Do I need a Roth IRA If I Have Social Security?

You Don’t Need an IRA; There’s Always Social Security

 Do I Need a Roth IRA If I Have Social Security?

I’m one of those dinosaurs that started her first IRA in her 20’s at the beginning of the IRA movement. At that time, there was no such thing as a Roth IRA, so I invested in a traditional IRA. On top of that anomaly, I was the only 25 year old at a retirement seminar in a room full of 60 year olds. The question of whether I needed need a Roth IRA if I have Social Security didn’t cross my mind since I believed that there’s no such thing as ‘too much financial security’. 

Do I need a Roth IRA If I Have Social Security?

Although my passion for saving and investing has stood the test of time, I am deeply concerned about the financial future of those who haven’t yet started to save and invest. Read on for some motivation to get started investing in a Roth IRA today. Get the answer to the question, “Do I need a Roth IRA if I have Social Security?”

A True Retirement Story

At 8:00 AM I receive a call from an older neighbor, just wanting to talk.

She started off by recounting the details of her husband’s firing from his job. My neighbor, June, believes he got fired because of his hot temper.

Strike one, keep your temper in check at work. The saga continues as she tells me about the new blinds she is buying for the home. I casually mentioned, that she might postpone this purchase since her husband, the main source of family income just lost his job. June replies, that expense was already planned so she will get the new blinds.

Strike two, don’t add more financial stress after a job loss. To top it off, June continues her financial mismanagement by sharing how she paid a consultant $100.00 to explain Medicare coverage to she and her hubby. Unable to keep my big mouth shut, I said that Medicare will explain their system for free. Strike three, don’t pay for information readily available for free.

The final blow came when she mentioned she has no Roth IRA, Traditional IRA, no 401k and little saved up for retirement.

She stated “We don’t need retirement savings, we’ll have social security soon.” 

What is she thinking? She simply stated I don’t need a Roth IRA if I have Social Security.

Why You Must Start a Roth IRA Today

I understand that retirement seems a long way off for those in their 20’s and 30’s. Yet, the earlier you start saving, the less total money you need to save, and the more you will have at retirement time. The future of Social Security is uncertain. And even if you do receive Social Security, it doesn’t come close to replacing your pre-retirement income. Your Social Security benefits will likely replace from 26% of your pre-retirement income if you were a high income earner up to 53% if your pre-retirement income was low. At best, benefits will be smaller and start later than they do now.

Today, long term employment with a single employer is practically nonexistent. So, if you fail to take responsibility for your future, you face a scary life in old age. As we all live longer, we need more assets to ensure that we don’t outlast our money. We also need to be certain that our IRA beneficiary designations are up to date. Explore the data so you don’t end up old and poor.

Even if you have a 401(k) at work, you should set up a Roth IRA as well. The more you can save today for retirement, the better your entire life will be. Once you automatically have your contributions transferred into your retirement account, you won’t miss the money, and you’ll learn to live on the rest. 

How to Invest Less and Have More Money in Retirement

Joleen’s Story

At age 25, Joleen began investing $200.00 per month in a Roth IRA and her employer added another $100.00 per month bringing the total up to $300.00 per month. She invested the monthly retirement money* this way:

  • 40% ($120.00) in Vanguard Total Stock Market Index Fund (VTSMX)
  • 30% ($90.00)  in Vanguard International Stock Index Fund (VTIAX)
  • 30% ($90.00) in Vanguard Total Bond Market Index Fund (VTBLX)

She started investing at age 25 and stopped at age 65, for a total of 40 years. At age 65, Joleen’s contributions plus her employers’ grew to $787,444.00*.

Jamar’s Story

Jamar, Joleen’s brother wanted to spend his earnings and didn’t think about the future. No retirement investing for Jamar, he was having too much fun; Jamar figured social security would take care of him.

At age 40, Jamar had a change of heart. He woke up one morning and realized that he had nothing invested for his future; and he was scared.

He decided to start investing and chose the same investments as Joleen, but decided to try to catch up.

Bonus; One of my favorite places to open an IRA is M1 Finance.

Jamar invested $400.00 per month, twice as much as Jill’s $200.00. Jamar’s employer matched his $400.00 per month with an additional $100.00, just like Jill’s. This brought his total monthly investment to $500.00.

*Assume: Portfolio average annual return of 7% At age 65, Jamar’s contribution plus the employers’ grew to $405,036.00, while Jill’s lesser contributions grew to almost twice that amount at $787,444.00.

Jamar invested $24,000 more than Jill and ended up with $382,408.00 less than Jill.

  Joleen & Jamar’s Total Contributions Employer’s Contribution Combined Total Roth IRA Contributions Portfolio Value at Age 65
Joleen  $96,000 $48,000 $144,000 $787,444
Jamar $120,000 $30,000 $150,000 $405,036





Do I Need a Roth IRA if I Have Social Security? The Answer

My friend June is living in denial. When Social Security comes, it won’t match her husband’s former income. As her savings are small and she didn’t plan for the future she faces major lifestyle cuts as she ages.

The alternative to old age is death. If you expect to get old, own up to reality, and invest through work or a discount broker in a Roth IRA and start contributing today.

Even if Social Security continues, don’t expect it to pay for a comfortable retirement. You can choose not to invest for the future, but be aware that Social Security is uncertain, and you will likely be poor in your old age without investing in an IRA. Start now, you won’t miss the money and you’ll appreciate the financial security later.

 The answer to this question, “Do I need a Roth IRA if I have Social Security?” is “Yes”. You do need an IRA, Social Security won’t be enough to support your retirement.

Click here and find out how we grew our retirement account 538% and get the 14 Rules of Investing.

A version of this article was originally included as part of Jeff Rose’s Good Financial Cents Roth IRA movement.

Have you started your retirement investing yet? If not, what are you waiting for?

Updated; April 11, 2019

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