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Retiring on Social Security alone

By Jennie L. Phipps · Bankrate.com
Sunday, July 14, 2013
Posted: 6 am ET

Retiring to live only on Social Security is risky retirement planning, but lots of people do it anyway. 

I read a report recently from Social Security that said 23 percent of elderly married couples and 46 percent of elderly single people count on Social Security for 90 percent or more of their income.

Even if you are prepared to live a frugal lifestyle in retirement, depending on Social Security alone won't leave you much breathing room. The Social Security Administration offers these calculations that explain why. They are based on the assumption that a beneficiary and spouse will be collecting jointly.

  • A couple retiring with $25,000 in final income can expect to receive a total Social Security annual benefit of $19,311, which is 77 percent of what they earned during their last year of employment. That will put them about $3,800 above the rock-bottom federal poverty level of $15,510 for a two-person household. They might be able to get by on that, but it isn't going to be pretty.
  • If they retired with a household income of $50,000 -- close to the U.S. average -- Social Security says they can expect a joint benefit of $30,438, which is 61 percent of their final income. Most experts believe that they need a minimum of 70 percent to 80 percent, but by some calculations, 61 percent is doable.
  • If they retired earning a household income of $100,000, then they can expect Social Security to replace 44 percent of their final income. Let's hope they managed to save some.
  • For high earners, with a final household income of $250,000, the total benefit is only slightly more than what lower earners get because of the $113,700 cap on Social Security payroll taxes. Big earners max out at a total annual benefit of $45,608, which is just 18 percent of their final salaries at this level -- less if they made more.

Granted, these calculations assume that one spouse will qualify for only a spousal benefit -- half of what the higher-earning spouse is getting. In many households, both halves of the couple qualify on their own for worker benefits and collect more than what Social Security says here. Nevertheless, these numbers make it obvious that putting as much money as you can into the retirement kitty is an excellent idea because Social Security just won't be enough.

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18 Comments
Lisbet
August 02, 2013 at 8:04 pm

Financial planning is something that people who have money and time to think about what to do with it do -- the vast majority of working people do not seem to have the luxury of extra money or extra time in this economy. My husband and I were on our way to financial security with college educations, great jobs, good savings, a good portfolio, retirement savings, and a sound plan. Then I developed MS and he suffered a traumatic brain injury. Both of us went from being gainfully employed, working adults to total disability. Despite long term disability insurance - a huge rip-off - we live now on SSDI and Medicare. We have NO savings or portfolio left. No one can afford chronic illness in the US, even with great health insurance. As soon as disability hits, it's COBRA time (expensive!) and then no health coverage until Medicare. We are now in our late 40s, sending a child off to college on loans and financial aid, and hoping that he can make it through. So much for working hard for the American dream. All the planning in the world cannot dig us out of what promises to be a long, tough time ahead.

Jo
July 30, 2013 at 12:48 pm

My husband and I both worked as we had a large family to support. This large family is now working and paying in to SS which benefits SS retirees. Way too many couples had only 1 or 2 children so the SS pay-in is depleting the overall program. We struggled to pay extra into our retirement accounts, but unfortunately our money was invested in the stock market and we lost it during the crash. We are barely surviving on less than $25,000 in our retirement years. When one of us dies that income will be cut in half and according to my calculations it will not be enough to meet the monthly bills. Every month we go a little deeper in debt. I, too, agree that we would have been better off to have stuffed it under our mattress. Blaming Clinton, Bush or Obama gets us nowhere - we're already there.

TerminologyBreakdown
July 29, 2013 at 6:38 pm

A lot of it depends on the lifestyle you live before you retire, and yes investing even just a little bit helps. This is much more important than throwing blame and pointing fingers at economic policies that Presidents have very little control over. If you want to blame anyone, blame whatever idiots you have been putting into congress that past three or four decades or so.

I live in a fairly expensive city on the West Coast on about $40,000 a year. How is it I survive? I live well within my means and don't borrow credit or even use a credit card. Also, even though I don't have a lot to invest, I do invest about $200 or so a month into a 401k above and beyond what I make in social security benefits so I at least have something. It all starts small and ends up compounding big once you decide to start investing.

Joan
July 27, 2013 at 1:00 pm

Larry: What are you blaming on Obama? Under Obama our economy has grown at a whopping 1.8% growth.

You do know, don't you, that the market crash of 2008 happened while Bush was president? Yes, the market crash happened under "bush" but remember people......both the HOUSE and the SENATE were run by the Democrats. When Bush saw the writing on the wall of what was going to happen and questioned the Dems.....Maxine Waters, said "everything is fine Mr. President, nothing to see here". Also, it was actually the policies of President Clinton that caused the housing market collapse.........Freddie Mac and Fanny Mae, were created long before Bush, so NO you are WRONG on your facts. It was President Clinton that created the housing mess, not Bush. When Bush questioned his Democratic Senate and House about some signals that started in 2007 that the whole thing was going to crash, he was mocked.

