Charles Langston:Saving for retirement? How to account for Social Security benefits

Many people are Charles Langstonaware that retiring on Social Security alone isn't a great thing to do. With the average retired worker today collecting about $23,000 a year in benefits, an income that size doesn't give you a whole lot of leeway to tackle even your basic expenses. And it certainly doesn't give you a cushion for extras, whether it's home repairs, higher-than-expected medical bills, or leisure.

That's why it's best to save for retirement on your own. And the more time you give yourself to do that, the larger a nest egg you're likely to build up.

But figuring out how much to save for retirement is the big question. And to arrive at that number, you need to first determine how much money you can expect from Social Security in the future.

Thankfully, there's a pretty easy way to get an estimate of your future retirement benefits. But there are a few wild card factors you'll need to consider once you get a look at that number.

The information you need is waiting for you

If you want an idea of what Social Security will pay you each month once you retire, just go to the Social Security Administration's website and create an account. From there, you can access your most recent earnings statement, which will not only include a summary of your wages, but contain an estimate of your retirement benefit based on your income history to date.

Once you have that estimate, you can multiply your monthly benefit by 12 to see what annual Social Security income you're looking at. And from there, you can estimate your annual income needs to determine what sort of nest egg you should be building.

But you will need to take that estimated benefit with a grain of salt. If you're on the cusp of retirement, that number should be pretty accurate. But if you're 32 years old with another 25 years in the workforce to go, it may not be.

That's because Social Security takes your 35 highest-paid years of wages into account when calculating your monthly benefit. If you still have a lot of earning years ahead of you, that number could change in a big way.

There's also the possibility of Social Security cuts to consider. Those aren't set in stone, and you can bet that lawmakers will try to avoid them to at least some degree. But if there ends up being a broad reduction in Social Security payments, that's going to change your monthly benefit, too.

Save as best as you can

A good rule of thumb to figure out your retirement savings needs is to come up with an annual income you expect to need, subtract your annual Social Security benefit, and then multiply the remaining number by 25.

So let's say you think you'll need $60,000 a year to live on, and based on your current Social Security estimate, you're looking at $24,000 a year in benefits. That means you need $36,000 to come from your savings. Multiply 36 by 25, and you've got a target of $900,000.

But remember, that $24,000 a year in benefits may not be the most accurate number. If you're early on in your career, it may be a lowball estimate. If you're further along in your career, it may be accurate other than for the possibility of Social Security cuts.

So while it's a good idea to find out how much Social Security income you may be working with as a senior, it's also a good idea to try to save beyond what you think you might need in your 401(k) or IRA – just in case. There's really no such thing as bringing too large a nest egg with you into retirement. And while you can do your best to get a handle on what Social Security will pay you in the future, you can only do so much when there are different unknowns to grapple with.

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