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    Planning for Retirement: How to Replace Lost Social Security Income

    Planning for Retirement: How to Replace Lost Social Security Income

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    Worried about Social Security?

    “Will Social Security still be around when I retire?” is the question that more and more people are concerned about. Many retirees rely on their Social Security benefit for guaranteed income in retirement and to help maintain their basic standard of living. But will Social Security last?

    The Social Security Administration says, in their 2013 Trustees Report, that without any governmental change to the current system, the Trust Fund paying out Social Security benefits may be depleted by 2033. While many people worry that the financial strength of the system will weaken sooner rather than later, it’s difficult to completely predict what will happen.

    And yet, the stability of the Social Security program is just one factor to consider when thinking about your retirement income. It’s important to understand how Social Security works — from when to take your benefits to what happens if your spouse dies — so you can better plan your retirement, protect your standard of living, and determine how best to supplement your income.

    Think about the following when figuring Social Security benefits into your retirement income picture.

    How Much Will I Get Every Month?

    Well, it depends. How much you get from Social Security is tied to how much you make over the course of your career, as well as other factors such as when you begin taking benefits and whether you still have dependents. Average monthly benefit amounts in 2014 ranged from about $1,000 to over $2,500.

    The Social Security Administration Retirement Estimator can help you calculate what your benefits may look like, based on your actual Social Security earnings record. Remember, if you and your spouse both work, you will each receive a benefit based on your individual earnings and the amount of time you worked for. While many people may not rely solely on Social Security to fund retirement, the benefits may make up a significant portion of your income.

    What Happens When My Spouse Dies?

    The simple truth is that when your spouse passes away, your Social Security benefit will be dramatically reduced. As the surviving spouse, you would continue to receive income equal to the larger of the two benefits you were receiving as a couple. However, this means your monthly income could be reduced by up to 50 percent. (And of course the same is true for your spouse if you die first.)

    The problem is that you will continue to have significant expenses such as property taxes, utilities, mortgage or rent. You will likely spend less on health care, groceries and clothing, but those expenses probably won’t be cut in half either. You (or your surviving spouse) may need to replace that lost Social Security income —  and the time to plan is now.

    How Can I Replace Lost Social Security Income?

    The main advantage of Social Security is that it provides steady, guaranteed income — compared to retirement savings accounts that may depend on fluctuating markets. When it comes to replacing that income stream, one stable option you may want to consider is life insurance.

    While many people only take out a life insurance policy for the length of time they’ll be working, it can be advantageous to continue this through retirement as well. Permanent life insurance provides a guaranteed death benefit that you can use as a source of income or to pay off a large expense. Many policies also offer options that provide beneficiaries with guaranteed lifetime income.

    How Does a Death Benefit Work?

    A death benefit is generally income tax-free and could be used to help replace lost Social Security benefits due to the death of a spouse. Many policies offer flexibility for beneficiaries in terms of how they receive the death benefit.

    Let’s say you receive a $250,000 death benefit. You can use the sum to pay off a major debt like the mortgage on your house. Or you can put the money in the bank to be used over time. Another option may be to convert the death benefit to an annuity which can guarantee a stream of income for the rest of your life.

    As the beneficiary, what you do with the money is up to you. You don’t have to decide when you take out the policy.

    Planning Now Makes a Big Difference Later

    If you’re getting close to retirement, now is the time to plan ahead — and plan for the unexpected. Start by getting a sense of how much Social Security income you will receive upon retirement. Then, talk to a Financial Professional about your life insurance options. Remember, premiums are based mostly on your current age and health. This means the sooner you purchase life insurance, the lower your premiums may be, and the sooner you can worry a little less about Social Security.

    Insurance and annuity products issued by Massachusetts Mutual Life Insurance Company (MassMutual) (Springfield, MA 01111) and its subsidiaries, C.M. Life Insurance Co. and MML Bay State Life Insurance Co. (Enfield, CT 06082).

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