Can You Retire On Only Social Security?

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The majority of Americans don’t have much faith in the future of Social Security. When it comes to retirement accounts, health care and average monthly benefits are among the many concerns for people on the precipice of stopping working. With the ever-elusive retirement age surpassing 65 to 67 in many cases, possibly even age 70, it makes planning retirement benefits all the more complicated.

Collecting Social Security and receiving benefits is everyone’s right who has put a percentage of their hard-earned income into the system- but it is enough to live off of in retirement. Social Security is a federal program designed to provide a safety net for retirees, disabled individuals, and surviving spouses and dependents of deceased workers. However, the amount you receive in Social Security benefits is based on various factors, including your earnings history, the age at which you start receiving benefits, and changes in the cost of living for your lifestyle.

To find out what you need to know about relying on Social Security to fund your retirement, GOBankingRates turned to the experts. Here’s what they had to say.

Quick Take: Can You Retire On Social Security Alone?

If you don’t have an employer-sponsored 401(k) or an individual retirement account, or IRA, you might be counting on living off of only Social Security when you retire. However, this could be a more limited pool than you realize. Here are some key takeaways from a recent GOBankingRates survey and more to compare your financial expectations in retirement.

• 55.76% of people 65 years and older have no retirement savings goal. 
• 25.12% of people aged 45 to 54 expect to have less than $500,000 in savings when they retire.
• 28.6% of people of retirement age expect to have to still work after retirement to pay bills. 
• 29.68% of people aged 55 to 64 expect to pay $500 a month in expenses outside of housing and rent.
• If you are planning on living off of Social Security alone you will likely need to lower your monthly expenses and live frugally. 
• Social Security typically replaces about 40% of an individual’s pre-retirement earnings, but this varies based on such factors as where you live, mortgage payments, medical bills and more. 
• The average Social Security monthly check is estimated to be around $1,767.03.

Can Americans Rely On Social Security as It Stands To Fund Their Retirement?

One-fifth of Americans plan on using their Social Security income to fund their whole retirement, but even if the program continues to exist in its current form, this will likely be difficult for most retirees.

“With the rise of inflation and the overall cost of living, unless you can truly stick to a budget — which in my experience most people don’t — Social Security is not sufficient for most retirement expenses,” said Frank Murillo, partner and managing director at Snowden Lane Partners.

“What people envision spending in retirement and what they actually spend are two different things,” he continued. “With the clients I work with, we go through an exercise I call ‘recreating the dollar’ where we piece together sources of income to mimic what they had through their working years. Then we stretch that for a reasonable time span, and the results of what they can actually spend are eye-opening.”

Social Security was never meant to be a retiree’s only source of retirement income, said Wade Pfau, co-director of the Retirement Income Center at The American College of Financial Services.

“It is meant to replace about 40% of the average indexed lifetime earnings of someone who worked and earned an average wage over their lifetime,” he said. “Many retirees will seek to replace a higher percentage than this.”

Most experts suggest aiming to plan for retirement income that is at least 70% of your pre-retirement income.

“Since Social Security is likely to make up only a portion of your retirement income, it is important to have a well-rounded strategy to meet your income needs in retirement,” said Katherine Tierney, CFA, senior retirement strategist at Edward Jones. “We recommend you act now to understand what you need to do to achieve your ideal retirement. If you’re unsure where to start, a financial advisor can help you outline your goals, develop a strategy to meet them and measure your progress along the way.”

4 Considerations for Depending Only on Social Security

1. Cost of living: Social Security benefits are adjusted annually based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). However, these adjustments may not always keep pace with actual increases in living expenses.
2. Healthcare costs: Medicare coverage typically starts at age 65, but out-of-pocket healthcare expenses can still be substantial, especially for long-term care needs.
3. Debt and expenses: Existing debts, including mortgages or credit card debt, can eat into your Social Security income. Additionally, unexpected expenses can strain a limited budget.
4. Transportation costs: Whether it’s gas prices, car maintenance or just generally getting around, make sure to factor in these costs into your monthly retirement budget. 
5. Quality of life: Relying solely on Social Security may require significant lifestyle adjustments, potentially impacting travel, leisure activities and overall quality of life.

