Kevin O’Leary, a prominent entrepreneur and investor from ABC’s Shark Tank, recently shared his perspective on Social Security and retirement planning.
What Happened: O’Leary underscored that Social Security was never meant to be the only income source for retirees. He pointed out that the average monthly payout, approximately $1,900 or about $23,000 per year, is insufficient for a comfortable retirement, reported The Street on Monday.
He recommended employer-sponsored 401(k) plans and traditional IRAs as alternatives, which offer company matching contributions and tax benefits, respectively. Roth IRAs, requiring upfront tax payments, allow for tax-free withdrawals during retirement.
O’Leary also addressed the question of how much money is needed for a comfortable retirement, stating, “you need less than you’d imagine, and panicking helps nothing. The best antidote to panic is realism.”
He suggested that retirees should aim for about 65% of their gross salary at the time they stop working, something he also stated in his book Cold, Hard Truth on Men, Women & Money.
O’Leary emphasized the need for adjusting spending habits and eliminating debt before retirement. “Don't retire until you can afford it,…Throw out your plan for freedom at fifty-five or even sixty-five,” he advised, highlighting the importance of budgeting, disciplined spending, and part-time work if necessary.
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Why It Matters: O’Leary’s advice comes at a time when concerns about the future of Social Security are driving more Americans to claim benefits earlier than planned. This trend, coupled with fears of outliving retirement savings, is pushing many retirees back into the labor pool, as seen in a recent D.A. Davidson survey.
Furthermore, the debate over the value of Social Security has been a hot topic, with financial guru Dave Ramsey calling it a “-4% return.” However, Colin Exelby, a Virtual Financial Advisor at Celestial Wealth Management stated that Social Security decisions are influenced by factors like income, taxes, timing, and market conditions. There's no universal answer—individual circumstances are key. O’Leary’s insights provide a fresh perspective on this ongoing discussion.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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