Let's go out on a limb and presume that Social Security will probably be around when you retire. It will be critical to factor any benefits which you receive from Social Security to your retirement strategies. You can obtain a quotation of this quantity by utilizing a retirement software. The following is an instance I ran on a retirement software as an illustration of what you can also do.
In the instance which I ran on a retirement software, I gave Steve Franks (our sample future retired person) a date of birth of 01/01/1955. That would make Steve age 56. Even with the present financial turmoil that the American government is in, it is fairly safe to assume Steve will obtain Social Security income for most or all of his retirement years when running this instance on a retirement software.
So, Steve began employment in 1975. He earned $20,000 for that year and his earnings increased by $1,000 annually. Thus, according to the quantity I entered on the retirement software, Steve now earns $56,000, which comes out to $4,666.66 monthly in gross income. However, based on Steve's numbers that were inserted in the retirement software, he stands to receive $1,890 in monthly social security benefits (in today's us dollars, as the actual figure would be greater due to inflation) later on. This income is far lower that what Steve currently earns. In fact, the combination of Steve's federal, state, and local earnings taxes would need to take almost 60 percent of his current income in order for his Social Security revenue to provide the same buying power that his present income offers. Using the retirement software makes it quite clear that Social Security is not designed to replace income but rather to supplement your other sources of income in retirement.
There is little you can do about increasing your social security benefits (see guide on options to increase social security income). The reminder of your retirement financial sustenance has to come form other sources and retirement software can also assist in this regard. If you enter the monthly amount you need to live on (say $4,000) and subtract the $1890 you will receive in SS benefits, then you see that you will need $2,110 from other sources. The retirement planning software will account for funds that you already have saved and tell you how much you need to out away monthly to reach the nest egg you need to generate $2,110 monthly through your retirement. Alternatively, you can tell the software how much you can save and it will tell you how much you will have for retirement income.
While retirement planning software must not be used as a completely accurate projection of your upcoming Social Security income or any retirement income, any retirement software should offer an estimate of how much you might anticipate, giving you a starting point for your retirement plan. Armed with this information, you'll be able to determine your retirement planning requirements more effectively than you could have otherwise. Finally, as always, talk to a retirement advisor in the event you require any support with your retirement planning requirements.
Interesting article on retirement software.
One tip I would add is to use retirement planning software, like Nest Egg Software, http://www.NestEggSoftware.com. It uses a "Basket Strategy" which provides discipline in managing your retirement assets.
The software allows you to change 18 different variables and see all the possible "what if" scenarios imaginable.
You can see an overview of the software here: