I RECENTLY ATTENDED a retirement readiness seminar sponsored by the financial firm that holds most of my retirement savings. The first question the presenter asked was, “How many of you think you’ll be able to retire comfortably living off just your Social Security benefits?” I was surprised to see how many people in the audience raised their hands. But maybe I shouldn’t have been surprised: It turns many of these same people couldn’t guess the average monthly Social Security benefit—and most thought it was far higher than it really is.
The Social Security Administration notes that Social Security benefits are generally designed to replace just 40% of the average wage earner’s income after retiring. Yet reports show that Social Security provides a majority of the income for 72% of retirees age 80 or older—and almost all income for 42% of those 80 and up.
Curious to find out your estimated retirement benefit? The Social Security Administration makes it easy: All you have to do is create an online account to access both your earnings history and a statement showing your estimated benefits. It might be prudent to assume the actual benefit received could be up to 25% less than the figure shown: Beginning in 2035, the Social Security Administration reports that the taxes collected will cover just 75% of scheduled Social Security benefits.
The average monthly Social Security benefit for retired workers is around $1,340. Not sure you can retire comfortably on $16,000 a year? Either you need to redefine what “comfortable” means to you—or you should start saving like crazy.