Social Security System May Be Cut 5 Investments Retirees Should Make to Offset Any Loss of Benefits.The Social Security Administration has highlighted that its benefits typically cover only about 40% of one’s pre-retirement earnings. This underscores the importance of diversifying income sources to ensure a comfortable retirement. The urgency to diversify is further amplified by ongoing discussions about potential modifications to the Social Security program due to anticipated funding challenges.
Social Security System May Be Cut 5 Investments Retirees Should Make to Offset Any Loss of Benefits
Proposed changes include adjusting the full retirement age, altering the method of calculating cost-of-living adjustments, considering a longer average work history, or introducing means-tested benefit reductions.Should these proposals materialize, beneficiaries might experience reduced payouts, emphasizing the need for alternative income streams. Here are five investment avenues to explore for a more secure retirement. Also read this article In 2023 Social Security Is Set to Undergo Six Major Changes
1. Dive into Annuities
An annuity is essentially a contract with an insurance company, where you make a lump-sum payment or series of payments. In return, you receive periodic disbursements, which can be monthly or annually. Given their predictability, annuities can be a valuable supplement to a diminished Social Security benefit.
There’s a variety of annuities, each with its own set of terms and returns. Consulting a financial expert can help navigate these options. Immediate fixed annuities, for instance, offer consistent payouts after a one-time investment.
2. Explore Dividend-Paying Stocks
For those comfortable with a bit of risk, dividend-paying stocks can be a source of regular income. While stock values fluctuate, dividends can offer a steady inflow. However, returns can sometimes be modest. For instance, Nasdaq reported a 1.51% dividend yield for the S&P 500 in August.
Blue-chip stocks, known for their reliability, are a good starting point for dividends. Preferred stocks can be especially attractive as they prioritize dividend payouts over common stocks.
3. Consider Low-Risk Bonds
Bonds, whether from corporations or governments, can be a stable investment to complement Social Security. Typically, they provide biannual fixed interest payments. While returns might be lower than stocks, bonds offer greater stability.
U.S. Treasury bonds are particularly secure and might offer tax advantages. Vanguard notes that municipal bonds, too, carry minimal default risk and can be tax-exempt. For those willing to take on slightly more risk, high-grade corporate bonds can be an option.
4. Lock in with Certificates of Deposit (CDs)
CDs are suitable for funds you won’t need immediately. You deposit a sum for a predetermined period, ranging from a month to several years, and earn interest. The key is to opt for an insured institution for safety.
Data from the Federal Deposit Insurance Corporation in July suggests that CDs typically offer better rates than regular savings or money market accounts. Some banks even provide rates above 5%. It’s worth shopping around to find the best rates and terms.
5. Opt for High-Yield Savings Accounts
Primarily offered by online banks, high-yield savings accounts can provide returns superior to conventional savings accounts. Some of the best accounts can offer interest rates between 4% and 5%. The flexibility to withdraw funds without penalties makes this an attractive option for retirees.
However, it’s essential to remember that these rates can vary. If you’re considering an online bank, evaluate the ease of transactions and account management.
In conclusion, while Social Security remains a vital component of retirement planning, diversifying income sources is crucial to ensure financial stability in one’s golden years.