The average social security benefit is probably less than you think

An estimated 44.5 million retired workers receive monthly income in the form of social security benefits. If you work and pay taxes for Social Security, chances are that benefits will be an important source of income for you when your career is over. But if you rely on these benefits too heavily and neglect your savings as a result, you may be in for an unpleasant reality check as soon as the golden years go by.

Currently, 50% of married elderly and 70% of unmarried elderly receive 50% or more of income from social security, while for 21% of married elderly and 45% of unmarried pensioners, these benefits represent 90% or more of the income. . But when we look at how much money actually translates into, it's easy to see why Social Security alone is not enough to sustain the typical senior.

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The average pensioner in Social Security today accumulates $ 1,471 a month, or $ 17,652 a year. Meanwhile, the average aged 65 and over $ 46,000 a year spend on living expenses, the Bureau of Labor Statistics reports. It is clear that there is a fairly large gap between these two figures, and it is for this reason that planning to live on pension alone is a really bad idea. If that is your purpose, consider this your wake-up call to start saving money and coming up with a backup plan.

How will your expenses look like in retirement?

Many expect that the cost of living will fall dramatically as they retire, but many older people do not see a significant decline. And when we think about what the elderly generally spend money on, it makes sense.

Seniors require housing, transportation, food, clothing, tools, and modest forms of leisure, such as cable television, just as workers do. Furthermore, retirees tend to face higher health care costs than workers, especially when considering the various out-of-pocket expenses associated with Medicare. And that's why most seniors can't manage with just 40% of their previous income, which is what Social Security is designed to pay for average income. Retirement simply costs too much money.

The solution? Save as much as you can while you work. If you start young, you can avoid contributing lesser amounts to a retirement savings plan and increase the balance with the right investments. If you are already older, you must make several significant contributions to build a solid savings level.

Take a look at the table below, which illustrates how your savings can fit, depending on the time window you have to work with and how much money you spend in a retirement plan each month:

AUTHOR CALCULATIONS.

The less time you give yourself to spend on retirement, the less wealth you have to accumulate. Our table does not help to increase monthly contributions to compensate for delayed savings. That's because by setting aside your savings, you are missing out on many years of critical investment growth. And if you wonder about the 7% return used above, it's actually a couple of percentage points below the stock market's average annual earnings.

Of course, saving money is not the only way to supplement your social security benefits by building. You can also get a part-time pension or earn a hobby. In fact, your retirement income can come from a variety of sources. Just make sure your plan is not to have everything from Social Security.