And how was Obama responsible for the real estate bubble that led to "the demise of the housing market"? Obama wasn't responsible for this, President Clinton was.....however due to Obama economic policies, like I don't know not allowing the Keystone pipeline to happen, opening up mining and oil on federal lands, giving HUGE subsidies to wind and solar companies that go bankrupt, Obama IS hurting our economoy........Oh and that Obamacare thing.......what a disaster, it is so bad he is delaying implementation of HIS OWN LAW!!!!!!!!!

It's gotten so ridiculous that I expect someone to blame Obama if the sun doesn't shine, or if there's an earthquake or a hurricane. Well some people think Obama is God, so actually he could be blamed for those too.......LOL.

And HH, hey, I've "been there, done that." I was born into poverty and had to leave HS at 16 to support myself and my mother. I was a good student, too. Well, I got my GED and after I got out of the Army, I wanted so badly to go to college, but I had no money, since Congress had not reinstated the GI Bill. When they did bring it back, I was married with a wife to support. I got my undergraduate degree in my middle age, with part-time studies. We never had enough money to invest or put aside for retirement ($100 a month is all I put aside because that is all I can afford, but it is definitely better than nothing.......no amount is TO SMALL, every bit helps). Now I'm living on SS and a small pension. I wasn't lazy or stupid, just had too many responsibilities and not enough opportunities......

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Ron
July 22, 2013 at 6:33 pm

I have to disregard all of the advice I see in print from financial planners. They seem to live in a fantasy world where all Americans with any gumption are raking in lots more than the national average per household. "How's your portfolio? Which stocks do you own? How much do you have in savings?"

Really? All this to lead up to their advice on "how to retire." So, I guess lots of us just retire in limbo, some place between Heaven and Hell. How are they training financial planners anyway?

Ron
July 22, 2013 at 6:19 pm

Larry: What are you blaming on Obama? You do know, don't you, that the market crash of 2008 happened while Bush was president? And how was Obama responsible for the real estate bubble that led to "the demise of the housing market"?

It's gotten so ridiculous that I expect someone to blame Obama if the sun doesn't shine, or if there's an earthquake or a hurricane.

And HH, hey, I've "been there, done that." I was born into poverty and had to leave HS at 16 to support myself and my mother. I was a good student, too. Well, I got my GED and after I got out of the Army, I wanted so badly to go to college, but I had no money, since Congress had not reinstated the GI Bill. When they did bring it back, I was married with a wife to support. I got my undergraduate degree in my middle age, with part-time studies. We never had enough money to invest or put aside for retirement. Now I'm living on SS and a small pension. I wasn't lazy or stupid, just had too many responsibilities and not enough opportunities.

SN
July 20, 2013 at 2:58 pm

Larry R., you are an idiot, blaming Obama for your family's mishandling of your mother's investments. Where were you? Take some responsibility for your own actions, or lack of it.

Larry Ripley
July 19, 2013 at 2:21 pm

My mther is 81 and lives on her Social Security alone. Thanks to the Obama Adminstration misconduct in the market place, the market crash of 2008 and the complete demise of the housing market....she lost my father's life savings in the market listening to the completely flawed advice of her broker and lost her home forclosed due to property taxes that she couldnt pay on $1185 a month. Don't even talk to us about saving and putting money in the market maam, my mother lost almost $750,000 in the debacle she would have been better off honestly putting that money in the mattress or a non-interest bearing savings account. At her age who gives a flying flip about inflation and she will never ever recover. If I could bring a lawsuit against her financial planner I would...as a result my family has completely moved everything we have invested into cash instruments at least when the market crashes again we still have our FDIC insured funds.

MK
July 18, 2013 at 9:10 am

HH I want to thank you for your comment. We have had to raise two families and like you there was never extra money to invest. Everything you stated and I mean everything is absolutely right on the "money". We are just a poor family too.

I fear for the future generation as there are fewer jobs and prices for necessities like "food" are rising daily. They cant worry about future retirement when they are trying to survive today.

This article and others like it help no one.

HH
July 16, 2013 at 12:09 pm

You people don't understand that there are many, many of us out there who make nowhere close to that combined 100K per year. We don't make a combined 50K per year. It doesn't mean we're lazy or stupid, either.

We don't have extra income TO invest. For me, it's just plain too risky. to have a 401K or buy stocks. I can't run the risk of losing ANY money at all.

Lavish lifestyle? Ha. A "new" car for us is a USED car. We shop at consignment stores, live in modest homes, and a dinner out for us is Taco Bell. When we ask for financial advice, people like you tell us to brown-bag lunch, skip "daily lattes", don't eat out so much - things we never did to start with.

I've been self-supporting since I was fourteen years old. I finished high school - but college? Forget it. I couldn't even think about it. No - I didn't drop out, get pregnant or get married, either. My family was just poor.