending more money, not less, during their first two years of retirement, according to data released a few years ago from the Employee Benefit Research Institute. Meanwhile, 33% of households wind up spending more money during their first six years post-career. As such, Social Security clearly can't provide enough income to buy most seniors the respectable lifestyle they seek once they stop working.
Here's why that's especially problematic: A whopping 42% of today's workers aren't saving for retirement, which means they risk turning to Social Security as their sole income source when they're older. If you're one of them, consider this a wake-up call to start contributing to an IRA or 401(k). Otherwise, you could end up miserable in retirement, not to mention broke.
If you're not convinced that Social Security will fall short in covering your retirement expenses, consider this: The average recipient today gets $17,532 in annual income. If that sounds like enough money to live on, then you're free to stop reading. Otherwise, begin setting some money aside each month, even if it's just $25 or $50 to start with. As your income increases, you can allocate your raises to long-term savings and ramp up that way.
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