40% of the average American’s income in retirement comes from Social Security. It’s really important when it comes to you deciding on your Social Security that you answer three really key questions. That’s what we’re going to talk about in today’s episode. I’m Tom Mosley, founder and president of Mosley Wealth Management, and if you’ll give me eight to 10 minutes, I promise I will do my best to increase your financial knowledge.

The first question you have to answer is when. When should you turn on your Social Security? Now, most people know you can turn it on at 62, you get the very lowest that you possibly can get at that point. It grows every year until you reach 70 if you can wait. Can you wait? I don’t know. Are you going to run out of money? Are you going to run out of income before you get to 66, 67, which are the full retirement ages that are predominant out there right now?

Or do you really want to maximize it by waiting until 70? At our firm, we help people know when the optimal time is. What does it mean by optimal? Optimal means the best time for you. You see, if you don’t have enough income and you’re 64 years old, like a lady came in about eight years ago and was $400 short, and she had an opportunity to get $1,400 a month in Social Security, I told her to go turn it on. Then she had a $1,000 margin. So it all depends on you, the when question, when should I turn it on?

You need to consider not just your Social Security and maximizing your Social Security, but are you going to drain your IRA? Are you going to drain your 401k just to get to 70 and be out of money in every other place and be on a fixed income for the rest of your life with just Social Security? The when question is a huge one.

The second question is what. What are you going to do if Congress doesn’t act? Now they’re telling us, and they’ve been telling us for 20 years, that Social Security will likely be reduced by 20 to 22% in the year 2034. Hey, the year 2034 is not that far away anymore. What will happen if they reduce it by 20 to 22% and they only pay out 78 to 80% of the benefit in that year?

Well, the Wall Street Journal did an article back in the summer of 2023, and they said that that would cost the average American 8,000 to $17,000 per year. If you’re married and you’re depending on Social Security for your income in retirement as a couple, what are you going to do when you’re 16,000 to $34,000 short? It’s a big question. What are you going to do? What’s your plan? How are you going to supplement income, not just your lump sum and what you’re growing in the market? Or what if the market’s down? Ooh, a lot of questions to answer with, what are you going to do if the income you’re getting from Social Security gets reduced by 20%?

The third question you need to answer is how. If 40% of the average American’s income comes from Social Security, how are you going to make up the other 60% of income in retirement? A retirement that might last 10 years, 15 years, 20 years, 25 years, 30 years? Who knows how long your retirement might last, and 60% of your income must come from other sources other than Social Security in the average case that’s out there.

So what we’re talking about today is the need to answer this question, and the second question as to what are you going to do if they reduce it, and the first question as to when do we turn it on, all of these questions should and could be answered with an appropriate income plan for retirement. So the question is, do you have an income plan? Oh, you’ve got the 401k, the 403b, the IRA, maybe even the ROTH IRA, maybe even a pension, maybe even Social Security, but the question is how do you put that puzzle together?

You go around the outside, you work toward the middle, and you make it a colorful retirement because you’ve put your income plan together, you never have to worry about running out of money for your entire retirement. That’s what we mean when we talk about an income plan. I’ll guarantee you, if everyone out there has one, you’ll be happy and you’ll know it. If you don’t have one, you know you don’t have one and you know you need one.

Today we’ve talked about what you do with the 40% of your income on the average that comes from Social Security. If you want to check out a broader scope of what a real retirement plan is all about check out our video on how to build a retirement plan. It’ll give you an overall picture of a complete retirement plan. As I always say, every week I promise you, if you give me eight to 10 minutes, I’ll do my best to increase your financial knowledge. If you like this information, be sure to subscribe and that way you’ll be notified when we come out with future podcasts.