Retiring on Social Security alone isn’t something most people plan to do. Many people have good intentions about saving for retirement but often fall short due to different challenges.
However, some people do expect to retire on just Social Security, thinking it will be enough to cover their expenses in retirement.
Here are three key reasons why relying only on Social Security is a bad idea.
1. Social Security Won’t Replace Enough of Your Income
Your spending habits will likely change in retirement. You may save money on things like commuting or housing if your mortgage is paid off.
But experts recommend having enough income to replace 70% to 80% of your pre-retirement salary. Social Security, however, only replaces about 40% of your former income if you earn an average wage.
That means you could face a major pay cut, which might force you to live on a very tight budget. Without extra income sources, you could end up with a lifestyle that feels restrictive and unsatisfying.
2. Unexpected Expenses Can Pop Up
Even if You Manage to Cover Your Basic Expenses with Social Security, Unexpected Costs Can Throw You Off Track.
You Might Face a Big Home Repair Bill, Expensive Car Maintenance, or Significant Medical Expenses from A Health Issue.
If You’re Relying Solely on Social Security and Using up Your Benefits Each Month, You May Struggle to Handle These Surprise Expenses. Having Additional Savings or Income Can Help You Stay Prepared for Life’s Uncertainties.
3. Inflation Will Eat Away at Your Benefits
Social Security Benefits Get a Yearly Cost-Of-Living Adjustment (cola) to Help Keep up With Inflation.
But the Way costs Are Calculated Often Falls Short, Meaning Seniors Lose Buying Power Over Time.
If inflation Rises Consistently During Your Retirement, relying only on Social Security Could Make It Hard to keep up With Even Basic Costs.
Don’t Depend Entirely on Social Security
It’s Fine to Count on Social Security as Part of Your Retirement Income, but You’ll Need Additional Savings or Income to Live Comfortably.
Try to Save and Invest Regularly During Your Working Years, Even if It’s Just a Small Amount. Putting Away $100 a Month in A 401(k) or IRA Over 40 Years, with an 8% Annual Return, Could Grow to Around $350,000 — Close to the Stock Market’s Average Return.
If saving isn’t an option, consider working part-time in retirement to supplement your Social Security.
While you might be able to survive on Social Security alone, it’s unlikely to provide the lifestyle you’d want in retirement.
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