"A lot of people think they'll manage just fine on Social Security once they stop working. But it may surprise you to learn that Social Security will only replace about 40% of your pre-retirement income, assuming you earn an average salary. Why is this a problem? It's common for retirees to need about twice that much money to cover their living costs without having to pinch pennies. For this reason, you should not plan to retire on Social Security alone."
"Ideally, you'll have savings in an IRA, 401(k), or another account you can use in retirement to supplement your monthly Social Security checks. But you may not end up getting as much income from your portfolio as expected. The money you save for retirement might need to last decades. So you can't just take large withdrawals early on and hope for the best."
Social Security will replace about 40% of pre-retirement income for average earners, which is far less than the roughly double amount many retirees need to maintain living standards. Retirement plans should not rely on Social Security as the sole income source. Retirement portfolios in IRAs, 401(k)s, or other accounts may not provide as much income as expected when stretched over decades. A $1 million portfolio following the 4% rule yields about $40,000 annually, which may be insufficient for those expecting $75,000–$80,000 per year. Large early withdrawals risk depleting savings over a 30-year retirement. Planning options include working longer, saving more, and delaying Social Security claims for higher monthly benefits.
Read at 24/7 Wall St.
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