The recent decision by the French government to increase the official retirement age from 62 to 64 has sparked global discussions and concerns. This move met with significant opposition, has led many to wonder what would happen if the U.S., which already has one of the highest retirement ages for full benefits, followed suit.
The Impending Retirement Crisis in the U.S.
The U.S. is on the brink of a retirement crisis. With Baby Boomers and Millennials approaching their retirement years, there’s a looming threat of potential cutbacks in Social Security benefits. The Social Security trustees predict that the fund will be depleted by 2033, after which it can only pay 77% of the currently projected benefits unless changes are implemented.
If the U.S. decides to raise its official retirement age, it could lead to significant public outcry. However, one undeniable fact is that those who opt to start receiving Social Security retirement benefits at 62, the earliest possible age, will receive much less than they initially anticipated.
Strategies to Maximize Benefits and Minimize Dependency
Given the uncertainty surrounding the future of retirement age and benefits in the U.S., it’s crucial to consider strategies to maximize Social Security retirement benefits or minimize dependency on Social Security.
Boost Your Savings Beyond Social Security
Financial experts often advise setting aside 10% to 15% of each paycheck for retirement savings, such as a 401(k) or individual retirement account (IRA). While it may be challenging to save this much, especially when starting in life, it’s crucial to prioritize this.
Even if you can’t save up to 15%, take advantage of employer matching contributions to your 401(k) to grow your retirement fund. As your income increases with age, so should your retirement savings contributions.
Extend Your Working Years
The Social Security Administration calculates your benefits based on an average of your highest 35 years of earnings. Therefore, working longer can increase your benefits. Each additional year of profits can replace a lower-earning year from your record, increasing your advantages when you tap into your Social Security benefits.
Leverage Spousal Social Security Benefits
If you’re married and your spouse was a high earner, you could apply for spousal Social Security benefits when you reach full retirement age. This allows you to receive up to 50% of your spouse’s benefit. However, waiting until full retirement age to claim spousal payments is crucial to avoid reducing the benefits.
Consult a Financial Adviser
These tips are general, and the best approach to maximize your retirement income can vary greatly depending on your specific situation. Therefore, consulting with a financial adviser is advisable to make informed decisions.
The retirement savings process is often complex and needs to be understood. Working with a professional can help you maximize your Social Security benefits and secure your financial future.