Are You Relying Too Much on Social Security in Retirement?

For many retirees, Social Security is a major piece of the income puzzle. In fact, it’s the primary source of guaranteed lifetime income for a large number of retired people. Your Social Security benefit may provide a lifetime safety net to help you cover retirement’s most challenging expenses.

It’s important, though, to have other income sources outside of Social Security. Too many retirees make the mistake of relying primarily on their Social Security benefit. More than 60 percent of retirees rely on Social Security for over half their income. Social Security provides more than 90 percent of income for a third of those individuals.1

Although Social Security is a valuable retirement resource, it likely won’t provide enough income to fund your lifestyle. For many workers, Social Security replaces only a third to half of their preretirement earnings. Depending on your plans for retirement, you may need a substantial amount of income to supplement your Social Security benefit.

If you’re behind on your retirement savings or haven’t started yet, the good news is that you have time. Below are a few strategies to help you create supplemental income after you stop working. If you haven’t implemented these steps, now may be the time to do so.


Don’t take early retirement account distributions.

Unplanned expenses are a normal part of life. It’s not uncommon to face unexpected costs for things like medical expenses, home repairs, unemployment and more. When these costs arise, you may be tempted to tap into your 401(k) plan, IRA or other retirement savings vehicles.

You may want to resist that temptation, though. Early distributions from retirement accounts can have big consequences. One is that a distribution can slow your account’s growth. The less money you have in your fund, the less capital that’s invested and available to compound.

A distribution from your retirement plan can also lead to taxes and penalties. Most retirement accounts are tax-deferred, which means you don’t pay taxes on growth while the funds are in the account. Distributions at any age can be taxable. Distributions before age 59½ can trigger a 10 percent early withdrawal penalty.

The taxes, penalties and opportunity costs associated with retirement plan distributions can have a substantial impact on your savings. They could significantly reduce the amount of retirement income you’re able to generate from your accounts. To maximize your income from these sources, make regular contributions and avoid unnecessary withdrawals.


Look for ways to generate side income.

Retirement is supposed to mark the end of your working years. However, many retirees are reframing retirement as an opportunity to transition from their career into new opportunities. Consider creative ways to generate income while you also maintain a flexible schedule.

For example, you could work part time in a seasonal job. You could teach lessons or classes, or use your expertise to provide consulting services. You could rent out property or drive for a ride-hailing service.

Retirement doesn’t have to mean that you no longer work. In fact, some form of earnings may be just what you need for a stable financial foundation. Once you reach full retirement age, earnings don’t impact your Social Security benefit, although they could affect the amount of your benefit that’s taxable.


Minimize debt.

Granted, debt elimination isn’t technically supplemental income. However, eliminating debt can have the same impact as generating additional income. If debt payments make up a significant portion of your budget, consider implementing a focused plan to eliminate as much debt as possible.

You may want to cut back on expenses so you can allocate more money toward debt paydown. Also, consider transferring balances to debt with lower interest rates, which may allow you to pay off the debt faster. You could downsize to a smaller home, which could minimize or even eliminate your mortgage and other housing costs.

Ready to develop your retirement income strategy? Let’s talk about it. Contact us today at TB Financial. We can help you analyze your needs and create a plan. Let’s connect soon and start the conversation.




Licensed Insurance Professional. This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.

The material is not intended to be legal or tax advice. The insurance agent can provide information, but not advice related to social security benefits. Clients should seek guidance from the Social Security Administration regarding their particular situation. The insurance agent may be able to identify potential retirement income gaps and may introduce insurance products, such as an annuity, as a potential solution. Social Security benefit payout rates can and will change at the sole discretion of the Social Security Administration. For more information, please consult a local Social Security Administration office, or visit

16767 – 2017/6/20

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