3 Reasons I Absolutely Refuse To Rely On Social Security Alone In Retirement And What I Will Do Instead

About 1 in 10 retirees rely on Social Security for at least 90 percent of their income, with the average monthly benefit as of June 2024 of $1,918 per month. That means those who are entirely dependent on Social Security survive on a little more than $23,000 a year. Couples can get more, but for many, their checks still aren’t enough.

Although I expect to receive some benefits when I retire in a few decades, I see Social Security only as a supplement to my other sources of income. Here are three reasons I’m choosing this path instead of living off Social Security alone in retirement.

Image source: Getty Images.

1. Social Security wasn’t meant to cover all of your costs

Social Security was only designed to replace about 40% of the average worker’s pre-retirement income. Those with lower incomes may receive slightly more than that, while those with higher incomes may receive less. But it’s highly unlikely that Social Security alone will help you maintain your current standard of living in retirement.

If you have no choice but to rely primarily or exclusively on Social Security, your quality of life could be affected. Supplemental checks from other household members who also receive Social Security can mitigate this somewhat. But it is possible to fall short.

2. The purchasing power of social insurance is decreasing

Social Security has lost 20 percent of its purchasing power since 2010, according to The Senior Citizens League (TSCL). This basically means you need $1 in 2024 to buy what you could get for $0.80 in 2010. That might not seem like much, but when you add that difference to every purchase you make you do it throughout the year, it’s substantial. TSCL estimates that today’s checks would have to increase by $370 per month to recover lost purchasing power.

Unfortunately, this trend shows no signs of reversing. So it’s likely that Social Security will cover even less of your expenses in the future than it does now.

3. The future of social security is uncertain

The most recent projections estimate that Social Security’s trust funds will run out in 2035. When that happens, the program could face benefit cuts. However, it is more likely that the government will step in and find a way to increase funding for the program before that happens.

However, we still don’t know what the solution might look like. That makes it difficult to determine how far Social Security will go into the future, especially for young workers who may not apply for the program until after 2035.

What do I do instead?

I prioritize personal retirement savings as much as possible in hopes that I can primarily or completely cover my retirement living expenses with these funds in retirement. I like this idea because it gives me more control over my retirement income and makes me more immune to any future cuts or declines in the purchasing power of Social Security.

Most of my money is invested in retirement accounts. These give me valuable tax advantages and help me increase my purchasing power over time. I also have some money in a taxable brokerage account. These funds aren’t subject to the 10% early withdrawal penalty under age 59 1/2 that retirement accounts are, so I could always tap into them if I decide to retire at 50.

I understand that not everyone can afford to put a lot of money away for retirement, which makes them heavily dependent on Social Security in the first place. But there may be other options to supplement your benefits.

If you’re still relatively healthy and able to work, you might consider part-time employment in retirement. You could also delay your retirement date a bit to give yourself extra time to save. Or you can see if you qualify for other government benefits, such as Supplemental Security Income (SSI). This is a monthly benefit available to blind and disabled people, as well as elderly people on low incomes.

It’s helpful to have multiple sources of income in retirement, but that doesn’t mean you can’t rely on any Social Security. Regardless of what happens in the future, it is likely that today’s workers will receive at least some money from the program. But it’s best to expect that it will probably cover about 40% or less of your retirement expenses. You may also need to update your Social Security strategy if the government changes the program.