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A Large Social Security Benefit Won't Save Your Retirement — Here's What Will

With the cost of retirement skyrocketing all the time, people are understandably interested in how much they'll get from Social Security. Many believe these guaranteed monthly checks will help them cover the bulk of their expenses in retirement, but they may be in for a disappointment.

Below, we'll look at how the government intended you to use Social Security and what you can do if you're worried about running short on retirement savings.

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How far will your Social Security checks go?

Your Social Security check is based on your income during your working years, but it's not intended to replace your paycheck. It's only supposed to provide about 40% of preretirement income for average workers, according to the Social Security Administration, and it could be even less than this for some people.

The maximum Social Security benefit in 2022 is $4,184 per month. This might be a livable wage for some, but in order to earn this, you must have made the modern-day equivalent of $147,000 in at least 35 separate years. That's not realistic for most people.

The average Social Security benefit is around $1,564 per month, or about $18,768 per year. That's closer to what most people can expect to receive, but for younger workers, it may still be too high.

The Social Security trust fund reserves are nearing depletion, and the latest estimates predict they will run out of money by 2034. When that happens, the program could face benefit cuts if the government doesn't come up with some alternative funding strategy. There's no way to know what will happen, but it's not unreasonable to think that benefits could shrink by up to 24%.

Based on all of this, it's not realistic to assume that Social Security will cover all or even most of your expenses in retirement. If you want a comfortable future, you have to take steps starting right now to increase your personal savings.

How to get the money you need for retirement

You will be able to count on a Social Security benefit as long as you've worked long enough to earn 40 credits (where one credit equals $1,510 in earnings in 2022 and you can earn up to four credits per year) or you're married to someone who qualifies. But you need to make retirement savings a priority if you want to live comfortably when you're older.

Get in the habit of making regular monthly contributions to a 401(k), IRA, or other retirement account. If you haven't already done so, figure out how much you need to save for retirement and use this as your guide. But be prepared to adjust this if your plans for your future change.

If you're not able to save as much as you'd like to right now, you have a few options. You could ask for a raise, start a side hustle, or seek out new employment. You could also work part time in retirement, perhaps switching fields to something more in line with your interests.

Delaying retirement is another possibility. This gives you additional time to save while also shortening the length -- and the cost -- of your retirement. Plus, it gives your savings extra time to grow before you have to withdraw them.

How to maximize your Social Security benefit

When it comes to Social Security, consider delaying benefits. Every month you claim benefits under your full retirement age (FRA) -- 67 for most workers today -- shrinks your checks, while delaying Social Security past your FRA increases your checks until you reach the maximum benefit at 70.

Delaying benefits means you may have to fund retirement on your own for a few years, but if you live into your 80s or beyond, you'll probably get more money from the program by doing this than you would by signing up early.

Married couples should also coordinate to decide when each person signs up. If both people have earned a similar amount of money over their working lives, they should each delay as long as possible. But if one has earned substantially more, it's more important for the higher earner to delay benefits. The lower earner may start early to help the couple out financially if need be. Then, once the higher earner signs up, the Social Security Administration will automatically switch the lower earner to a spousal benefit -- up to 50% of the higher earner's benefit at their FRA -- if it's worth more than what the lower earner is already getting.

Everyone's retirement savings strategy is going to look a little different based on their goals and finances. So it's up to you to figure out which of the above suggestions make the most sense for you right now. Draft a retirement plan if you haven't already, and put it into action. Then, revisit it in a few months to decide if you need to make any changes.

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