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We spend so much of our lives paying into Social Security that we almost expect it’ll live up to its name. After all, most of us—from the self-employed entrepreneur to career professionals—have been handing over a hefty percentage of our income to Social Security for longer than we care to remember.
However, while you can count on receiving some benefits when you retire, you can’t expect Social Security to cover the entirety of your living expenses.
Reliance on Social Security Actually Correlates With Poverty
In fact, you may be surprised to learn of a very unfortunate trend for Social Security recipients: the more you rely on your payments for support, the more likely you are to be living below the poverty line. There’s a reason for that, even if you may find it somewhat disagreeable. Although we often think of Social Security as critical for retirement, Uncle Sam never intended it as our sole source of support through our golden years.
Quite the opposite—Social Security, so far as the U.S. government is concerned, is only meant to pay out about 40% of what you were earning before you left the workforce. So, if you were planning to maintain the same standard of living you had while you were still working, it’s a practical necessity to look beyond Social Security.
Thinking Beyond the Social Security Net
This is where advance planning and a good understanding of America’s wealth market become major assets. If you don’t want to spend your retired years fretting over bills, then you need income aside from Social Security benefits. A wealth planning attorney can help you figure out the best way to spread your assets—ensuring you have enough to live comfortably now while still working towards a sustainable future.
IRAs and 401(k)s
Among the most common solutions attorneys propose is the maintenance of a 401(k) or IRA. Both types of accounts let you effectively store money for retirement, often with noticeable tax benefits. You deposit money throughout the course of your life—sometimes with employer-matched contributions, too—and begin receiving disbursements once you reach a certain age. Some IRA accounts even let you earn up to 10% interest on your annual contributions.
Stock Investments and Index Funds
However, IRAs deliver predictable returns—and you can’t readily keep contributing after you’ve already retired. That’s why many wealth planning attorneys recommend that people planning for retirement also channel some funds towards a diversified stock portfolio or index fund. Investments give you the freedom to move money intelligently: you can take small risks to attain big gains or put your earnings into time-tested winners.
The advantage to investing in your retirement is, of course, that even modestly profitable portfolios will continue to accrue gains after you’ve stopped working.
Your Personal Situation Demands a Personal Retirement Strategy
Needless to say, deciding which strategies to pursue and to what extent isn’t an easy question. It varies from person to person. Wealth planning, in spite of its clear-cut importance, is sort of a minefield in that way: you need to do it, but it’s hard to actually do without the right tools and background. An experienced wealth planning attorney can help you get started or improve the plans you’ve already begun to lay. Send us a message online, or give us a call—your retirement might be years away, but your future quite literally depends on the choices you make today.
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If you are ready to achieve financial peace of mind, it's time to schedule a coaching session with an experienced wealth management advisor. Contact Quraishi Law Firm and Wealth Management at 870-275-4304 if you have additional questions or would like to learn more about our wealth coaching process.
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