Do You Really Need a Retirement Account When You're Getting Social Security?

If you've worked for at least 10 years and earned a sufficient number of work credits, you are going to get Social Security benefits when you retire. These benefits will be deposited into your checking account and will help you afford the costs of living as a senior once you no longer have a paycheck from a job coming in. 

Since you'll be getting Social Security, do you really need money in your brokerage account to help support you in your later years?  The answer is an unequivocal yes. Here's why. 

Investing in a brokerage account matters a lot

It's critical to have money in a retirement account (like an IRA) either held at a brokerage firm or held by your employer's 401(k) plan administrator.

You need money invested because Social Security can't be your sole support source if you want to maintain a reasonable living standard. Social Security benefits are intended to only replace about 40% of pre-retirement income. This is because they are intended to support you alongside a pension and money you have saved.

Without a pension or sufficient retirement investment money, you would be left trying to live on only around 40% of the money made before quitting work. Even though you won't have to save for retirement or commute to a job when you retire, you are probably going to find it difficult or impossible to take a 60% pay cut.

Saving for your retirement is one thing you have direct control over. You can't easily increase your Social Security benefits by a substantial amount, nor can you force an employer to provide you with a pension. If you want a secure retirement, you need to get serious about investing and not rely solely on Social Security. 

How much should you be investing for your retirement? 

There are many ways to determine how much to invest for retirement, but one of the simplest is to aim to save 10 times your final annual income. If you're years away from actually retiring, you can assume you'll get an average 2% annual raise to estimate what you'll be earning when you finally quit work, and then multiply that number by 10. 

If you're able to save a nest egg of this size, you should ideally have a comfortable retirement when you combine your Social Security benefits with the money you can safely withdraw from your investment accounts. Make sure you're investing consistently, though, so you can hit your target.

Investor.gov has calculators that can show you exactly how much to invest to be on track to save 10 times your final salary. The specific amount will be based on how long you have until retirement as well as what return on investment you are able to earn on the money you put into the market.

Calculate your desired amount of retirement savings today so you can begin investing for your future. You'll be very glad you did when you see just how low your Social Security checks are when you get to retirement age.