Yahoo Finance Dave Ramsey Says Social Security Should Be Your Retirement ‘Dessert’: Do Other Experts Agree?
Many people think of Social Security as the main safety net of income they will rely on when they retire, but it was never created to be anyone’s sole form of retirement income.
President Roosevelt created Social Security in 1935 to protect against what he called “the hazards and vicissitudes of life” — particularly aimed at people who were elderly, retired, widowed or disabled.
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Finance expert Dave Ramsey underscored this point in a recent post, pointing out that the best way to regard Social Security income is as the “dessert” in your retirement — meaning a supplement but not the entire “meal.” Yet as many as 1 in 4 Americans age 65 and up rely upon these funds for most of their income.
GOBankingRates asked other financial experts whether they agree with Ramsey’s attitude toward Social Security.
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Social Security Isn’t Enough
While calling Social Security “dessert” might be a step too far for Tim Connon, founder of ParamountQuote Insurance Advisors, he agreed with Ramsey that Social Security was never meant to support a full retirement.
“It was meant to be a supplement to retirement,” Connon said.
“Individuals should be creating additional incomes for retirement instead of relying on Social Security,” he said. “Most of the money individuals get on Social Security is subpar, with amounts ranging from $600 to $900 a month, which barely pays bills with today’s utilities.”
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It Depends on Your Situation
In an ideal world, Social Security would indeed be just the dessert, but Jennifer Kirby, a fiduciary financial advisor and managing partner of Talisman Wealth Advisors, said, “So many people depend on Social Security for at least a portion of their retirement income — that’s the reality.”
She said Ramsey’s advice may not be applicable to everyone.
“It depends. If you can treat Social Security as discretionary income, or dessert, great,” she said, adding that it would be better to exclude it from a financial plan because cuts to Social Security may be in store. “Right now, there are at least eight proposals in front of Congress about altering Social Security that affect different people in different ways.”
Kirby said her practice encourages younger clients to exclude Social Security from their retirement planning or to at least reduce the estimated payments as much as possible. They still have time to save and invest, but older adults might not have that luxury.
“This is more about mitigating the risk of not having dinner before even getting to dessert,” Kirby said.
Nathan Jacobs, senior researcher at The Money Mongers, Inc., agreed with Kirby. While he understands where Ramsey is coming from, he said it’s smart to not bank everything on Social Security.
“For a lot of folks, Social Security is more than just a treat; it’s a big piece of the retirement puzzle,” he said. “Not everyone’s in a spot to stash away big bucks for later years. This is where we need to step up, making financial planning and education more accessible so more people can see Social Security as a cherry on top, not the whole sundae.”
No One-Size-Fits-All Approach
While Ramsey’s approach of treating Social Security as a luxury or a dessert is prudent, finance expert Jake Claver said it’s crucial to understand the context and applicability of this advice for different individuals.
Understand Your Retirement Picture
Before deciding on the role of Social Security in your retirement plan, it’s essential to assess your unique financial landscape, Claver said, looking at factors such as your savings rate, investment strategy and the lifestyle you envision for retirement.
“For those with substantial retirement savings and a well-structured investment portfolio, Social Security can indeed serve as a bonus,” said Claver, who is a qualified family office professional and founder of Syndicately. “However, for individuals with limited savings or those who started saving later in life, Social Security might be a crucial component of their income in retirement.”
Balance Prudence and Realism
Ramsey’s advice leans toward financial prudence, Claver pointed out, encouraging individuals to build a retirement plan robust enough to withstand potential changes in Social Security policies. On the positive side, “This approach fosters a sense of financial independence and resilience.”
However, it’s also vital to balance this prudence with realism.
Claver said, “Completely disregarding Social Security benefits in planning may lead to over-conservation in spending or unnecessary financial stress, especially for those who do not have the means to build a large nest egg.”
It’s Personal
Each retirement plan should be as unique as the individual it serves, Claver explained. While treating Social Security as a luxury works for some, others may need to incorporate it as a fundamental part of their retirement income.
“It’s about finding the right balance based on personal circumstances, expected lifestyle and existing savings,” he said. “Engaging with a financial planner to tailor a retirement strategy that factors in Social Security benefits in a way that aligns with your specific financial situation and goals is advisable.”
Timing Matters
Michael Ryan, a retired financial planner and founder of Michael Ryan Money, said there is wisdom in seeing Social Security as a bonus, not the bedrock.
However, he added, “For many, Social Security isn’t just icing on the cake; it’s the whole cake! Countless Americans lean on it as a crucial income stream. We can’t overlook its role as a safety net for those without substantial savings or investments.”
He recommended that people who may need to lean more heavily into their Social Security income consider waiting longer to take the benefits.
“Delaying your benefits past full retirement age can sweeten the deal, increasing your monthly take,” he said.
Ultimately no single piece of financial advice works for everyone. It’s best to consult with a financial professional to determine what is best for you.
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This article originally appeared on GOBankingRates.com: Dave Ramsey Says Social Security Should Be Your Retirement ‘Dessert’: Do Other Experts Agree?
