Social Security is expected to be exhausted by the early 2030s. This means that the amount of benefits Americans will receive will be substantially less compared to previous generations. Benefits have been cut in the past, and it’s reasonable to expect cuts in the future, possibly up to 25%. Additionally, the minimum retirement age will likely increase again and again as average life spans increase. So, employees might have to work for more of their lives only to receive a smaller check at the end of their career.
How much will retirement cost?
Even before Social Security’s depletion, benefits haven’t always provided full coverage. The average senior receives just over $18,000 in Social Security every year. That’s not a lot more than a minimum wage salary. And as people grow older, and their trips to the doctor grow more frequent, medical bills can pile up exponentially. Fidelity estimated that “a 65-year-old couple in 2019 would spend around $285,000 in healthcare and medical expenses throughout their retirement,” a $5,000 increase from the 2018 estimate.
The early bird gets the short end of the benefits stick
Additionally, employees may be forced to retire before they can claim benefits. And that’s become more true during the pandemic. Before COVID-19 hit, the Employee Benefit Research Institute found about 48% of workers were forced into early retirement, due to a variety of factors including:
When people go to claim their Social Security early, they risk lifelong deductions on monthly benefits.
Long-term planning is the best bet
It’s recommended for everyone to have a retirement plan that doesn’t only rely on Social Security. Employees can invest in their own retirement fund or open a health savings account (HSA). While it’s possible to delay Social Security benefits so that each month a bigger paycheck arrives, not everyone can afford to wait a few years. Social Security wasn’t designed to sustain an individual by itself. At the time of its creation, during the Great Depression, it was supposed to replace around 40% of pre-retirement wages. Over time, that percentage has decreased, while the cost of living has increased. Starting to save now, even incrementally, can have a big impact on your retirement.
Building your emergency savings plan now pays more than waiting
So you’re ready to plan for retirement. Where to start? The best way to ensure you get the most out of your retirement fund, like a 401k or a Roth IRA, is to let it grow. If you don’t make any withdrawals until you retire, you’ll face no penalties and enjoy the fruits of your labor. This sounds easy, right? But life happens, and though it may be tempting to dip into the retirement fund when money is tight, you’ll end up paying for it later. That’s why most economists and financial strategists are recommending everyone start an Emergency Savings Account (ESA). With SecureSave, your employer helps you set up an account, and matches your regular contributions after a certain dollar amount. All you have to do is contribute a small amount of your paycheck. With an ESA, you have the power to be prepared for whatever life may throw at you, without risking your retirement. Join the employee waitlist for SecureSave and we will help encourage your employer to explore this new benefit for your company.