The Role of Social Security in Your Financial Planning
“Fact 1: Social Security is the guaranteed part of your retirement plan.
There have been lots of questions raised about Social Security lately. And granted, it isn’t perfect. We at AARP know that it was never intended to be the sole solution to financial security in retirement. But it has been the guaranteed component of retirement. And that hasn’t changed.
The fact is, with no change at all, Social Security will be able to pay 100% of promised benefits that keep pace with the cost of living until the year 2042. After that, it will still be able to pay three-quarters of promised benefits.
Getting three-quarters wouldn’t be okay today and it won’t be fair tomorrow. At AARP, we want to be sure you reach your retirement goals. And we know that Social Security plays an important role in getting you there. Think about the role of Social Security in your own retirement planning. Then let’s start thinking about ways to fill that one quarter gap to make sure your financial security goals are within reach when you retire.
Fact 2: With Social Security in your retirement plan, you’re starting at about midfield.
Financial planning for retirement is like a football game. And you’re the one who has to go the distance and carry the ball. Only you’re not starting at zero. Thanks to the years you’ve worked, when you retire, you’re starting with about half the field already behind you.
That’s because Social Security isn’t based on your future prospects, but on your past performance. No matter who you are, Social Security is there for you because it’s based on your work history—and that just won’t change. Social Security promises that when you stop working, you’ll still have a guaranteed stream of income that, for most people, is about 40 percent of the pay you received when you were working.
One nice thing to know is that Social Security follows you wherever you go. It’s not tied to a specific job, again making it something you can count on when you retire.
Plus, it’s protected against inflation. Year after year, Social Security rises with the rising cost of living. And when you choose to retire, Social Security will continue to keep pace with the times, preventing erosion of your purchasing power. That’s why there’s a cost of living increase every year—so 20 years from now, you aren’t stuck trying to make up for the fact that what used to cover a mortgage doesn’t even cover a car payment.
You may outlive your savings, but your Social Security is always there. It gives you a safe, unshakable financial base to complement a private pension, an IRA, a 401(k), or other savings, all of which, together, put you solidly in the scoring position when you retire.
Fact 3: Social Security is on the sidelines, backing you up, while you’re working.
If you’re still working, you probably don’t realize Social Security is protecting you right now. Thanks to Social Security, you have disability and survivor insurance for you and your family. No one likes to think about the unexpected realities life can bring, but we all know bad things can happen to good people. In the event of a worker’s death or disability, Social Security is there to step in and provide for that worker and his or her family.
With Social Security, you’re that much closer to your goals and that much more secure. Today. And every day.”