Will Your Pension and Social Security Provide Enough Income for Your Retirement?

The short answer, as is so often the case in personal finance, is "it depends." For South Carolina teachers and other public employees, relying solely on a pension and Social Security may provide enough income for a secure and comfortable retirement. This is especially true for those who retire at age 67 or later with 28 or more years of service. For those retiring at younger ages, that likelihood may decrease. Many people don't realize that "retiring" does not automatically mean collecting Social Security and/or your pension. You can begin collecting Social Security as early as age 62 (although that is not always the wisest decision). The longer you wait, the more you will receive in your monthly Social Security check. There are also age and service requirements to receive a pension from the South Carolina Retirement System. While the state’s pension plan and Social Security offer foundational support, they are unlikely to fully cover retirement expenses due to inflation, healthcare costs, and changes in lifestyle that often come with retirement, especially for those looking to leave employment 10 years (or more) before they will begin collecting social security.

South Carolina’s public employee pension plan is structured to replace a portion of pre-retirement income, generally around 50-60% for those with full service (the formula in South Carolina is 1.82% x years of service x Average Final Compensation). For example, a teacher who retires after 30 years of teaching will receive (at most) 54.6% of the average of their highest 3 (or 5) years' income as a pension payment. See my other post on this site regarding optimizing your pension. Some retirement experts suggest that retirees need 70-90% of their working income to maintain their standard of living, especially as costs rise over time. Adding a pension to Social Security will likely provide this income level. Healthcare is one significant concern; premiums, medications, and out-of-pocket expenses can quickly deplete fixed income sources. A teacher or other public employee relying only on their pension and Social Security may find it difficult to cover these costs comfortably.

To bridge the gap, South Carolina public employees may consider supplementing their retirement savings through tax-advantaged accounts like 403(b) or 457(b) plans, or Traditional or Roth IRAs. By contributing to these accounts during their working years, employees can build additional savings and investment income to cover unexpected costs and inflation. Investing in these options allows these employees to grow their retirement funds beyond what pensions and Social Security offer, creating a more comprehensive plan for the future. With additional savings, teachers and other public employees can retire with greater financial security and peace of mind, ready to enjoy their post-career years. See the separate post on this site to learn about differences between 403(b) and 457(b) plans, and choose the plan that will work best for you.

Do you need professional help navigating these decisions or managing your investments? Head on over to venablesfinancialsolutions.com. Our financial advisers will never sell you anything but their advice. They are 100% fiduciary advisers who are legally obligated to do what is in your best interests. They cannot receive commissions, and do not sell any financial or insurance products.