A boosted benefit is helpful, but there’s another key step you can take to set yourself up for a financially stable retirement.
Scour the internet, and you’re apt to come across plenty of advice for boosting your Social Security benefits. Growing your job skills to set yourself up for higher wages, for example, is one way to get more money out of the program.
You could also plan to delay your filing until the age of 70. Doing so will set you up for the highest monthly benefit you’re eligible for, based on your personal earnings history.
While it’s certainly not a bad thing to try to boost your monthly Social Security benefit, it’s not the only thing you should fixate on boosting. It’s just as important to do what you can to grow your savings.
You can’t retire on Social Security alone
If you’re an average wage earner, you can expect Social Security to replace about 40% of your pre-retirement income, assuming that benefits aren’t cut. But unless lawmakers manage to come up with a solution to Social Security’s pending financial shortfall, benefit cuts will remain on the table, potentially leaving you with even less income from the program.
That’s why it’s so important to focus your efforts on pumping more money into your IRA or 401(k) plan. It’s a wise idea to try to snag a higher monthly Social Security benefit because you’re guaranteed that benefit for life (benefits cuts aside). But the money you save on your own might do more for you in retirement than the money you receive from Social Security.
Let’s assume that you want to travel a lot in retirement and enjoy many hobbies that cost money. You might, in that case, need almost the same income in retirement as during your working years.
We just learned that in a best-case scenario, Social Security will replace 40% of your earnings. But that puts a lot of pressure on your savings to provide the rest, so you’ll need to diligently fund your IRA or 401(k) as best as you can.
Aim to ramp up over time
Some people get into the habit of committing to a certain monthly IRA or 401(k) contribution and sticking with it throughout the years. That’s not a terrible plan, but a more ideal scenario would be to increase your savings rate year after year — namely, by banking your raises if you can afford to part with them.
Ideally, over time, your earnings will grow. It’s one thing to set aside $300 a month in a retirement plan when you’re only making $60,000 a year. It’s another thing to stick to that $300 when you’ve gotten promoted several times over and are now making $125,000.
If your earnings don’t manage to pick up nicely from year to year, another solution may be to turn to the gig economy. There are many flexible jobs you can do on a part-time basis. And since the money you earn from a side gig won’t be earmarked for ongoing bills, you can use that extra cash to fund your IRA or 401(k).
It’s easy to see why you’d want to get as much money out of Social Security as possible. Don’t just take steps to score a higher monthly benefit; also take steps to grow your savings so you have plenty of income at your disposal once your retirement begins.
