LOS ANGELES, California – Social Security provides essential retirement benefits, but for most Americans, it may not be enough to live on comfortably. The program is designed to replace about 40% of pre-retirement income, which means additional income streams are crucial for maintaining a standard of living in retirement. To address this need, many financial experts recommend setting up alternative income streams to supplement Social Security benefits.
Despite these recommendations, studies have shown that a significant percentage of Americans aged 65 and older rely heavily on Social Security for their income. The average monthly Social Security retirement check in December 2023 was $1,905, which may not be sufficient to cover living expenses, including Medicare premiums. As a result, many retirees may find it challenging to make ends meet on Social Security alone.
Financial professionals emphasize the importance of creating multiple income streams in retirement, especially for those who may not have enough savings to support themselves. In a recent survey, it was revealed that a majority of American workers, including those in Generation X, have insufficient savings, highlighting the need for alternative sources of income in retirement.
One method for maximizing Social Security benefits is to delay claiming them until the age of 70, as this can increase the monthly payout. However, even with a maximum Social Security benefit, retirees are advised to establish additional income sources to ensure financial security.
To set up alternative income streams, retirement savers have several options, including employer-sponsored accounts like 401(k)s, individual retirement accounts (IRAs), brokerage accounts, annuities, and health savings accounts (HSAs). Each of these accounts offers various tax advantages and investment opportunities for building wealth and generating income in retirement. Additionally, these accounts can support different strategies for creating income, such as investing in bonds, dividend stocks, preferred stocks, real estate investment trusts (REITs), and S&P 500 index funds.
In conclusion, establishing alternative income streams is essential for retirement savers to supplement Social Security benefits and maintain a comfortable standard of living in retirement. By investing in diversified income-generating securities and taking advantage of tax-efficient accounts, individuals can build a powerful income stream that supports them throughout their golden years. It’s never too early to start planning for retirement and creating multiple income sources to ensure long-term financial stability.