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These Social Security Secrets Could Ruin Your Retirement

Social security has been around for a long time. Despite this, there is a lot that a lot of people don’t know about the program.

If you rely on Social Security to help you get through retirement, it’s important that you educate yourself about its many rules and keep up to date with Social Security news. If you don’t, you could end up with a series of nasty surprises.

In fact, here are a few lesser-known things about Social Security that could hurt your retirement, unless you take steps to get around them.

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1. Your benefits will not replace your entire salary

Many people don’t go to great lengths to save for retirement because they believe they can just fall back on Social Security. But in reality, these perks will only replace about 40% of your salary if you are an average employee. And if your income is above average, you will receive even less replacement income from Social Security.

Most seniors need around 70-80% of their previous income to live comfortably. Of course, there is some wiggle room with this formula, for example if you make $ 100,000 a year but only spend half of your income and you do very well in this situation. But for the most part, it’s best not to rely too much on Social Security and save for retirement to supplement these benefits.

2. Your benefits may be taxable

Most of us are used to contributing to Social Security during our working years. But you might be surprised to learn that Social Security benefits can be taxed during retirement. Worse yet, the income thresholds to which taxes apply are not very high and have not changed for many years.

In addition, 13 states impose their own taxes on Social Security. And while some of these states offer low and moderate income exemptions, you could end up losing some of your benefits to taxes if you have healthy retirement income.

3. The benefits may be reduced in the future

In the years to come, Social Security is expected to owe more money in benefits than it receives in income. This is because baby boomers will be leaving the workforce in droves and too few replacement workers will arrive.

Social Security can tap into its trust funds to track expected benefits. But once those funds are depleted, benefit cuts will be on the table. And from now on, it could happen as early as 2034.

This is yet another reason to independently save for retirement rather than relying solely on Social Security. If benefits are reduced, they will provide even less replacement income than you might expect.

Don’t be in the dark

Learning about Social Security might not be the funniest way to spend an afternoon, but it’s an important step to take, whether you’re about to retire or decades away. And now that you know these secrets, you can take steps to get around them and avoid financial worries once your career is over.