Thinking back on the first Social Security assignment of my career tends to make me laugh. Back then, which was about a decade ago, I found the idea of reporting on the topic daunting.
After all, I knew little about Social Security other than it being a program that pays benefits to people when they're older. I had no idea when benefits started or what the rules for claiming them entailed.
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These days, I could bore you with hours of conversation about Social Security's numerous rules and nuances. And with a catalog of more than 1,000 articles on the matter, I can probably answer any question you have about how or when to claim benefits.
But with all of that Social Security knowledge floating around in my brain, there's one piece of advice I'm eager to share more so than any other. And it's something I feel strongly that every single person should know about Social Security ahead of retirement.
You can't rely too heavily on those benefits
A lot of the Social Security content I've written through the years focuses on when to claim benefits. And that's an important decision.
Your Social Security filing age plays a big role in determining what monthly benefit you get. You're allowed to sign up for Social Security as early as age 62. But you're not entitled to your complete monthly benefit based on your personal income history until several years later, or when your full retirement age arrives. Full retirement age is 67 for those born in 1960 or later.
There's also the option to delay your Social Security claim past full retirement age. Each year you hold off boosts your monthly benefit by 8%, up until you turn 70. At that point, there's no sense in delaying Social Security, since you can't grow your benefits any longer.
But as important as it is to land on the right Social Security filing age, what's even more important is to understand the role those benefits should play in your retirement finances.
Many people are shocked to learn that Social Security will only replace about 40% of the typical wage-earner's pre-retirement income. And if that sounds like a small percentage to you, well, it is.
It's common for retirees to need 70% to 80% of their former income once their job-related paychecks disappear. This puts seniors who don't save independently and rely on Social Security alone in a very tight spot.
So if there's one piece of Social Security advice I'd give everyone, it's to not plan to live off of those benefits alone in retirement, and instead, save as well as possible.
This doesn't mean you have to sacrifice every bit of extra spending during you working years to retire with millions of dollars. But it does mean you should try to contribute to a retirement plan consistently, and invest your savings through the years for additional growth.
It pays to be informed
Reading about Social Security may be interesting to me, but I get that it's not a top activity on most people's lists. However, those benefits will likely play an essential role in your retirement finances one way or another. So it's a good idea to get reasonably educated on Social Security while you're still earning a paycheck from a job.
This doesn't mean you have to research Social Security endlessly like I do. But try to set yourself up with a basic understanding. And also, get an estimate of your future Social Security so you know what number to expect to some degree. It'll only put you in a stronger position to approach retirement with confidence.
