I Used to Think It Was Possible to Retire on Social Security Alone. Here's Why That's Definitely No Longer My Plan.

That government retirement benefit may be less generous than you think.

Although I’ve been writing about personal finance for many years, there was a time when I was basically clueless about Social Security. In fact, the first time I was asked to write something on the topic, I had to look up “What is Social Security?” and hope for the best online education I could get.

It’s funny for me to think back to that period, because these days, I know so many random facts about Social Security I could probably write a short book about the program. But I can admit that there was a time when I thought it was possible for a person to retire comfortably on Social Security without any other source of funds.

A person at a desk.

Image source: Getty Images.

I know I’m not alone in that — and I don’t even have to take a broad survey to confirm it. In talking to friends, many of whom are educated people, I frequently hear about folks’ plans to retire largely on those benefits.

But relying on Social Security alone to cover your budget in retirement is a horribly bad mistake. And I’m grateful that I learned that years ago so I could switch gears on my long-term financial planning.

My new game plan

Even though I’ve only been writing about Social Security for about 10 years now, I’ve been saving for retirement longer than that. To be clear, I never thought it was a good idea to not save for retirement. Rather, I was under the impression that Social Security provided seniors with enough income to pay their bills, and that the funds that retirees withdrew from 401(k)s or IRAs were merely gravy.

But now that I’m more well-versed on the topic, I can say with confidence that planning to retire on Social Security benefits alone is a bad idea. For one thing, they’ll only replace about 40% of your pre-retirement wages, assuming you were an average earner during your working life. And that’s not even considering the possibility of a system-wide cut to benefits, which may be coming in about a decade’s time if Congress doesn’t address the program’s looming funding shortfall.

Meanwhile, I’d like you to think about what it would be like to take a 60% pay cut. Could you do it? I couldn’t.

I’m not saying I’ll need 100% of my current earnings to cover my expenses as a retiree. But 40% sounds pretty inadequate.

That’s why I’m doing everything I can to sock away money for retirement. My strategy has me maxing out my 401(k), contributing to a health savings account (HSA) and reserving those funds for the future, and also investing in stocks through a brokerage account in case I end up retiring before I’m eligible to take penalty-free 401(k) distributions.

My goal, in fact, is to make it so that I can cover my primary expenses in retirement without touching my Social Security checks at all. This doesn’t mean I won’t be happy to get that money, nor that I won’t find a good use for it. However, I want to be able to cover my needs using just my nest egg. That way, the money that comes in from Social Security will simply be extra spending cash.

Make sure you’re not misunderstanding Social Security

There are tales and insinuations out there that Social Security is going to go broke soon and that retirees’ benefits will disappear completely when it does. That is not going to happen. If you’re a qualifying worker or spouse, you can expect to receive Social Security benefits during your retirement. However, the program’s Trust Fund is shrinking fast, and if lawmakers in Congress can’t finally come together on a plan to increase the amount of taxes going into Social Security’s coffers, those benefits may not be as large as it currently provides.

But even if Washington finds a solution that removes the threat of benefit cuts, you shouldn’t expect Social Security to cover your senior living costs in full. Your best bet is to do what I’m doing — save and invest as much as you can for your golden years, and plan to use your benefit checks as backup or supplemental income.

And don’t worry if you’re midway through your career and you haven’t started building your retirement nest egg yet. I have plenty of friends who used to be in that boat, and who have taken steps to turn their savings game around. But the first steps in that process are to understand the role Social Security should play in your retirement, and to get realistic about the limited amount of income it will likely provide you with.

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