San Francisco, CA – Social Security benefits are not intended to be the sole source of income for retirees. Typically, these benefits are designed to replace about 40% of an average worker’s salary. Many financial planners assert that retirees will need approximately 80% of their pre-retirement income to maintain the same standard of living after leaving the workforce. As a result, the majority of Americans rely on other sources such as savings in 401(k) or IRA accounts, pensions, annuities, and other forms of income to supplement their Social Security benefits.
With the question of whether it is feasible to retire on Social Security alone in mind, it is important to consider key statistics and information. According to the latest data from the Social Security Administration, the average retired worker received a monthly benefit of $1,905.31 in December 2023. This means that the average retired worker brought in about $23,600 per year from Social Security, with the additional 3.2% cost-of-living adjustment for 2024 factored in.
Social Security benefits vary widely, and determining whether one can retire solely on these benefits depends on individual circumstances. Factors such as income throughout one’s career and the age at which benefits are claimed play a significant role. Social Security calculates benefits based on an individual’s 35 highest-earning years, adjusted for inflation, up to each year’s taxable maximum earnings. The benefit formula is also weighted in favor of lower-income workers.
Another crucial consideration is the claiming age. For those born in 1960 or later, the full retirement age for Social Security purposes is 67. Claiming benefits before reaching full retirement age results in lower payments, with the option to claim as early as age 62. On the other hand, delaying claiming benefits beyond full retirement age results in permanently increased payments, up to a maximum of age 70.
Furthermore, the maximum possible Social Security benefits at different claiming ages in 2024 range from $2,710 at age 62 to $4,873 at age 70. Higher earners may receive significantly more than the average beneficiary, with the claiming age making a substantial difference.
While it is possible to retire on Social Security alone, there are numerous factors to consider. Considerations such as spousal benefits, remaining debts, and desired lifestyle in retirement all play a role in determining how much income will be sufficient. Ultimately, while millions of Americans retire on Social Security alone, it is essential to supplement these benefits with other forms of income and to prioritize contributing to retirement accounts for long-term financial security.