Will Social Security have a big role in your retirement? If you don’t save enough, you may need to fall back heavily on these benefits once you are ready to leave your job for good.

But you should careful — Social Security has problems, and you might end up with much less income from it than you believe you will. Here are a few tough realities about social security you must know about.

1. Those benefits will not even come close to replacing your income


Many seniors think they will do fine living off of just Social Security. But actually, these benefits will only take the place of around 40% of your previous paycheck if you are an average earner.

Chances are, you can make due on less once you are retired, because you wont have to deal with the costs of going to work or a retirement plan to invest in. But can you really get by with just 40% of the paycheck you are used to? Very likely not. And so if you don’t save a good sum of money for your retirement, you could end cash-strapped.

2. You might not get generous raises

Though next year’s Social Security cost-of-living adjustment (COLA) is turning out to be a good one, in recent times, those raises were very stingy. And increasing Medicare Part B premiums are leaving some seniors with even less income after their COLAs are implemented.

As a good rule, you should not expect your monthly social security to go up substantially once they start rolling in. If you think you will need to boost your retirement income over the long term, working in some way is a better strategy to go about this.

3. Taxes

If Social Security is your only source of income during retirement, there is a good chance you could avoid federal taxes on these benefits. But if you have other income sources (which is a great idea), then as much as 85% of your benefits might be subject to federal taxes.

Also, there are 13 states that have their own taxes against Social Security. Depending on where you are during your retirement, you may not be allowed to keep your benefits completely, and that is something you should definitely work against.

Author: Scott Dowdy

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