Social Security benefits can go a long way toward providing a comfortable retirement, but many older adults depend on them too much.
Your monthly checks are meant to replace only around 40% of your pre-retirement income. But nearly one-quarter of married couples and close to half of unmarried beneficiaries depend on Social Security for at least 90% of their income in retirement, according to the Social Security Administration.
And there’s a chance benefits could be reduced. The money coming in from payroll taxes isn’t enough to cover current retirees’ benefits, so the SSA has been leaning on its trust funds to cover the deficit. Those trust funds are expected to be depleted by 2034, at which point the SSA will only be able to pay approximately 76% of projected benefits. In other words, your monthly checks could be slashed by nearly 25% if Congress doesn’t come up with a solution relatively soon.
Balancing risk and reward when investing
As you’re investing for retirement, you’ll want to be aggressive enough to earn relatively high rates of return, but safe enough that you don’t risk losing your life savings if the market takes a turn for the worse.
That can be tough, but there’s one type of investment to make it a little easier to balance risk and reward: index funds.
Index funds are large groupings of securities that track a certain index, such as the S&P 500 or the Dow Jones Industrial Average. Because you can’t invest in the indexes themselves, investing in a fund that mimics an index’s performance is the closest you can get. So, for instance, if you invest in an S&P 500 index fund, you’re investing in the 500 companies that make up the S&P 500…Read more>>