If you haven't heard the news, the latest Social Security Trustees Report just announced that the program only has enough money in its trust funds to last another decade. After that, owed benefits will exceed its ability to pay.
While this news isn't surprising, it is still concerning. Many seniors rely upon Social Security for their sole or primary financial support, and many workers would like to be able to count on it to supplement their own savings.
But given all this uncertainty, some might wonder whether it's safer to plan for a retirement without it. Below, we'll look at what that would take and what you could expect from Social Security in the future.
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How much do you need to save to retire without Social Security?
There's no magic retirement savings number to aim for because everyone's retirement looks different. You have your own goals and hobbies that might not line up with your neighbors' or even others in your own household. And you'll have your own life expectancy and unique challenges to face. So you need a personalized plan built around how you envision your retirement.
But it's reasonable to think you could spend seven figures or more in retirement. The latest Bureau of Labor Statistics data shows that the average household headed by an adult 65 or older spent about $52,141 in 2021. And that figure likely rose in 2022 with the high inflation we faced. If you live 20 years or more in retirement, you'll easily spend $1 million. Some people might even spend closer to $2 million if they plan to travel or they experience a lot of costly health issues.
So if you hope to pay for all your retirement expenses without Social Security, you will need to save somewhere in that neighborhood to pull it off. But all that money doesn't have to come out of your own pocket. If you invest your funds, you'll wind up with earnings to supplement your personal savings.
The amount you have to set aside on your own depends on your savings target, what you invest in, and how long you have until retirement. Those who start early and make monthly contributions typically have the easiest time.
For example, those starting from scratch who hope to have a $1 million nest egg in 40 years only need to save about $311 per month if they earn an 8% average annual rate of return. But if you only have 20 years to save $1 million, you need to save about $1,759 per month with the same average annual rate of return.
For some people, the monthly savings target they need to hit in order to retire without Social Security isn't feasible. But fortunately, it's probably not necessary to save that much on their own.
Social Security isn't disappearing
Even in the worst-case scenario laid out in the Social Security Trustees Report, the program is still going to be around for you. If it continues as it has been, it will have to slash benefits by up to 23% after 2033. That would obviously be a huge blow to the seniors who count on it. But it also means the program will still have some money to pay qualifying beneficiaries.
And it's possible this benefit cut never happens. The federal government is aware of this issue, and several members of Congress have proposed solutions. Nothing's been agreed upon yet, but there's still time to come up with a way to make the program sustainable over the long term.
If you're worried about how far Social Security might go in the future, you can always plan for a reduced benefit. Use your my Social Security account to estimate the size of your monthly checks based on the current benefit formula and your work history to date. Then, plan to receive about 23% less than this so you're prepared if the government has to slash the payouts.
Use this information and your estimated life expectancy to figure out how much you think you'll get from the program during your lifetime. The easiest way to do this is to multiply your monthly benefit amount by the number of months you expect to receive checks. Then, you can subtract this from your total retirement costs to figure out how much you have to come up with on your own.
Planning for a retirement without Social Security isn't really necessary, but if it makes you feel better, you could still do that. Just know you'll have to save a lot more of your own money during your working years. But if you pull that off, you'll hopefully be able to afford a pretty comfortable retirement, and you could even have a little surplus to leave to your heirs.
FAQs
Women in Particular Should Consider Delaying Benefits
“A woman who makes it to age 65 in average health has a 50% probability of still being alive at age 88,” Orman wrote. “That's an argument for waiting if you expect to rely on Social Security for a lot of your retirement income.”
Can I retire without Social Security? ›
Key Points. If you hope to retire without Social Security, you'll probably need to save $1 million or more on your own. Making monthly retirement contributions is key to achieving that goal. But most people don't need to plan for a retirement without Social Security because the program will still be around in some form ...
How long will $400,000 last in retirement? ›
This money will need to last around 40 years to comfortably ensure that you won't outlive your savings. This means you can probably boost your total withdrawals (principal and yield) to around $20,000 per year. This will give you a pre-tax income of $35,000 per year.
What is the $16728 Social Security bonus most retirees completely overlook? ›
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
What does Dave Ramsey say about taking Social Security? ›
Dave Ramsey says you can take Social Security at 62 if you invest all of it. But most people can't do this, and many who can probably shouldn't.
Do millionaires get Social Security when they retire? ›
In the United States, pretty much every worker pays into Social Security. This includes very high earners. And everyone who paid into the program gets retirement benefits, even if they are really rich and don't need the money. It's not a means-tested benefit limited to those with low earnings.
What is it like to retire on nothing but Social Security? ›
Roughly one in seven Social Security recipients ages 65 and older depend on their benefits for nearly all their income, according to an AARP analysis. Unable to maintain the lifestyle of their working years, they trim their already trim budgets, move into smaller homes, or rely on the kindness of relatives to get by.
What will people do without Social Security? ›
Without Social Security benefits, nearly 4 in 10 adults aged 65 and older would have incomes below the official poverty line, all else being equal, according to our estimates based on the U.S. Census Bureau's March 2023 Current Population Survey.
Can a senior who never worked collect Social Security? ›
But even if you never worked and therefore don't have an earnings record, you're not necessarily out of luck. If you're married (or were married) to someone who's entitled to Social Security, you can collect spousal benefits equal to 50% of your husband or wife's benefits at full retirement age.
What is the $1000 a month rule for retirement? ›
What is the $1,000-a-month rule for retirement? The $1,000-a-month retirement rule says that you should save $240,000 for every $1,000 of monthly income you'll need in retirement. So, if you anticipate a $4,000 monthly budget when you retire, you should save $960,000 ($240,000 * 4).
Average Monthly Retirement Income
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
What is 4% rule in retirement? ›
What does the 4% rule do? It's intended to make sure you have a safe retirement withdrawal rate and don't outlive your savings in your final years. By pulling out only 4% of your total funds and allowing the rest of your investments to continue to grow, you can budget a safe withdrawal rate for 30 years or more.
What is the 10 year rule for Social Security? ›
If you've worked and paid taxes into the Social Security system for at least 10 years and have earned a minimum of 40 work credits, you can collect your own benefits as early as age 62. We base Social Security benefits on your lifetime earnings.
When my husband dies, do I get his Social Security and mine? ›
If your spouse dies, do you get both Social Security benefits? You cannot claim your deceased spouse's benefits in addition to your own retirement benefits. Social Security only will pay one—survivor or retirement. If you qualify for both survivor and retirement benefits, you will receive whichever amount is higher.
At what age is Social Security no longer taxed? ›
Social Security income can be taxable no matter how old you are. It all depends on whether your total combined income exceeds a certain level set for your filing status. You may have heard that Social Security income is not taxed after age 70; this is false.
What is the 4% rule Social Security? ›
What does the 4% rule do? It's intended to make sure you have a safe retirement withdrawal rate and don't outlive your savings in your final years. By pulling out only 4% of your total funds and allowing the rest of your investments to continue to grow, you can budget a safe withdrawal rate for 30 years or more.
What documents does Suze Orman recommend? ›
4 Documents Suze Orman Says You Need
- Will. A will is a legal document that, among other things, outlines where you want your assets to go after you die. ...
- Living Revocable Trust. ...
- Durable Power of Attorney for Healthcare. ...
- Advance Directive.
Social Security offers a monthly benefit check to many kinds of recipients. As of May 2024, the average check is $1,778.24, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
What percent of people wait until age 70 to collect Social Security? ›
Like Schroders, the researchers found only about 10% of workers actually wait until age 70 to claim Social Security benefits, though more than 90% would benefit from waiting until that age.
