When it's time to plan our golden years, many of us automatically think about relying on our company's retirement plan or Social Security to fund our lifestyle. However, there are good reasons why you should never depend on either of those things to fully support you in your retirement. In this blog post, we will reveal several of those reasons and provide some tips on how you can better prepare yourself for a financially secure retirement.
1. Company Retirement Plans Aren't Guaranteed
You should never depend on your company's retirement plan to fund your retirement because those plans are not guaranteed. Therefore, if your company goes bankrupt, or if it decides to freeze or terminate its retirement plan, you could lose out on all the money you've been counting on.
Additionally, even if your company's retirement plan is rock solid, there's no guarantee that you will still have a job with the company when you reach retirement age. In today's volatile job market, it's not uncommon for people to switch jobs multiple times throughout their careers. If you stop working in your job before you're able to fully vest in your company's retirement plan, you could lose out on a significant amount of money.
2. There is a Social Security Funding Shortfall
The Social Security Administration put out a note in 2021 saying that Social Security and Medicare face long-term shortfalls under the current structure. These Social Security and Medicare shortfalls are not good news to the beneficiaries. Since there has been a steady decline in the amount collected in the Social Security and Medicare account, there is a prediction that it might get depleted in 2034. If you are planning to dependent on social security funding for your retirement lifestyle, you need to look for another source of income that will supplement what you get (if anything) from social security.
3. It May Not Cover All Your Health Care Bills
Healthcare costs have been rising steadily for years, and they're not showing any signs of slowing down. If you retire relying on a company's health insurance or Medicare/Medicaid, there's a good chance that your coverage won't be enough to cover all of your medical expenses. This could leave you struggling to pay your bills and you will be forced to make tough choices about your care.
4. Your Purchasing Power Will Reduce
Inflation will slowly but surely eat away at the purchasing power of your retirement savings. If you depend on a fixed income from Social Security or a pension, you may find that your money doesn't go as far as it used to and it will not be enough to cater to the rising cost of living. This can be a real problem if you're trying to maintain your standard of living in retirement. It will therefore require you to significantly reduce your expenditures to cater to what you need most. You might need to pick up a part-time job to supplement that income and live comfortably. The cost of inflation will therefore affect your purchasing power of goods and services in your golden years making it a potentially miserable retirement period of your life.
5. You Can Only Enjoy It When You Retire
The only time you can access Social Security retirement benefits is when you reach the retirement age of 62 years. If you retire yourself before that age, you will not enjoy the Social Security retirement benefits. The most frustrating thing is that you have to wait until your full retirement age to enjoy all the full standard benefits. This is not convenient for many people that are choosing early retirement. This will be a challenge for those people who choose to retire early but had not planned their finances well for retirement because they are depending on social security to pay them.
6. You Will Not Have Much to live on
Depending on Social Security for income will not provide you with the necessary funds to sustain your current lifestyle. You'll simply be living below the federal poverty line, which is something you don't want to do. The money you will get from Social Security may not be sufficient to meet all of your ever-increasing requirements in your golden years. As a result, you will not have much disposable income. This lack of planning has made many older people go back to work to earn a living and take care of their needs. This is another strong reason why you should never depend on a company or social security to provide for your retirement.
Tips For Preparing for Retirement
What can you do to ensure that you're prepared for a financially secure retirement?
1. Maximize your 401k
If your company offers a 401(k) matching program, be sure to contribute at least enough to get the full match. This is free money that can help you jump start your retirement saving.
2. Start Saving Early and Invest
The sooner you begin putting money away, the more time it has to grow. Also diversify your savings into an investment mix of ways to earn passively through dividends and more.
3. Get a Separate Retirement Savings Plan
It’s important to have a retirement savings plan completely separate from your company’s retirement plan. That way, you can ensure that your retirement savings are safe, even if something happens to your company’s plan. Use this link to learn more about starting your own retirement savings account with acorns. https://share.acorns.com/Silivere?advocate.partner_share_id=3142454806132063142
Final Take Away
As you have read, it is not wise to fully depend on a company or on social security to cater for your golden years. Making a retirement plan is essential, especially for those who want to maintain their current lifestyle standards during their retirement. Start working on saving and investing your money to create streams of income in later years. An example is to earn passive income from renting one of your homes or houses. Therefore, start planning for your golden years today so that you have full control of the lifestyle you want to live when you are ready for retirement. All the best!
Use the link below to learn More about how to start your own retirement account.
Join me and you'll get a free $5 investment! https://share.acorns.com/Silivere?advocate.partner_share_id=3142454806132063142
Comments