Social Security at one time provided a reliable source of income for Americans post-retirement. For the first time in history though, future outlooks show that while more Americans hope to rely on social security as a major income source, less money will be available, and alternative sources of income will need to be established.
For some, that will mean more reliance on the home equity they have built.
In an April Gallup poll, the percentage of non-retirees who say they plan to rely on social security funds post-retirement has increased from 27% before the recession to 33% today.
This means more baby boomers will be relying on Social Security funds to supply their monetary needs once they have retired and are no longer contributing to the workforce.
With a large population of baby boomers and the increasing percentage of people expecting to rely on Social Security, the funds being distributed to retirees will be greater than the funds coming in from current payroll taxes.
All of these factors contribute to a problematic situation as people continue to assume they can rely on Social Security to fund their retirement when they could be seeking alternative ways to support their expenses after retirement.
Despite a drop in home values since the recession, 21% of Americans expect to rely on the equity built up in their homes as a source of income.
Funding retirement without social security requires attentive planning to the future and saving and investing in a 401(k) or other retirement savings account, increasing the size of stock portfolios, and an establishing a pension plan with a place of employment.
In addition to these supplemental ways to fund a retirement, an increased number of Americans plan to simply continue working until a later age than in the past. According to Gallup’s annual Economy and Personal Finance survey conducted in April, the average age at which Americans expect to retire is up from 60 in 1996 to 67.
Additionally, there has been no change in the percentage of people who plan to rely on annuities or insurance plans to supply post-retirement funds.
Written by Erin Hegarty