Any American who spends his or her working years on United States soil knows how important savings are. Not having a good savings base is insane in a system where inflation causes prices to skyrocket continuously. The same is true for Social Security benefits. A key thing to keep in mind is that Social Security benefits will always be less than wages.
Therefore, this is a key point to understand whether we should have savings or not. There are several elements that shape this need, but what is key is that having savings helps us a lot. Each situation is totally personal and has a context. So, to know if we can really start collecting Social Security without savings we have to carefully study our own case.
Savings and Social Security
As is obvious, it is not strictly necessary to have savings in order to collect Social Security. However, it is highly advisable. Reaching retirement with money saved is something that all financial advisors recommend. Not doing so may be totally unwise. It is not mandatory to save half of your salary as a worker.
If you save about 5% of your monthly allowance while you are a worker, you will arrive at retirement with a large amount of money. Get, therefore, to make a base of money that will benefit your monthly Social Security. If you don’t have a benefit as high as $4,194 a month, try to get to that time of rest with a large amount in your bank account.
Maximizing your retirement benefit
Considering that savings may not be enough to have a comfortable life in retirement, another strategy is to increase the benefit. This way we will have a more interesting monthly check, although it will never ever reach the amount of our salary as a worker. Still, you can follow a few tips to reach the maximum possible.
Don’t retire early. The earlier you retire, the less money you will receive. Try to apply for retirement at age 67 or 70. After age 70 there is no extra Social Security benefit, so you can consider that the maximum limit before you stop working.
Work for 35 years. Any year below 35 years worked implies a reduction in your monthly benefit. Work all these years even if it is at a low salary.
Don’t have a low salary. Having a low salary means having a low retirement. Your benefit is calculated based on the taxes you pay as a worker. That is why it is important that you work 35 years and have a good salary before you start collecting Social Security.