Should You Write Off Social Security for Your Retirement? | Personal Finance

Unfortunately, the program’s trust funds could run out in about 10 years or so if recent projections are correct. That would make benefit cuts not a far-off possibility, but a near-term one.

Is Social Security going away?

While future retirees may need to grapple with Social Security benefit cuts, that’s a far cry from the program’s funding drying up completely. The latter scenario isn’t a concern right now, and so there’s no need to operate under the assumption that Social Security won’t pay you any money in retirement.

That said, even if benefits aren’t cut, the money you receive from Social Security will generally only be enough to replace about 40% of your pre-retirement paycheck — and that’s if you’re an average earner. If you’re a higher earner, those benefits will replace even less income.

That’s why it’s so important to build a retirement nest egg — not because Social Security is actually going away, but because even if those benefits aren’t cut, you’ll still need outside income to manage well once you stop working. And if benefits are indeed cut, you’ll need independent savings even more.

The good news, though, is that if retirement is many years away, you have plenty of opportunity to build a solid amount of wealth. Socking away $400 a month in an IRA or 401(k) plan, for example, will leave you with over $1.2 million after 40 years if your invested savings generate an average annual 8% return, which is a bit below the stock market’s average.

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