The National Academy of Social Insurance says one in four Americans aged 65 and older are using Social Security as the sole source of income. That means the other 75 percent of the retired population may be finding these benefits are not enough to cover expenses in retirement.
Of course, the Social Security program was never designed to cover all of retirees’ expenses. The monthly benefits only replace about 40 percent of the average pre-retirement income, with the remainder left to the responsibility of retirees.
In order to work towards filling this gap in retirement, you may want to plan on saving between 70 and 80 percent of your pre-retirement income. That sounds like a lot, but there are ways to help spur those savings over time. (If you currently have a pension, you may be able to adjust your personal savings and investments.)
For example, you may want to consider making contributions to an IRA or 401(k), which help your money grow tax-deferred until retirement. This can sometimes supplement your social security benefits and help you cover the basic expenses and support your retirement lifestyle.
Wondering what your expenses might look like in retirement? According to the Bureau of Labor Statistics, Americans aged 65-74 spent an average of $4,123/month in 2015. If you consider the average monthly social security benefit is $1,360, then even two people on social security can’t cover the monthly expenses with their combined $2,720/month.
Whether you’re close to retirement or have a few decades before that time, you can always start saving for your later years. It can be to your advantage to explore a few options that include social security but don’t depend on it as a primary source of income.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing involves risk including loss of principal.