Retirement Savings: What You Need to Know About Social Security and 401(k)s

Retirement planning is a big deal for many Americans. Two key players in this game are Social Security and 401(k) plans. Let's break down what you need to know about these sources of income. Social Security is a safety net for retirees, the disabled, and families of eligible workers. It's designed to replace only a portion of your income, not cover all your expenses. Think of it as a supplement, not your main source of income. Here's a sobering fact: the Social Security trust fund might run out of money by 2035. If that happens, benefits could be cut by 23%. So, relying solely on Social Security might not be the best plan. Now, let's talk about 401(k)s. These are employer-sponsored plans that let you save and invest a part of your paycheck. The best part? Many employers match your contributions, which is like getting free money. There are two types of 401(k)s: traditional and Roth. Traditional 401(k)s let you contribute pre-tax dollars, lowering your taxable income now. You'll pay taxes on withdrawals later. Roth 401(k)s, on the other hand, use after-tax dollars. You pay taxes upfront, but withdrawals are tax-free. When choosing investments, aim for diversity. Spread your money across different types of mutual funds to manage risk. Also, don't forget to update your beneficiary information regularly. In 2026, the contribution limits for 401(k)s will increase. The standard limit will be $24, 500, and those aged 50 and above can contribute up to $32, 500.