I don’t think Social Security will last. How can I plan?

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Q. I’m 33 and I work full time. I save $10,000 a year to my 401(k) plan. I’m concerned that Social Security won’t be there when I retire. How can I plan so that I have enough when I’m finally leaving work for good?
— Worker and worrier

A. You are wise to start thinking about retirement early in your working life.

Your retirement could last 30 years or longer, so the sooner you start saving, the less you’ll have to set aside every year until you leave the workforce.

That said, the biggest risk in retirement is longevity. With medical enhancements and healthier lifestyles, life expectancy has many living to age 100 and beyond, said Jody D’Agostini, a certified financial planner with AXA Advisors/The Falcon Financial Group in Morristown.

Social Security is one of the funding tools for retirement, but it will be at risk if funding isn’t addressed, D’Agostini said.

“The combined Social Security trust funds currently are slated to run out of cash reserves by 2035, and next year the benefits paid out will exceed the revenues taken in,” she said. “After such time, there are reserves enough to pay about 75 percent of the scheduled payments.”

So right now, she said, it’s wise to assume that the benefit will be less than expected.

For that reason, you should look to save as much as possible.

Generally, you will need to replace 75 to 80 percent of your expenses at retirement to continue your standard of living, she said. You will no longer have savings as a line budget item, and presumably your taxes will be lower because you may be living off of investment income and eventually Social Security.

D’Agostini noted you did not share your annual earnings amount, but IRS code allows you to save to $19,000 a year in your 401(k) plan.

“Start by creating a budget and seeing what your fixed and discretionary expenses are. If possible, make sure not to get into a living situation that does not allow you to adequately save,” she said. “If you get a raise or promotion, look to increase your savings and if your company has a matching program, then at least contribute up to the match.”

If at the end of the year you find you have some extra cash after maximizing your 401(k), you can also contribute up to $6,000 in an IRA, she said.

“Depending upon your income, a Roth IRA would make sense, as you contribute after-tax money to this, which grows income tax-free and comes out income tax-free in retirement,” she said. “It is nice to have assets that have different tax preferences to choose from.”

There are income limits for contributing to Roth IRA, so if you’re priced out, you can still contribute to a traditional IRA.

How you invest your savings will also impact your overall nest egg. Asset allocation matters.

Be sure that you are taking on enough risk to drive higher returns over time, D’Agostini said.

“You most likely will not be using this money for 30 years or more, so you might want to consider committing 80 to 90 percent to stocks at your age,” she said. “Even with market declines, you have many years to recover.”

Lastly, D’Agostini said, it might be good to start a financial plan for yourself to look holistically at your entire financial situation.

“Saving money and growing assets is only one piece of the pie,” she said. “You also must look at risk management so that situations such as early death of a family member or disability do not derail your solid plan.”

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This story was originally published on June 20, 2019.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.