If you set up on social security to finance your retirement, you may want to think twice.
A new forecast of the Social Security Administration shows that the trustee funds of social security will be exhausted by 2034, a year earlier than initially. For the moment, you can only receive 81% of your advantages, by reducing the amount you will be paid.
As an expert in personal finance which saved enough to retire comfortably at 40, I worked with dozens of customers to help them calculate how much they need to save now to allow retirement. Whether social security is reduced or eliminated, I can tell you with confidence that you should not count on this program to fully finance your future expenses.
The monthly payments you will receive from social security is not sufficient to cover most of your expenses – and these payments should only decrease. Here’s how social security services work and how to plan your retirement without relying on the future of this program.
Find out more: Social Security 2025: What is happening to determine your monthly payment and how to maximize it
How do social security benefits work?
Social Security is a program managed by the government that we pay thanks to our payroll tax – employees pay 6.2%, employers pay 6.2%and self -employed workers paid 12.4%.
The money you pay on social security taxes goes directly to current beneficiaries rather than a personal savings account for you. So what you pay now is for the generation before you and you will be paid according to what the next generation puts in the silver basin.
How much you will receive from social security depends on the fact that you are single or married, how much you have won in your highest 35 years and the age you retire. Most people can start claiming services at 62, but the more you wait, the more your monthly payment could be. You can use the benefits calculator to estimate what you plan to receive.
Will Social Security exist on your retirement?
It is always likely that social security will be there in a form to your retirement, but you may not receive all of the advantages offered to current retirees.
The annual report in 2025 of the Social Security Administration revealed that the program will probably be able to pay 100% of the current advantages until 2034, a year earlier than expected last year. After that, retirees would receive 81% of their expected advantages.
What could this look like? In May 2025, average social security payment for retirees was $ 1,950 per month. If you were to receive 81% of this, it would drop to around $ 1,580 per month.
Is social security sufficient to finance your retirement?
Most people are counting on social security to help finance their retirement savings. However, no matter how frugal you are, your social security payment is probably not enough to cover your retirement needs. Although $ 1,950 – or $ 1,580 if you retire after 2034 – this is not an insignificant amount, it is not enough to cover the living expenses for any of my customers, and it is probably not enough for you.
Social security is a crucial part of the monthly income of many retirees – but it should not be your only retirement plan.
Constance Craig-Mason of national social security advisers agrees. “Financial well-being is not only the figures-it is stability and peace of mind,” she said. “Social security must be considered a foundation, not the only pillar of retirement planning.”
Do not rely solely on Social Security. Do this instead
Rather than speculating on the fate of social security, I recommend that you set up a plan now to start developing your own pension fund. Even if you cannot save much, starting little is better than pushing it on the road. Here are the preemptive measures that I took which helped me plan the traditional retirement and allow me to save enough money to retire at the start of the forties.
1. Review your options and configure a pension fund
Saving for retirement may seem impossible if you are experiencing the Painie pay check and you find it difficult to allow your rent, your mortgage and other essential elements. My first step does not require investing money. Instead, I encourage you to consult your options and install accounts so that you are ready to record when you are able to contribute.
I also strongly recommend talking to people in your life who are retired or approaching retirement age to find out how they started.
2. Maximize your sponsored plan by the employer
If your work offers a 401 (K) or another retirement plan with a match, your best bet contributes to this account until you reach your annual maximum. This is your best bet, because your employer will meet part of your contributions, helping you develop your money faster. Due to changes in retirement in Secure 2.0 law, you can even be eligible to contribute to a work plan if you are part -time, depending on the moment the plan has been put in place.
My husband and I focus on the contribution to our sponsored plans before investing elsewhere. It is an automatic way to earn additional money for retirement without too much effort. This year, you can contribute up to $ 23,500 to your 401 (K). If you are 50 or older, you can contribute $ 7,500 additional.
3. Open a following IRA
If you reach your maximum 401 (K) contribution, then aim to invest in an individual retirement account. The maximum contribution limit for 2025 is $ 7,000.
The fact that a traditional Roth or a logical IRA depends on your estimated tax rate now and in the future. Both allow you to develop your money in tax franchise; A Roth Ira allows you to contribute dollars after tax, while a traditional IRA is financed with dollars before taxes and then taxed when you remove it. Too much of my clients open a brokerage account instead of an IRA, without realizing that they lose their money hardly earned each year.
4. Put additional money to your mortgage now
A good way to help your social security income and retirement funds is to eliminate high spending. Having your house gets rid of one of your biggest expenses. It looks like a high goal, but it is possible. I focused on the reimbursement of $ 300,000 in debt, including my house, in three years. If you get a tax refund, a work bonus or another windfall, pay it for your mortgage if you can. Each bit can reduce your balance.
5. Lower your accommodation costs, if you can
If you are open to move, consider the places with lower taxes and housing costs so that you can put more money on your retirement goals. Ten years ago, my husband and I took the daring step to leave my hometown of New York to settle in Charlotte, in North Carolina, which was much more affordable. We have saved tens of thousands of dollars in taxes, car insurance and subsistence costs each year.
Even if you are not ready to move across the country, considering the districts at a lower cost in your region can make a big difference. We have also reduced the size to Charlotte and decided to rent. The money we would have brought to the repairs and the maintenance of the house released additional money for us.
6. Take advantage of health savings accounts
Health care is one of the most important expenses in retirement. So investing in your health can now save money later. Take the habit of filling in tax accounts such as a flexible expenditure account or a health savings account to help you save money on your health expenses. Keep in mind that an FSA account is offered by your employer, but you can create an HSA yourself.
These accounts may encourage you to use these funds for health care resources you need to keep long -term healthy habits because you will not pay as much pocket for health care purchases, controls and procedures. Then you can use your take -out salary to focus on your retirement plan.
Concentrate on what is under your control
We cannot predict exactly what will happen with social security, but we can act now to reduce financial anxiety about the future.
As Craig-Mason encourages, “when you combine social benefits with intelligent savings strategies, intentional money management and a concentration of finance alignment with your well-being, you build a durable and fulfilling pension plan-whatever the uncertainties.”
The worst thing you can do? Suppose social security will cover everything. Instead, start planning today.
