Millions of retirees today collect Social Security, many of whom have come to rely on it as their primary source of income. But for many seniors, depending too heavily on Social Security means struggling to pay the bills.
Though Social Security can certainly help retirees stay afloat financially, it cannot serve as their main income stream, especially given the way costs like healthcare keep climbing. Unfortunately, more than half of today's older workers are at risk of falling into the same trap so many current retirees have landed in. In a new study by the Nationwide Retirement Institute, 55% of adults 50 and over who plan to retire in the next 10 years say that Social Security will be their primary source of retirement income. And that's nothing more than a recipe for disaster.
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You need more than Social Security
One major Social Security myth that hurts so many seniors is the notion that it's designed to sustain retirees on its own. In reality, Social Security will only replace about 40% of the typical earner's pre-retirement income. If you're a higher earner, that percentage drops.
The problem, however, is that most seniors need roughly 80% of their former earnings once they retire, and the reason for that boils down to the fact that most of their costs don't go down as expected. Take housing, for instance. Many seniors enter retirement having already paid off their mortgages, so by then they're used to not having to make that monthly payment. However, that doesn't negate the need for maintenance, repairs, insurance, and property taxes, all of which are likely to climb, not shrink, over time. The same holds true for food, utilities, clothing, and most of the basic expenses adults of all ages must bear.
Then there are those categories where spending is likely to rise in retirement. Healthcare is a big one -- it'll cost the typical healthy 65-year-old man today an estimated $189,687, while the average woman's tab is projected at $214,565. Furthermore, because retirees have tons of free time on their hands compared to when they were working, they're more likely to increase their leisure spending to occupy themselves.
And Social Security just can't pay for all of that. At present, the average beneficiary collects just over $1,400 a month, which totals less than $17,000 a year. And clearly, that's hardly enough for a comfortable retirement.
Salvaging your golden years
If you've been neglecting your savings because you've been banking on Social Security, consider this your wake-up call to change your ways, effective immediately. Now, the good news is that as long as you have a job, you have an opportunity to build some savings, even if you have none to date.