Sitting across the table from your financial advisor could bring some sobering results in terms of the type of lifestyle you’ll be able to lead after you’ve kissed your job goodbye. Regardless of the amount of asset’s you’ve amassed throughout the years, though, the name of the game in retirement is income.
One primary income source for many retirees is Social Security. But, while you may be able to count on at least some retirement income from Social Security, the reality is that this source of income is oftentimes much lower than what you need – especially if you have big plans for travel, fun, and other “non-essentials” down the road.
According to the Social Security Administration, the retirement income that is generated from these benefits will only replace about 40% of pre-retirement wages – and even less for those who are higher income earners. Plus, Social Security was never meant to be a primary component of retirement income.
So, if you’re going with the notion that you’ll need 70 to 80% of your current wages to maintain your same lifestyle when you retire, where will the rest of the income come from?
Keeping the Cracks in Your Financial Foundation Sealed
Just like any other strong and stable structure, building a solid retirement income foundation requires good planning. In fact, the decisions that you make up-front with regards to your Social Security and other income benefits could end up netting – or losing – you hundreds of thousands of dollars over the course of your retirement.
With that in mind, there are some key areas to really pay attention to as you nail down how and when you will start receiving your retirement income from Social Security, including:
- Your full retirement age. If you qualify for Social Security, you can start receiving your retirement benefits at age 62. But as a “tradeoff” for starting your income early, the dollar amount will be permanently reduced. On the other hand, if you wait until after your full retirement age to take Social Security, you could end up seeing a substantially higher dollar figure. In fact, due to the delayed income credit, for each year that you wait to start your Social Security retirement income (up until you turn age 70), your benefit will increase by roughly 8%.
- Taxes. Another primary component in your Social Security income planning is taxes. While many people believe that they’ll have the full amount of their monthly benefit to spend, this isn’t necessarily the case. For instance, if you continue to work while receiving Social Security, it could cause up to 85% of your benefits to be taxed.
- Spousal benefits. If both you and your spouse are entitled to Social Security, there are various “maximization” strategies that you could use to increase the overall amount that you receive. In addition, if you are divorced (and you have not remarried), you could qualify for Social Security divorced spouse’s benefits.
How to Enhance Your Stable Retirement Income Foundation
Even if you’ll have an ample amount of benefits from Social Security, one of the best ways that you can ensure you’ll have an ongoing, steady source of income in retirement is to purchase an annuity. That’s because annuities can provide you with a lifetime stream of incoming cash flow for the rest of your (and your spouse’s) life – no matter how long that may be.
At Annuity Gator, we focus on providing in-depth information about annuities and the income they can provide. We know just how confusing these financial products can be – and with more insurance companies offering annuities, the technical jargon that explains how they work can literally be overwhelming.
We can assist you with finding the right annuity and coordinating it with other benefits like Social Security that you may be entitled to. So, if you’re ready to construct a strong retirement income foundation rather than just hoping for the best, contact us and talk with one of our annuity experts now.