Social Security is a valuable source of retirement income, but I’m not comfortable living off just my checks.
About 1 in 10 retirees rely upon Social Security for at least 90% of their income, with the average monthly benefit as of June 2024 being $1,918 per month. That means those who are wholly dependent on Social Security are surviving on little more than $23,000 per year. Couples may get more, but for many, their checks still aren’t enough.
Though I expect to receive some benefits when I retire in a few decades, I see Social Security as just a supplement to my other income sources. Here are three reasons why I’m choosing this path instead of living solely off Social Security in retirement.
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1. Social Security wasn’t intended to cover all your costs
Social Security was only designed to replace about 40% of the average worker’s pre-retirement income. Lower earners may get slightly more than this, while higher earners may get less. But it’s extremely unlikely that Social Security alone will help you maintain your current standard of living in retirement.
If you have no other option but to rely primarily or exclusively on Social Security, your quality of life could take a hit. Extra checks from other household members who are also receiving Social Security may mitigate this somewhat. But it’s possible you could still come up short.
2. Social Security’s buying power is declining
Social Security has lost 20% of its buying power since 2010, according to The Senior Citizens League (TSCL). This basically means that you need $1 in 2024 to buy what you could get with $0.80 in 2010. That might not seem like a lot, but when you add this difference up over every purchase you make throughout the year, it’s substantial. TSCL estimates that today’s checks would need to rise by $370 per month to recoup that lost buying power.
Unfortunately, this trend doesn’t show any signs of reversing. So it’s likely that Social Security will cover even less of your expenses in the future than it does today.
3. Social Security’s future is uncertain
The latest projections estimate that Social Security’s trust funds will be depleted in 2035. When this happens, the program could face benefit cuts. However, it’s more likely that the government will intervene and find some way to increase the program’s funding before this happens.
We still don’t know what the solution might look like, though. That makes it difficult to determine how far Social Security will go in the future, especially for young workers who may not even apply for the program until after 2035.
What I’m doing instead
I’m prioritizing personal retirement savings as much as possible in the hope that I can primarily or completely cover my retirement living expenses with these funds in retirement. I like this idea because it gives me greater control over my retirement income and makes me more immune to any future Social Security cuts or decreases in buying power.
Most of my cash is invested in retirement accounts. These give me valuable tax advantages and help me increase my buying power over time. I also have some money in a taxable brokerage account. These funds aren’t subject to the 10% early withdrawal penalty under age 59 1/2 that retirement accounts have, so I could always draw upon these if I decide to retire in my 50s.
I understand that not everyone can afford to set aside much money for their retirement, which is what leads them to be heavily dependent on Social Security in the first place. But there may still be other options to supplement your benefits.
If you’re still relatively healthy and able to work, you could consider part-time employment in retirement. You could also delay your retirement date a little to give yourself extra time to save. Or you could see if you qualify for other government benefits, like Supplemental Security Income (SSI). This is a monthly benefit available to blind and disabled people, as well as low-income seniors.
Having several sources of retirement income is helpful, but this doesn’t mean you can’t count on any Social Security. No matter what happens in the future, it’s likely that today’s workers will get at least some money from the program. But it’s best to expect that it will probably cover about 40% or less of your retirement expenses. You may also need to update your Social Security strategy if the government alters the program.