While most retirees are going to enjoy the increase because it means more money for them, it is also important to understand how your Social Security functions as the cornerstone of your retirement income.
In retirement planning, there is a metaphor of a three legged stool used to illustrate a stable income in retirement.
One leg is going to be your savings and investments, the other leg is going to be your IRA, 401(k), and/or pension, and the last leg is going to be your Social Security check.
You cannot have a stable income in retirement without having three stable legs of your retirement stool.
According to the Social Security Administration, Social Security checks make up about 40% of beneficiaries pre-retirement income.
While the 2021 1.3% increase is pretty minimal, Social Security timing, meaning when you choose to take your check, can mean the difference between thousands of dollars over your lifetime. It can mean the difference between having a stable leg of your stool or not.
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