Social Security can boost your retirement savings, here's how

By RetirementFOXBusiness

Best ways to save for retirement

Marketwatch editor-in-chief Jeremy Olshan provides insight into financial planning for retirement.

As Americans across the nation are faced with a savings crisis, it helps to have a plan in order to retire comfortably.

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On average, about half of Americans may experience a shortfall covering essential expenses in retirement, according to Fidelity Investments.

“It’s a challenge for a lot of Americans,” Keith Bernhardt, the vice president of retirement income at Fidelity Investments, told FOX Business.

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Overall, Bernhardt recommends people put away 15 percent of their income each year in retirement savings in order to have enough to continue their lifestyle in retirement.

Stashing money in a 401(k) or other employer-sponsored plan can help, especially when there is an employer match. That would be accounted for in the 15 percent savings target. The contribution limit for 401(k) plans in 2019 is $19,000. People over 50 can stash away an extra $6,000 in so-called "catch-up contributions."

For IRAs, the contribution limit is $6,000.

Health Savings Accounts (HSAs) are another useful tool. An HSA is an account where an individual contributes pretax dollars for the explicit purpose of spending those funds on future medical expenses. HSAs can be used to cover everything from dental, vision and prescription costs to Medicare premiums.

Further, Social Security is a "really important factor that should come into play," Bernhardt said.

Many people, however, have pretty serious misconceptions about the program, which was only designed to supplement retirement savings – not replace them. As previously reported by FOX Business, one-in-four Americans think they will be able to live on Social Security alone. Others believe that if they claimed their benefit at age 62, it will actually increase over the years.

Misconceptions can drive people into making ill-informed decisions. Some people claim benefits early, for example, because they think the program is “going broke,” while others do so based on hearsay or advice from family and friends.

“One of the most powerful things people can do is delay taking Social Security,” Bernhardt said. “Each year you delay you increase the payout by about 8 percent on an annual basis. That could make a really big difference in your life.”

The reduction of benefits for those who claim at 62 is 25 percent, 20 percent for those that claim at 63, 13.3 percent at age 64 and 6.7 percent at 65. That means it could be worthwhile to stay in the workforce a few extra years.

People may have concerns because Social Security’s reserve funds are expected to be depleted in 2035, according to the annual Social Security and Medicare trustees report. At that time, about 80 percent of benefits will be payable.

But, for today’s workers, Bernhardt says Social Security is something people can count on, even if the program is modified or adjusted.

“It’s a really important part of Americans’ finances, I think it’s fair to expect it will be lasting quite a bit of time,” he said.

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Working with a financial adviser has proven to help. Those who worked with an expert saw 15 percent greater lifetime Social Security income benefits – $1,551 per month versus $1,324.

It’s also important to note that if you recently filed, but think you made a mistake, you are able to reverse that decision within 12 months. In order to do that you pay all the money back in a lump sum, suspend your account and it will continue to grow until you are ready to file for benefits in the future.