If you don't anticipate having a ton of retirement savings, or simply want to know if you really need to save aggressively for your retirement, the question of "Can I live on Social Security alone?" is a perfectly valid one to ask. The average retired worker gets $1,915 per month, and this may or may not sound like enough to you.
The short answer is that you'll always be in better financial shape with a significant retirement nest egg, but in some cases it could be possible to make ends meet on Social Security alone. Here's a quick rundown of how you can determine your own retirement income needs, and why Social Security income means different things to different households.
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How much retirement income do you need?
Social Security is designed to replace about 40% of the average worker's pre-retirement income if claimed at full retirement age. One frequently used rule by retirement planners is to assume you'll need 80% of your salary after retirement to maintain the same lifestyle.
Of course, the 80% rule is just a general rule of thumb. It simply assumes that you'll need the same amount of spendable income after retirement, but that you'll no longer have certain expenses (such as the need to save money in retirement accounts). Your actual income need may be higher or lower, depending on your circumstances.
For one thing, many people strive to eliminate as many expenses as possible before retiring. As one example, if you can pay off your mortgage and your vehicles before retiring, you'll need significantly less money to cover your living expenses than you did when making those payments.
A wide range in Social Security benefits
As mentioned, the average retired worker gets about $23,000 per year from Social Security, but it's entirely possible to get a lot more. You can read a thorough discussion of the Social Security benefits formula, but there are two main factors that determine your benefit -- the age at which you start collecting it, and your average (inflation-adjusted) earnings throughout the 35 highest-earning years of your career.
In fact, while very few people do, if you max out the Social Security taxable earnings for at least 35 years and wait until age 70 to start collecting your benefits, the maximum possible Social Security benefit is $4,873 per month, or just under $58,500 per year. I'd be willing to bet that there are quite a few retirees who could live on that.
There are also spousal benefits to consider. The short explanation is that if you're a married couple, and one spouse either didn't work or earned comparably little, a spousal benefit can provide as much as half of the primary earner's monthly benefit.
Examples of Social Security income replacement
There are a wide range of benefit scenarios with Social Security, so let's take a look at just a couple to illustrate how Social Security can mean very different things to different people.
First, let's say that a single retiree averaged a $100,000 inflation-adjusted salary throughout their career, and decide to retire and claim benefits at age 64, which is well before their Social Security full retirement age of 67. Based on the 2024 current benefit formula, this would correspond to a monthly benefit of about $3,134. However, claiming it three years before reaching full retirement age would result in a 20% reduction, so this retiree would get $2,507 per month, or $30,087 per year. This would be about 30% of what they earned before retiring and isn't likely to be enough.
Second, consider the case of a married couple. One spouse earned an average inflation-adjusted income of $75,000 per year throughout their career. The other was a stay-at-home parent and didn't work enough to get Social Security on their own. Both spouses wait until their full retirement age of 67 to start collecting benefits.
In this case, the primary earner's income would produce a monthly retirement benefit of $2,681, and because they waited until full retirement age, they'd get every bit of it. However, their spouse would also qualify for a benefit on their work record, and waiting until their full retirement age would result in half of the primary earner's benefit, or about $1,340 per month.
Combined, this couple would receive $4,021 in Social Security income, or $48,252 per year. This would replace 64% of their pre-retirement income, which wouldn't be ideal, but could certainly be a workable situation.
The key point is that a Social Security check might be enough for some retirees, but not others. It depends on how much income your household gets from Social Security and how much income you need to cover your cost of living.
