How Much of Your Retirement Expenses Will Social Security Cover?

Whether you’re nearing the end of your career or just joining the workforce, you can count on the fact that when you do retire, Social Security will be there for you.

That said, its monthly checks are never going to be enough to fund a comfortable retirement on their own. The program was only ever designed to replace about 40% of the average worker’s pre-retirement income. And for those who earned higher wages, that share will amount to even less. To properly plan for your future, you’ll want to calculate long in advance approximately how much Social Security will provide for you.

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How much does Social Security actually cover for retirees?

Social Security was designed to replace about 40% of the average worker’s pre-retirement income, but not many people are “average,” and we all have our own unique ideas when it comes to the retirement lifestyle we’d like.

In the typical household headed by some 65 or older, spending amounts to about $50,220 per year, according to the latest Bureau of Labor Statistics Consumer Expenditure survey. These same households receive an average of $26,355 annually from Social Security and other government retirement assistance programs. In sum, those benefits cover about 52% of that average senior household’s spending.

But a variety of factors can influence this. Seniors who plan to do a lot of traveling may have much higher expenses, which means their Social Security benefit won’t cover quite as large a share of them. Households with only one Social Security recipient may also end up covering more of their expenses on their own than households with two or more people claiming benefits.

Those whose benefits are far above or below the average could also find that Social Security covers relatively more or less for them in terms of expenses and lifestyle. In short, it’s difficult to make any kind of generalization about how much Social Security will cover for retirees.

How to figure out how much Social Security will cover for you

You’ll get a better gauge of how far Social Security will go for you by focusing on a personalized estimate rather than on general numbers.

The first step toward getting that personalized estimate is to create a my Social Security account, which will allow you to run calculations using your actual earnings history to estimate how much you’ll receive. The tools on this website will allow you to see what happens to your future benefits if you change various factors, like the age at which you sign up or your future earnings.

Once you’ve got your estimated monthly benefit, you can multiply it by 12 to get your estimated annual benefit. Then, you can divide that by your estimated annual retirement expenses and multiply that by 100 to figure out what percentage of your income Social Security will cover.

For example, if Social Security tells you that you can expect a $1,500 monthly benefit, you’d multiply that by 12 to get an annual benefit of $18,000. If you anticipate that you’ll spend $45,000 per year in retirement, you’d divide $18,000 by $45,000, then multiply by 100 to get 40%. Under that scenario, that’s the percentage of your total expenses Social Security would cover.

Keep in mind that these results could change over time if your plans for retirement do. And if the government makes alterations to the program, that would also affect how much you receive. So it’s a good idea to revisit this calculation every year or two to make sure nothing major has changed.

What to do about what Social Security doesn’t cover

Unless you plan to survive on $25,000 per year or less in retirement, you’re probably going to need some personal savings to supplement Social Security. There are a few smart places you can stash that money in the meantime to help it grow.

A 401(k) is your best option to start with if your company offers matching funds for some portion of what you contribute. These tax-advantaged retirement accounts can also make saving enough a lot easier. Alternatively, you could invest via an IRA. Those accounts give you more control over your investments, and some control over when you pay taxes.

Use a retirement calculator to figure out how much you’ll need to save per month in order to build up a nest egg capable of covering what Social Security doesn’t. When it asks for you to input the expected annual growth rate of your investments, choose 5% or 6%. Your portfolio may grow more quickly than that, but you should be more conservative when you plan so that you’ll have a bit of cushion in case your returns are derailed by a market downturn.

If you’re not able to save as much as you need to right now, you may have to rethink your long-term plan. Delaying retirement by a few years, if possible, would give you more time to save while also reducing the length and cost of your retirement. You could also look for ways to increase your income, like starting a side hustle or switching employers. Explore your options until you find one that works for you.

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