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Social Security Never Meant To Be Sole Source of Retirement Income

There’s little question that Social Security is a very important part of America’s retirement scene, with about 50% of households aged 65 or over relying on Social Security for at least half of their retirement income. Indeed, Social Security accounts for at least 90% of income for about 25% of aged American households, a rather foreboding statistic. And, unfortunately, for a small percentage of Americans Social Security is their sole source of income in retirement. While these numbers emphasize the importance of the program, Social Security is not and was never intended to be the sole source of retirement income for retired Americans. Rather, it was originally designed as an anti-poverty program for aging Americans, not one which provides financial comfort in retirement. One only need to look at Social Security’s benefit formula to understand, as discussed in this Motley Fool article by Adam Levy. The article, titled “The Most Important Social Security Chart You’ll Ever See,” provides a description of how much (or little) of your pre-retirement income is replaced by Social Security, highlighting that while most financial advisors counsel that you’ll need 70% – 80% of your pre-retirement income in your “golden years,” Social Security’s benefit formula yields only 40% or less of your pre-retirement dollars. It’s up to you to provide the remaining income needed for financial comfort in retirement. Click here to read the Motley Fool article by Adam Levy.

Note: A clarification is needed for the “bend points” section of the article. The sentence which reads “And if you earn more than $6,172 per year, you’ll only collect 15% of earnings above that until you reach the maximum taxable earnings threshold for Social Security. That’s $147,000 in 2022.” should read “And if you earn more than $6,172 per month, you’ll only collect 15% of earnings above that.”

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