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.