Millions of seniors today collect a monthly paycheck from Social Security. And for a large number of people in that boat, those benefits represent the bulk of their income. There are even some seniors who look to Social Security for all of their retirement income.
But that's not my plan for retirement. I don't want to be reliant on Social Security at all. And I'm taking steps to set myself up so that Social Security is simply extra money I have access to.
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Leisure spending and nothing more
Many retirees today use their Social Security benefits to do things like pay rent, put gas in their cars, and buy groceries. But if I have things my way, the only thing I'll be spending my Social Security money on is leisure.
Sure, I might also choose to donate some of that money to charity. The point, however, is that I'm aiming to retire with enough money to cover my essential expenses without Social Security . That way, any monthly benefit I get is merely extra money I can spend as I please.
You might initially think, "Wow, she's putting a lot of pressure on herself to save." But actually, not having to rely on Social Security at all in retirement takes a lot of the pressure off.
See, Social Security's financial future is pretty uncertain. Benefits aren't at risk of going away completely, but they may be cut substantially if lawmakers don't find a way to address the program's solvency issues.
It's hard for me to count on Social Security as a core income source when I have no idea what the coming decades have in store for it. So I'd rather not worry about benefit cuts and instead take steps to set myself up with a large enough nest egg that I can cover my bills that way.
To that end, I take on as many assignments as I can get, even if it means working long hours. I also live frugally relative to my income so that while friends who earn similarly have larger homes with mortgages that are four times the size of mine, I live in a modest house and bank the difference. I also drive an older car and shop strategically for things like groceries and household essentials.
Another important thing I do is automate my retirement savings. I have money leaving my checking account each month that goes into a retirement plan before I get an opportunity to spend it. Even though I'm pretty diligent about allocating funds to savings, the automation keeps me even more on track.
What role should Social Security play in your retirement?
There's nothing wrong with factoring Social Security into your retirement income. But do know that even if benefits aren't cut, they might only replace about 40% of your pre-retirement wages -- and that's if you're an average earner. If you earn a higher salary, you might get even less replacement income.
So with that in mind, it's a good idea to build as much savings as possible to reduce your future reliance on Social Security. You don't have to go to the extreme I'm going to. But be realistic about what the program will pay you and how far that money can be stretched once you're no longer working.
All told, I'm happy with my personal Social Security strategy. It may not be for you, as it might mean having to give up certain luxuries or work more hours than you want to. But in my mind, having the option to use Social Security strictly for leisure spending is appealing enough that I'm motivated to do what it takes to get to that point.
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