Yes, we all want a stable financial future and there it is so important to follow constructive financial advice. Financial expert, Dave Ramsey has been giving out financial advice for most of his life and this is how he built his career, teaching people how to live without debt. However, recently he has been flagging Social Security. Ramsey has been clear with his statements, he mentions that if people are going rely solely on Social Security, they are going in the wrong direction.
Why Social Security Isn’t the Whole Answer
Social Security is the financial backbone for millions of Americans. So how does it work? Well, the Social Security system is funded by payroll taxes, and you receive a monthly check when you retire, sounds like the perfect plan, right?
Ramsey highlights one important point, that is that Social Security was never meant to replace your entire income. Let’s calculate an average: Social Security only covers approximately 40% of your pre-retirement salary. If you made $70,000 a year while working, your benefit might land around $28,000. That’s before taxes, healthcare costs, or inflation are factored in.
If you think that’s enough to live on comfortably, Ramsey will tell you to think again.
The One Fact That Could Wreck Your Plan
According to Ramsey, the problem is assuming that Social Security will remain the same forever. Unfortunately, the program is under financial pressure and is expected to run short of money by 2030 if no changes are made.
This simply means that if you’re expecting a $2,000 check each month, it might be reduced to $1,500. People are already living with tight budgets, and this reduction could be detrimental.
Common Mistakes That Make Things Worse
There are also other things that Ramsey notes which makes the situation worse:
- Making an early claim: Although you can start receiving benefits at age 62, you may receive larger Social Security payments if you wait until you are 70.
- Banking on one income source: Retirees assume that Social Security should be their sole source of income.
Here Are Some Suggestions from The Financial Expert
Here are a few ways in which retirees can maximise their income as per Ramsey:
- Consider putting away at least 15% of your income into savings now so that it can grow as time goes by.
- Pay off what you owe now so you don’t carry debt into retirement.
- Try and wait up until your Full Retirement Age (FRA) to claim benefits, or even until age 70, this will enhance your benefits.
- Ensure that you save and budget for things such as medical savings etc.
Ramsey stresses that beneficiaries should prioritise being independent, accumulate their own wealth, and recognise that Social Security is only a benefit.
Why Planning Ahead Is Important?
The most effective thing that one can do is start preparing from now. Consult a financial expert if you need assistance regarding your financial future and make proactive decisions. By doing this, you can live a peaceful retirement and ensure that your expenses are covered.
The Future Ahead
Dave Ramsey is clear with his message, relying solely on Social Security is potentially not the best solution. Social Security isn’t enough on its own.
But here’s the encouraging part: you have the power to change your future. You can enjoy retirement on your own terms if you plan accordingly. In Ramsey’s words, “Live like no one else now, so you can live like no one else later.”