What To Do If You Must Rely On Social Security To Fund Your Retirement

Although financial experts do not recommend living on Social Security alone, for many Americans, this is their only source of retirement income.

“Each situation is unique and some people can live on Social Security only,” said Colleen Carcone, director of wealth planning strategies at TIAA. “If your only source of income is Social Security, remember that continuing to work and delaying the start of your Social Security benefits can close the gap [between how much you need for retirement and how much you have saved] because a delay would mean a bigger check when you do start.”

What Will Social Security Look Like in the Future?

As the survey found, most Americans believe that Social Security benefits will be reduced or cease to exist in the coming decades. As it stands, the Social Security trust fund is set to run out in 2035, so are these concerns warranted?

Most experts believe Social Security will continue to exist, but to keep it going will likely require some changes in the current program.

“There are a few simple solutions that will likely occur,” said Jeremy Finger, CFP, founder of Riverbend Wealth Management. “First, we could eliminate the earnings cap on Social Security tax so that all income above $147,000 is taxed. This could extend the Social Security trust fund. Second, [the Social Security Administration could] increase the full retirement age, which is kind of a pay cut. For example, people who were born after 1970 may not able to get full benefits until age 68 or 69. Third, [they could] increase the payroll tax on Social Security.”

One or a combination of these solutions should balance the Social Security trust fund, Finger said. However, because there are a lot of unknowns, Finger does not recommend relying on Social Security to fund your retirement.

“I would not advise clients to make their Social Security decisions based on what the government may do,” he said.

No matter how the Social Security trust ends up being funded — and most experts believe this will happen before it gets depleted — there is a chance that benefits will be reduced in the coming years.

“Social Security could be reduced to match incoming revenue from individuals and their employers,” Carcone said.

The uncertainty surrounding the future of Social Security should be taken into account when retirement planning.

“While most advisors consider current funding estimates as provided by the Social Security Administration for retirement planning, one should consider possible changes to the system,” said Wendy S. Baum, a financial advisor with Equitable Advisors. “The more saved over time with pension strategies and portfolio building, the less reliant one will be on Social Security benefits.”

Final Take To GO: Supplementing Social Security Income

To improve financial security in retirement, it’s advisable to supplement Social Security income with other sources of retirement savings. Here are some strategies to consider:

1. Personal savings: Building a retirement nest egg through savings accounts, IRAs, 401(k) plans or other investments can provide additional income.
2. Part-time work or side hustle: Some retirees choose to work part time or pursue consulting/freelancing opportunities to supplement their income and stay active.
3. Delaying Social Security: Waiting to claim Social Security benefits until your full retirement age or later can result in higher monthly payments.
4. Budgeting and financial planning: Creating a detailed budget and working with a financial advisor can help optimize your retirement income and expenses.

Methodology: GOBankingRates surveyed 1,395 Americans aged 18 and older from across the country between February 26 and February 28, 2024, asking twelve different questions: (1) Do you have a specific retirement savings goal?; (2) Will you need to work part-time in retirement?; (3) In retirement, what type of housing/living situation would/do you prefer?; (4) How important is/was proximity to family and friends in choosing a location to retire?; (5) Are you considering downsizing in retirement?; (6) Do you plan to or did you move for your retirement?; (7) Where is your ideal location for retirement?; (8) Which of the following will you consider/considered when deciding where to live in retirement? (Select all that apply); (9) What is the MOST important factor in deciding where you want to retire?; (10) What are you looking forward to in retirement?; (11) How much do you plan to spend monthly in retirement (outside of housing/rent)?; and (12) Which of the following countries would you be most interested in spending your retirement?. GOBankingRates used PureSpectrum’s survey platform to conduct the poll.

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