A common misperception regarding Social Security would be that its payments are intended to fully replace an employee’s pre-retirement income. If you have an average wage, Social Security is going to replace roughly 40% of it, that is, if future benefit cuts aren’t made because of the program’s anticipated budget shortfall. Therefore, relying solely on Social Security to fund your retirement is a bad idea. Instead, you should work to increase your nest egg so that you can earn additional money to augment those benefits. Not persuaded? You may have a different opinion after comparing the average annual income of an older American with what Social Security provides a senior in 2024.
You Might Be Surprised By How Little Social Security Pays
The 3.2% increase in Social Security benefits in 2024 is a result of the cost-of-living adjustment implemented this year. As a result, the average monthly Social Security payout is now $1,907, or $22,884 per year. It’s evident from the outset that the figure is not very high. However, a closer look at the finances of older Americans will reveal that it might not be as possible as anticipated to retire on Social Security alone. According to a 2023 study, the average earnings for persons 65 and older in the United States is $75,254. In contrast, the median salary for individuals in that age range is $47,620.
This kind of disparity leads one to believe that the annual income of the average elderly American is closer to $47,620. There are probably a few wealthy seniors who are skewing the average income upward, which is why it is so much higher. Even still, $47,620 is not quite as much as $22,884. This suggests that a large number of elderly Americans are unlikely to retire on Social Security alone. It’s also important to remember that, according to the aforesaid research study, the typical annual expense for an American 65 years of age and over was $48,872. In 2024, that will be more than twice the average yearly Social Security income.
Furthermore, 2019–2020 data was used to calculate that $48,872. Since then, there has been a great deal of inflation, so it is reasonable to conclude that the average elderly American is now spending more on necessities than they were just a few years ago. It’s difficult to determine whether older Americans’ $48,872 annual average in spending is per individual or household. Nevertheless, the average annual Social Security payout for couples in which both spouses get benefits is $3,033. That’s a $36,396 yearly benefit, which is still a lot less than $48,872.
Retiring On Social Security Alone Is Not What You Desire
These figures show that relying alone on Social Security to support oneself throughout retirement in 2024 won’t be all that comfortable. It is reasonable to expect, however, that as living expenses increase over time, potentially at a faster rate than benefit increases, they will too. You’re better off saving for your later years so you can handle your future expenses stress-free, even if you’re still at least 30 or 40 years away from retirement. That being said, you might be amazed at how much even small commitments to a plan for retirement can do.