When it comes to income during retirement, you should think of Social Security payments as the icing on the cake, but not the entire cake. The reason for that is the payouts are likely to fall way short of the amount you’ll need.
Acccording to the Bureau of Labor Statistics, the average Social Security payment is $1,471 a month, or $17,652 a year, once you retire? If $17,652 per year sounds low, that’s because it is. The average retiree spends $46,000 a year on living expenses, leaving quite a large gap between Social Security earnings and what people actually need. Still, despite that low number, many people end up depending on Social Security. According to USA Today, Social Security payments make up 50 percent or more of income for 50 percent of married seniors. Some rely on it even more: those payments make up 90 percent or more of income for about 21 percent of married seniors.
There’s a good chance that many of those who are over-relying on Social Security payments in retirement didn’t want to end up that way. But, life happens. Perhaps those folks had to retire earlier than they thought because of health issues. Perhaps they got laid off and had the time they were counting on to fund their 401(k)s cut short. The point is, you should be saving as much as possible as early as possible so you don’t rely too much on Social Security. No matter what your strategy is — be it via a work-sponsored plan or an IRA or both — the sooner you save the better. If you retire and get $1,471 per month as a bonus, you’ll be happy. If you get that as your primary source of income, you’ll be frustrated.