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Social Security: Why it's important to your retirement

Social Security represents one of the most effective and efficient ways to deliver stable retirement income. That's why it's important to your retirement plan.

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Updated: Published:

Robert Steen, Ph.D., CFP® Reviewed by: Editorial contributors

USAA Life Insurance Company and USAA Life Insurance Company of New York

Social Security is the largest source of income for older retirees. According to the Social Security Administration's "Income of the Aged Chartbook Opens in New Window,"‍ ‍ See note 1 these benefits make up 90% or more of total retirement income for about 20% of married couples and over 40% of unmarried people.

Especially for lower and middle-income retirees who depend on it the most, Social Security is a critical component of your retirement toolkit. That's because Social Security benefit payments are:

  • Paid for the rest of the retiree's life, so there's no risk of outliving your money.
  • Not subject to stock market volatility, so you don't have to worry about stock market returns.
  • Periodically increased by the Consumer Price Index, which makes inflation less of a risk.
  • Generally exempt from federal income tax — up to certain limits.
  • Paid automatically and often electronically.

Deciding whether to claim Social Security benefits at or before full retirement age is one of the biggest financial decisions most people make as they transition to their nonworking years. More than a third of men and women continue to claim benefits early at age 62. But the decision to claim benefits at 62 could permanently reduce most Americans' largest and most reliable source of stable retirement income. How important is Social Security to your retirement income plan?

First, look at how much of your retirement lifestyle will be guaranteed by non-Social Security benefits, such as pensions and annuities. Second, understand some of the risks you may face in retirement and how Social Security can help manage them. Lastly, consider how the decision of when to claim Social Security benefits affects your family's retirement plan.

For more information, visit the Social Security website Opens in a New Window.‍ ‍ See note 1 For retirement planning, visit the USAA retirement page.
 

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Related footnotes:

  1. You are leaving USAA and being directed to a third party site that is not maintained, owned or operated by USAA. USAA does not control and is not responsible for the site content or the privacy or security practices of third parties. You should read the third party's privacy and security policies and site terms, as their practices may differ from those of USAA.

Related footnotes:

  1. The information contained is provided for informational purposes only and is not intended to represent any endorsement, expressed or implied, by USAA or any affiliates.

  2. The contents of this document are not intended to be, and are not, legal or tax advice. The applicable tax law is complex, the penalties for non-compliance are severe, and the applicable tax law of your state may differ from federal tax law. Therefore, you should consult your tax and legal advisers regarding your specific situation.

  3. An annuity is a long-term insurance contract issued by an insurance company designed to provide a retirement income stream for life. Once the contract principal is converted into an income stream, you will no longer have access to your principal as a lump sum. Terms, conditions, limitations and surrender charges may apply.

  4. Life insurance and annuities provided by USAA Life Insurance Company, San Antonio, TX and in New York by USAA Life Insurance Company of New York, Highland Falls, NY. All insurance products are subject to state availability, issue limitations and contractual terms and conditions. Each company has sole financial responsibility for its own products.

  5. Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, and CFP® (with plaque design) in the United States to Certified Financial Planner Board of Standards, Inc., which authorizes individuals who successfully complete the organization’s initial and ongoing certification requirements to use the certification marks.

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