Page 17 - Southern Exposure- May '23

Southern Exposure, Page 17
finAnciAl focuS
Can You Count On Social Security?
If you’re getting closer to retirement, you might be thinking
more about Social Security. Specifically, can you count on it
to contribute part of the income you’ll need as a retiree?
There’s been an increase in alarming language surrounding
the solvency of Social Security, but in reality, its prospects
are not nearly as gloomy as you might have heard. Security. The maximum amount of earnings subject to the 6.2
Here’s the story: Under current law, Social Security is
estimated to exhaust its trust funds by 2035, after which
benefits could be cut by 20 percent, according to the 2022
Social Security Trustees report. However, the large cost of
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living adjustment (COLA) (8.7 percent) for 2023 could cause for boosting funding to Social
the trust funds to use up their resources sooner. Security.
But this outlook may represent a worst-case scenario. And here’s a political
For one thing, the cost of the 2023 COLA will be somewhat reality: Social Security is
offset by higher taxes on workers contributing to Social a popular program and it’s
unlikely that any future
percent Social Security tax jumped from $147,000 in 2022 Congress wants to be blamed
to $160,200 in 2023. And in looking down the road, further for reducing benefits. Of
increases in this earnings cap may also help reduce the gap in course, there are no
the trust funds. Increasing the payroll tax is another possibility guarantees, but it seems fair
to say that you can reasonably
expect some benefits from
Social Security when you retire.
But perhaps the bigger issue is just how much you should
depend on Social Security for your retirement income. On
average, Social Security benefits will provide about 30
percent of a beneficiary’s preretirement earnings, according
to the Social Security Administration. But the higher your
earnings before you retire, the lower the percentage that will
be replaced by Social Security.
Still, you’ll want to maximize the benefits that are
available to you — and that means deciding when to start
taking Social Security. You can begin as early as 62, but your
monthly payments could be as much as 30 percent lower than
your normal (or “full”) retirement age, which will likely be
between 66 and 67.
Even if you were to wait until your full retirement age
before collecting Social Security, you’ll also need to draw
on other sources of funding. So, while you are still working,
it’s a good idea to keep contributing to your IRA and 401(k)
or other employer-sponsored retirement plan.
The amount you contribute should depend on your overall
financial strategy and your financial needs, so, for example,
you probably shouldn’t put in so much into your retirement
accounts that you feel significant stress in your monthly cash
flow. But when you do get a chance to invest more in these
accounts, such as when your salary goes up, you may want
to take advantage of the opportunity.
Ultimately, you should be able to count on Social Security
as part of your retirement income. You may want to consult
with a financial professional to determine when taking Social
Security makes the most sense for you and how you can also
get the most from your other retirement accounts. You’ll want
a retirement income strategy that’s built for the long run.
This article was written by Edward Jones for use by
your local Edward Jones Financial Advisor, Edward Jones,
Member SIPC.
Edward Jones is a licensed insurance producer in all states
and Washington, D.C., through Edward D. Jones & Co., L.P.,
and in California, New Mexico and Massachusetts through
Edward Jones Insurance Agency of California, L.L.C.;
Edward Jones Insurance Agency of New Mexico, L.L.C.; and
Edward Jones Insurance Agency of Massachusetts, L.L.C.
Edward Jones, its employees and financial advisors cannot
provide tax advice. You should consult your qualified tax
advisor regarding your situation.
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