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Can I live on my Social Security when I retire?

No, you probably cannot.

(RETIRE READY) — Social Security is not designed to replace your full working wages. It’s intended to cover only approximately 40 percent of the income you earned while working.

You may not need to fully replace your working years’ income during retirement, however. The Social Security Administration notes that many financial advisors suggest you’ll likely need to replace only 70 percent of your previous income during your retirement years.

Why would that be the case?

You may have some expenses while working which may not exist after you retire. For example:

  • If you needed to buy formal clothing or uniforms to wear for work, that’s no longer a necessity
  • If you needed to have your work clothes professionally dry cleaned while working, that’s no longer a required expense
  • If you spent a lot of money on gasoline and put a lot of wear and tear on your vehicle while working (whether for work purposes or just commuting to and from the office) - you won’t need to replace the income to cover that since those expenses won’t carry on into your retirement years
  • If you ate out or bought coffees during the day while working, that money will not need to be replaced for your retirement
  • If you were placing some of your income into a retirement plan (like the 401k at your office), that will no longer be required when you begin living off your retirement savings and the interest that generates for you during your retirement
  • If you were paying a mortgage on your house while working, but have finally paid it off, that will be another expense you won’t need to cover in your retirement years
  • A married couple who required two vehicles when one or both were working may find their needs met completely with a single vehicle once both are retired

But you’ll likely still need more than the 40 percent which Social Security tries to replace.

If you retire before you turn 65, you’ll need to pay for health insurance since your previous employer probably won’t cover that for you after you retire. If you retire at 65 or older (so you qualify for Medicare), you’ll still need some money to cover the expense of the supplemental insurance you’ll want to purchase each year. In addition to those costs, you will need the money to pay for the “co-pays” to your insurance company each time you visit a doctor’s office or pick up a prescription.

So, how much do you need?

At Texas Financial and Retirement, we work with people just like you to maximize their retirement income while reducing the tax burden their heirs will need to shoulder. If you’re married, we’ll work to assist you in developing a plan to make things as good as possible for the surviving spouse after a death, regardless of which spouse that might be.

Contact James Holloway, Sr., and the rest of the team at Texas Financial and Retirement, by emailing bestclients@texasfinancialandretirement.com or calling (903) 534-5477. We’ll help you determine if you’re qualified for a free initial visit. Then we’ll work with you to determine where you are “at,” financially, and how to get the greatest possible benefit from the retirement savings you’ve accumulated.