Social Security Matters

Dallas/Fort Worth Financial Planner Fee Only CFP, Steve Blankenship of HeritageFinancialPlanning.com Addresses the Importance of Social Security Retirement Benefits

Grapevine, TX (PRWEB) March 13, 2005 -- Change is on the horizon for the Social Security system, and the next few years will be pivotal in charting the new course of the system. While politicians debate the merits of this change or that change or no change at all, the outcome of their decision will likely have a greater impact on your financial situation than you anticipate.

Most people, particularly those with higher incomes, dismiss the Social Security system especially with regard to the retirement benefit payments that each is entitled to receive.

Think back to the last statement you received from Social Security. Do you remember how much your estimated to receive when you hit full retirement age?

Most high income earners can expect (based on current estimates and rules) to receive somewhere between $1,500 and $2,000 per month in retirement benefits when they reach full retirement age. Doesnt sound like a lot does it? The reality is that this benefit can have a dramatic impact on your success in retirement despite what seems to be a paltry monthly benefit.

For many retirees, Social Security serves as the safety net that keeps them from poverty. The reality is that for many middle to high income earners wont retire on Social Security alone and many feel that anything they receive from Social Security will just be a drop in the bucket compared with what they need to sustain their lifestyle in retirement. Oh, but how important a drop in the bucket can be.

Numerous investment studies have concluded that when you retire, you should only plan to spend 3% to 5% of your portfolio on an annual basis in order for your assets to sustain your standard of living. So, if you plan to retire on $10,000 per month then you will need to have saved at least $3,000,000 by your retirement date and keep these assets invested in order to stay ahead of inflation.

So where does Social Security come in? Imagine that instead of pulling the full $10,000 per month from your retirement portfolio, you only draw $8,000 per month because theres a check in the mail from Social Security every month for approximately $2,000. The resulting reduction in monthly withdrawals means that the same retirement lifestyle may be maintained with a portfolio 20% smaller than that required without Social Security benefits.

Translate the difference into quality of life and youll see the difference. Being able to retire with 20% less in savings opens the door to early retirement, more travel and possibly that vacation home that you have been imagining. Even modest benefits from the Social Security system provide the opportunity to slow the burn rate" of your portfolio greatly increasing the sustainability of your retirement savings and eventually increasing the size of your estate to pass down to future generations.

While Social Security may not be the primary means for your retirement, it is important to understand the impact of these benefits and adjust your retirement planning according to the final result of the current reform initiative.

About Heritage Financial Planning: Steve Blankenship is an hourly, as-needed Certified Financial Planner practitioner. As Founder of Heritage Financial Planning, he provides commission-free, unbiased advice to those at all financial levels. For more information go to www.HeritageFinancialPlanning.com or call 817-410-5725.

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