While it was once safe to hedge your retirement funding solely on Social Security, it’s now necessary to look for alternative future income sources, says Steve Landy, senior financial adviser with Ameriprise Financial.
Nowadays, only about one-third of retirement income comes from company pensions or Social Security, says Landy. Another third should come from your 401(k) savings, and the remaining third should consist of your own personal savings and investments.
Landy believes that instead of privatizing Social Security, the government will push the eligibility age for collection back - possibly into the 70s - instead of the current average collection age of 67.
This possibility, coupled with the fact that people are living longer, could leave a large gap in the funds needed to live off of after retirement - and some people may live long enough to be retired for the same number of years they spent working.
And while Social Security payments typically go up 2.5 percent annually to adjust for cost-of-living increases, Landy says those increases are likely to be offset by rising Medicare costs.
The bottom line, says Landy, is that you must find another source of retirement income. He suggests saving 10 percent of your gross income every year. And contribute to a 401(k), at least up to your company’s match amount. Beyond that look to other outside investments.