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Social Security Jitters? Don't Panic, Plan!

Social Security Jitters? Don't Panic, Plan!

April 25, 2024

Social Security is a cornerstone of retirement planning for many Americans. But headlines about the program's future have sparked anxieties in recent years. Will it be there when you retire? Here's a breakdown of the concerns and why you shouldn't let fear dictate your financial decisions:

Why the Worries?

The primary concern is the program's projected shortfall. Payroll taxes fund Social Security, and the ratio of workers to retirees is shrinking as the baby boomer generation retires. This shrinking means more money may need to come into Social Security to cover all the promised benefits.

But Here's the Calming Fact:

Even if Congress takes no action, Social Security will not entirely disappear. The Social Security Administration projects that by 2035, the program will still be able to pay around 80% of benefits.

So Why Plan?

While a slight reduction is manageable, it highlights the importance of having a personal Social Security plan. Here's where a Dixon Financial Group advisor comes in.

The Three-Legged Stool of Retirement: 

Planning for retirement can feel overwhelming. You've heard horror stories about people struggling to make ends meet on Social Security alone. But is that the whole picture?

A recent study by the National Institute on Retirement Security (NIRS) reveals a surprising truth: only 7% of retirees have income from all three recommended sources: Social Security, a pension, and savings.

Here's why this "three-legged stool" approach is so important:

  • Social Security isn't enough: While Social Security is a vital program, it typically replaces only around 40% of pre-retirement income. Most financial advisors recommend a 70% replacement rate, or even higher, to account for rising living costs.
  • The pension gap is widening: Defined benefit pensions, which provide a guaranteed monthly income, are becoming less common. This means that future retirees may need to rely more heavily on their own savings.
  • Savings make a difference: Defined contribution plans, like 401(k)s, allow you to build a nest egg for retirement. The NIRS study found that these plans help reduce poverty among retirees, but not to the same extent as pensions.

What does this mean for you?

Be sure to start planning before retirement. Here are some key takeaways:

  • Talk to a financial advisor: A professional can help you assess your retirement needs and develop a personalized plan to reach your goals.
  • Consider all your options: Explore Social Security benefits, potential pension income, and how much you need to save in your retirement accounts.
  • Start saving early: The sooner you start, the more time your money has to grow.

Remember, knowledge is power. Don't let fear or the lack of knowledge dictate your financial security.

Contact Dixon Financial Group. Our advisors are waiting to help; click to schedule or call today.

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Disclaimer: The information provided here is for informational purposes only and should not be considered financial advice. Please consult with a financial advisor for personalized guidance.