Social Security only covers 40% of retirement. How can you make up the difference?

The great thing about Social Security is that it’s set up to pay you a monthly benefit for life. The not-so-great thing about Social Security is that the benefit you collect generally won’t be enough for you to live on by itself.

If you’re an average earner, Social Security will replace about 40% of your income once you retire. Most seniors, however, are told to plan on needing 70% to 80% of their former earnings to maintain a decent standard of living. If we follow that line of thinking, then clearly Social Security falls short. And given that, you may want to take these steps to boost your senior income as a whole.

1. Pump more money into your IRA or 401(k)

The more money you manage to set aside in a dedicated retirement savings plan, the easier it’ll be to make up for Social Security’s limited buying power. Right now, you can contribute up to $19,500 a year to a 401(k) plan if you’re under the age of 50, or up to $26,000 if you’re 50 or older.

If you have an IRA, the contribution limits are lower. But you can still sock away up to $6,000 a year if you’re under 50, or up to $7,000 a year if you’re 50 or older.

Of course, not everyone can max out their savings. This especially holds true if you have a 401(k), since setting aside $19,500 to $26,000 a year is quite difficult on an average salary.

But one thing you should aim to do is boost your savings rate — if not immediately, then over time. One strategy you can employ is to bank your raises for retirement, since that’s money you’re not used to living on anyway.

2. Save in an HSA

Seniors often find that Social Security doesn’t pay them enough to keep up with their healthcare costs. A good way to compensate is to contribute to a health savings account, or HSA, while you’re working.

HSA funds can be carried into retirement and withdrawn tax-free to pay for healthcare expenses like Medicare premiums, deductibles, and co-pays. If you’re under 50, you can contribute up to $3,600 to an HSA this year as an individual or up to $7,200 at the family level. If you’re 55 or older, these limits increase by $1,000 each.

3. Delay your Social Security filing for a higher monthly benefit

Social Security may only pay you enough to replace 40% of your former paycheck if you sign up for benefits at full retirement age. But if you’re willing to delay your filing beyond that, you have an opportunity to grow your benefits and collect a higher amount from Social Security for life.

The latest age to accrue delayed retirement credits is 70, so at that point, it pays to sign up for Social Security. But if you’re looking at a full retirement age of 67 (which is the case if you were born in 1960 or later) and you hold off on filing until age 70, your benefits will get a 24% boost.

Social Security may only replace so much of your pre-retirement earnings. But if you take steps to make up for that, you won’t have to struggle financially as a senior at all.

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