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to increase the amount they save annually. Automatic enrollment with yearly increases in contributions for 401(k) plans, Simple IRAs, or other investment vehicles, increased deposit limits for retirement plans such as IRAs, and tax incentives for long-term savings are being put in place to take some of the weight off Social Security.
Even more important than these incentives, Americans are starting to see the big picture and are taking greater personal responsibility for their financial security during retirement. Recent surveys indicate that more than 77% of people believe Social Security will provide only 50% or less of what they will need once they retire.
The Federal Government thinks this is a pretty accurate belief. The younger the people surveyed, the less they believed Social Security would provide. Those in the 18-35 age bracket believe Social Security will provide less than 25% of their retirement income. That means you must find a way to make up the difference between what Social Security will provide and what you will need to maintain a satisfactory lifestyle.
According to the FDIC, the rules governing retirement can be compli- cated. So, about a year before you plan to retire, discuss your situation with a Social Security Administration claims representative. After you decide on a retirement date, apply for your Social Security benefits and other pensions about three months in advance. If you plan to work part-time, find out how this will affect your Social Security income or taxes.
How Your Social Security Benefits Are Determined
The following factors all contribute to a formula that determines how much you will be paid in Social Security benefits when you retire. Any Social Security taxes you pay on income you earn will contribute to the amount of Social Security benefits you receive.
Social Security