Reality Check

Richard Quinn

CAN YOU LIVE ON Social Security alone? The answer is a big fat “it depends.”

I was recently taken to task by a reader, who stated he and his wife live just fine on their combined $30,000 in Social Security benefits. I also know of a retiree who says he’s quite happy living in a trailer out west on $1,300 a month. How does that square with the conventional wisdom that, once retired, you need 80% of preretirement income, let alone with my unconventional wisdom that you should strive for 100% income replacement?

It all boils down to how you want to live. If you say you can live comfortably on just your monthly Social Security check, you’re saying that, on the day you retire, you can absorb a 60% cut in income for the rest of your life. The reason: Social Security is designed to replace 40% of income, and for many it’s less.

The median income for seniors age 65 to 74 is $36,320. If you’re over 74, that drops to $25,417, according to the U.S. Census Bureau. Indeed, 12% of those 65 and older are living at the poverty level.

I could not survive on $30,000 a year. My property taxes alone are more than half that amount. But even if I could make do with $30,000, paying for basic necessities with nothing left over sounds grim. Even most hobbies cost money.

So what are the components of “it depends”?

  • Are you willing and able to relocate to a less costly area?
  • Do you have assets to fall back on, if only for a financial emergency?
  • How modestly are you willing to live? Is it just a matter of surviving—or do you seek more from retirement, such as travel?
  • Will you be debt-free at retirement, especially from a mortgage and any credit card debt, or will you need additional income to cover your borrowing costs?

Even if you figure you can get by on Social Security alone, you should probably ask yourself two additional questions:

  • If you live on just Social Security and you’re married, could the surviving spouse live on perhaps two-thirds of that income?
  • Are you comfortable leaving your entire income to the whims of the folks in Congress?

The Social Security Administration estimates 21% of married couples and 44% of single seniors count on Social Security for 90% or more of their income. Clearly, people do manage to live on Social Security alone, but it can’t be much fun.

For the vast majority of Americans, there’s no reason to do so.  Even modest saving and investing can make a big difference to your retirement years. If you’re still in the workforce, get time on your side. Save whatever you can and leave it to grow. Your future, retired self will thank you.

Richard Quinn blogs at Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include Under ConstructionGet Me the Doctor and Mini-Golf, Anyone. Follow Dick on Twitter @QuinnsComments.

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