Most of us know by now that it's important to set money aside for retirement. But doing so is often easier said than done.
It's hard to allocate a chunk of our paychecks to an IRA or 401(k) plan when life's expenses keep popping up. And so it's easy to see why so many people end up approaching retirement with little money to their name.
In fact, the median retirement savings balance among workers today is a mere $93,000, according to a recent survey by Transamerica. And while that's certainly a respectable sum to have socked away by your 20s or even 30s, it means you're not in the greatest spot if that's all you have on hand by the time you reach your 60s.
If you're approaching your later years with a nest egg that's sorely lacking in funds, here's some good news. Social Security could help you salvage your retirement -- and avoid being cash-strapped throughout it.
One of the most wonderful things about Social Security is that it pays you a monthly benefit for life. The higher that benefit is to start with, the more money you'll have to look forward to throughout retirement.
Your monthly benefit is calculated based on your personal earnings record during your 35 highest-paid years in the workforce. From there, the age you file at will dictate how much money you receive on a monthly basis.
If you file at your full retirement age, which is either 66, 67, or somewhere in between, depending on your year of birth, you'll be entitled to your full monthly benefit based on your earnings history. Meanwhile, you're allowed to claim Social Security as early as age 62, but for each month you file ahead of full retirement age, your benefit will be reduced.
There's also the option to delay your filing past full retirement age. And if you're entering retirement low on savings, that's an option worth pursuing.
For each month you hold off on claiming Social Security, your monthly benefit will increase by about two-thirds of 1%. This means that for every year you delay you filing past full retirement age, your benefit will rise by 8%.
Once you turn 70, you can no longer grow your benefits. But if your full retirement age is 67, waiting until 70 to file for Social Security will give your benefits a 24% boost -- for life.
In an ideal world, you'd be entering retirement with plenty of money socked away in an IRA or 401(k). But many seniors end up in the opposite boat -- they're on the cusp of retirement with little money in savings.
If that's the case, then delaying Social Security could serve as your backup plan. It's not the same thing as having a pile of cash to withdraw from, but it could be just the thing that saves you from being cash-strapped and stressed to the max throughout your senior years.