Should you rely only on social security benefits in retirement? The answer is probably no. Social security benefits should be seen as a supplement to income rather than the only source of income in retirement. The average benefit often covers only a portion of living expenses. Also, the program is facing long-term funding challenges, so if you haven’t collected yet, you may not receive benefits in the future. In addition, Social Security benefits most likely won’t be adjusted as inflation raises costs and makes healthcare more expensive.
Paying into Social Security
Social Security is collected through payroll deductions while you’re working. Eligibility is always based on work. Check here to see if you qualify. In general, you pay 6.2% of your earnings into Social Security, and your employer matches that amount, contributing another 6.2%. This is why monthly payments of benefits are only a small portion of your average income over time. Your actual benefit depends on your highest 35 years of earnings and when you start claiming.
How Much Will You Receive
Social Security payments vary based on your earnings history, retirement age, and contributions. Here’s a general breakdown for 2024:
- The average retirement payment is $1,900 a month
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Maximum benefits at age 67 are $3,822 a month
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Maximum benefit at age 70 is $4,873 a month
While this money is helpful monthly, it probably won’t cover all of your expenses in retirement, especially with inflation. As you can see, if you take your benefits later, you’ll receive more money each month, but it still may not be enough to live on. It’s best to plan to have a backup source of income for when you plan to retire. If you save early and diversify investments, you won’t have to just rely on Social Security benefits. You should be contributing to 401(K)s, IRAs, and other retirement accounts as soon as possible. It’s a good rule of thumb to max out these contributions as you get closer to retirement age. This way, you’ll have enough money throughout your golden years.
The more you plan for retirement, the earlier you’ll be able to retire. In addition to retirement accounts and Social Security benefits, you should also plan out your investments, side income, and pensions to supplement your income. Careful planning and budgeting can help you save for the lifestyle you want in retirement. Without such planning, you may be struggling to make ends meet on Social Security benefits alone.
Problems with the Social Security Program
If you rely solely on social security, you may face problems collecting in the future. For example, more retirees are collecting benefits while fewer workers are paying in. Also, people are living longer, thus collecting longer. As a result, the fund is estimated to be depleted by 2035, meaning benefits will be cut if no reforms are made to the program. It has been proposed to raise taxes to fund the program, increase the retirement age, or reduce benefits. All of these proposals have been met with political resistance.
How are you planning for retirement? Will you rely solely on Social Security benefits?
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Teri Monroe started her career in communications working for local government and nonprofits. Today, she is a freelance finance and lifestyle writer and small business owner. In her spare time, she loves golfing with her husband, taking her dog Milo on long walks, and playing pickleball with friends.
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