There’s a reason people are advised to save independently for retirement rather than rely on Social Security alone. Those who attempt to mostly retire on Social Security are likely to struggle financially when living costs rise.
That’s the exact predicament seniors are facing today. Inflation is causing everything from food to gas to groceries to soar, and Social Security’s most recent 5.9% raise is falling short of giving beneficiaries the income boost they need to keep up.
In fact, the average monthly Social Security benefit today is only $1,665. That’s not a lot of money when you factor in housing, transportation, and healthcare costs, among other essentials.
Of course, seniors who have a decent chunk of savings are no doubt faring better these days than those without. But new data from Clever Real Estate reveals that the average retiree isn’t sitting on much savings at all.
A surprisingly low number
In a recent survey, Clever found that, on average, retirees only have $191,659 saved for retirement. That’s not a large amount at all for what could be a 20- to 30-year time period.
In fact, financial experts have long advised withdrawing from retirement savings at a rate of 4% per year. Based on that average savings number, that would translate to an annual income of $7,666. On a monthly basis, that’s just $639 — not a whole lot when combined with the average Social Security benefit.
To be fair, that $191,659 is based on a single survey of 1,000 retired Americans. That number may look different across a much larger sample size.
Still, this isn’t the first survey to find that Americans are sorely lacking in retirement savings. And unfortunately, many seniors are now learning the hard way that not saving was a major mistake.
Avoid a financial crunch
Today’s retirees can’t go back in time and build themselves savings. But if you’re still working, you can make an effort to sock money away so you’re able to better manage your living expenses down the line.
If you were to put $300 a month into a savings plan over 40 years and invest heavily in stocks for an average annual 8% return (which is a bit below the market’s average), you’d end up with almost $933,000. Withdraw from that total at a 4% rate, and you’re looking at $37,320 of annual income, or $3,110 a month. That paints a much more comforting picture — especially since you’ll mostly likely get a Social Security benefit on top of that.
If you don’t have 40 years between now and retirement, you may need to cut back on spending to make larger monthly contributions to an IRA or 401(k) plan. That could mean downsizing to a smaller home or spending less money on non-essential purchases like cable, restaurant meals, and vacations. The key, either way, is to build yourself a nice nest egg while you can so you don’t spend your senior years constantly strapped for cash and stressed out because of that.
The $18,984 Social Security bonus most retirees completely overlook
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