If you don’t have a retirement savings account — a 401(k) or an individual retirement account (IRA) — what would it take to persuade you to open one?

How about the prospect of living on Social Security alone?

About one-third of households live on nothing other than Social Security, according to an analysis of data by the Center for Retirement Research at Boston College. Among those with low incomes, 75 percent of people live on Social Security alone, the center calculates.

What does that mean in terms of money in your pocket to pay the bills?

The average Social Security check, according to Social Security, is $1,230 or $14,760 a year — about $7.10 per hour, a little less than the federal minimum wage of $7.25 per hour.

But that doesn’t take into account money deducted to pay for Medicare. There is no charge for Medicare Part A, but Part B, which covers costs other than hospital stays, charges most people $115 per month. Social Security deducts it before depositing your benefit in your bank account. That takes the amount you have to live on annually to $13,380.

If you opt for Part D, which covers prescription drugs, you’ll pay another $30 a month, reducing your take home to $13,020 or $1,085 a month.

If you want a Medigap plan to cover deductibles and other costs that aren’t covered by basic Medicare, you’ll pay an additional $165 per month or $1,980 per year, although this cost varies by plan and region. That will reduce what you have to live on to $11,040 or $920 per month.

Not much — although there are benefits to being this poor. You will probably qualify for the government’s “Extra Help” with Part D, and you may also be eligible for SNAP — the program formerly known as food stamps. But any way you look at it, it’s not a way of life most of us would choose.

If you have a spouse, the situation improves, but not by much. Especially if you’re a woman and can expect to live at least five years longer than a man.

At a time when both candidates for the U.S. presidency are proposing cutbacks in Medicare and/or Social Security, Alicia Munnell, the director of the Center for Retirement Research, is urging an expansion of programs that help people save for a more comfortable retirement, especially for those in the private sector who are not among the 42 percent who participate in a workplace retirement plan.

Will that happen? I wouldn’t hold my breath. In the meantime, the best retirement planning starts with taking the initiative to open a retirement savings account and putting as much as you can into it. Munnell says the typical household approaching retirement (ages 55 to 64) has only $120,000 in 401(k)/IRA balances. Assuming that the household purchases a joint-and-survivor annuity at retirement, its monthly income from savings would amount to only $575, she calculates.

She says it’s not enough and she’s probably right, but it sure beats nothing.



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