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If you think you can count on Social Security for anything resembling a comfortable retirement, think again.

Don't just take my word for it. Here's what the Social Security Administration itself claims:

  • As of June 2008, the average monthly benefit paid to a retired worker was $1,084.47.
  • In 2041, Social Security will be able to pay only 78% of scheduled benefits.

Put those two points together, and it means that in 2041, the average retiree can expect to receive the inflation-adjusted equivalent of $845.89 per month. That may be enough to squeak by on the most meager of lifestyles, but it's also well below what a full-time minimum-wage job pays.

You deserve better!
By the time you reach retirement, you'll have worked your whole adult life to get there. It'd be a shame to retire, only to have to choose between taking your medicine and turning on your heater in the middle of winter. But if you're depending solely on Social Security to see you through your golden years, that's precisely the type of choice you'll have to make.

Unless you're one of the vanishing few who can depend on a guaranteed pension for the rest of your life, you're left with just one other source for your retirement income: you.

What you save over the remainder of your career will make the difference between a comfortable retirement and one filled with exceptionally tough choices.

Every little bit helps
As long as you draw a paycheck, you have the opportunity to set some of it aside for your future needs. The more time you have, the more your money can grow for you.

The chart below looks at the potential growth of $1,000 over time. Even if you're a late starter, investing what you can for as long as you can will make a significant difference.

Years to Go

10% Annual

9% Annual

8% Annual

7% Annual




































When it comes time to spend your savings in retirement, the rule of thumb is that you can spend 4% of the starting value of your nest egg annually, adjusted for inflation, without running out of money. That same $1,000 saved and compounded over time turns into this much in monthly retirement spending:

Years to Go

10% Annual

9% Annual

8% Annual

7% Annual




































A little bit saved over a long period of time can add substantially to the amount you can spend in your retirement. That's a welcome supplement to (or replacement for) the ever-shakier payouts from Social Security.

You can do it!
Of course, to turn your one-time, $1,000 investment into $150 worth of monthly income, you need to invest it well for quite a long time. That may seem like an impossible challenge in the current market, but history suggests it's quite doable. In fact, over the long run, it's average.

Since its inception in 1926, for instance, the S&P 500 index has delivered long-run annual returns in the 10% range. And that period of time included such economic disasters as the Great Depression! As crazy as the market has been recently, it still takes most people multiple decades to save for retirement. Over that length of time, stocks have been and will likely continue to be an excellent vehicle with which to build your long-term nest egg.

While past performance doesn't guarantee future results, an index investment still gets you an ownership stake in these great companies (along with 493 others):


Trailing Earnings
(in Millions)

Portion of Index

General Electric (NYSE: GE  )



Abbott Labs (NYSE: ABT  )



ConocoPhilips (NYSE: COP  )



Intel (Nasdaq: INTC  )



McDonald's (NYSE: MCD  )



Disney (NYSE: DIS  )



Costco (Nasdaq: COST  )



The Foolish bottom line
Investing for your retirement is only the first step in protecting your future self from the pending cutbacks in Social Security.

If you're ready to start down the path toward the comfortable retirement you deserve, join us today at Motley Fool Rule Your Retirement. It provides strategies for saving money, model portfolios, asset-allocation advice, and other tools you need to plan for the retirement you want -- including retirement calculators.

You can even take the next 30 days to try it for free -- there's no obligation to subscribe. To learn more, click here.

This article was originally published on July 9, 2008. It has been updated.

At the time of publication, Fool contributor Chuck Saletta owned shares of General Electric and Intel. Intel, Walt Disney, and Costco Wholesale are Motley Fool Inside Value recommendations. Walt Disney and Costco Wholesale are Stock Advisor picks. The Fool owns shares of Intel and has written covered calls on Intel. It also has a disclosure policy.

Read/Post Comments (12) | Recommend This Article (40)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 15, 2009, at 11:22 AM, FinancialFellow wrote:

    No doubt about it, you can't count on Social Security to fund a comfortable retirement. One assumption that Gen Xers and Gen Y's have heard a lot is that we shouldn't expect to get social security. While I think it is important to state, because it encourages people to save for their own retirement, I think social security will continue to be around for many decades to come:

  • Report this Comment On January 15, 2009, at 11:35 AM, FrankMom wrote:

    Interesting, but your assumptions about return may not be on track - as recent history proves. My retirement IRA has been cut by 20% this year, and most retirees have lost 30%. Return OF principal is at least as important as percentage growth. It's ridiculous for "advisers" to ask you what "return" you want - everyone wants as much as possible - but we do want to have our principal too. (Be careful out there.) My Certificates of Deposite are looking very good about now.

  • Report this Comment On January 15, 2009, at 12:02 PM, MellowGuy1 wrote:

    Social Security isn't adequate to retire on for a reasonable lifestyle. People need a pension and considerable savings (without a pension, tremendous savings) in retirement and taxable accounts. And, don't forget to have a decent house without a big mortgage.

    Index funds aren't good enough as the recent cash crisis has shown. Adequate cash flow can only be maintained with diverse investments where one can buy and sell losers and winners. And, who wants to own an index that is overweighted in financials and other companies that should be in bankruptcy?

  • Report this Comment On January 26, 2009, at 10:11 AM, ericjstrand wrote:

    Although it may be true that Social Security will only pay around 78% of projected benefits in a few decades if the trust fund is exhausted, that projected benefit may be larger than today's benefits. My understanding of it is that if wage inflation is greater than price inflation (as expected and as usual) than the expected benefits in a few decades will be larger than today's benefits, so 78% of projected benefits may be at least as good as 100% of today's benefits. That would sort of be good news for those who were worried about Social Security.

  • Report this Comment On February 03, 2009, at 11:14 AM, realisticsoul wrote:

    WAKE UP !! It's high time to stop the expectation of continuous 10, 8 , or even 6% yields! Update your graphics and calculations if you expect to be taken seriously.

  • Report this Comment On May 22, 2009, at 1:40 PM, lcollins5120 wrote:

    The news I get says that congress has raided the social security trust fund (which does not really even exist) for pork barrel projects. And this last year, even though the president has promissd to eliminate this practice, he let the pork go through.

    How can everyone be crying about social security going broke and not do anything about congress's stealing what is there?

  • Report this Comment On August 06, 2011, at 7:22 PM, vulcanalex wrote:

    Well they are not really raiding the trust fund to pay for things, but rather to reduce the amount of debt that the country shows. This means that the deficit and debt are really much worse than reported and the reductions (eliminations) need to be much larger than proposed.

  • Report this Comment On December 25, 2011, at 1:20 PM, dolrcostavg wrote:

    Just got into Fool, having a time adding to my scorecard positions. Easy enuf to sell.

    Anyone got any ideas?????

  • Report this Comment On February 19, 2012, at 11:14 PM, luckyspike01 wrote:

    suggest you replace the 7-8-9% projections with 3-4-5%

  • Report this Comment On January 03, 2013, at 6:10 PM, Ics54 wrote:

    I think 5% is optimistic if you are planning a worst case scenario. We're using 3.5.

  • Report this Comment On July 06, 2013, at 12:33 AM, bags2u wrote:

    retiring at an early age of 62 ,isn't to bad you lose 25 % of what you would have earned if you retired at age 66. the trick is to stay at your present job and you are allow to earn 15,200. per year before they tax you big. so at age 62 you do not have to leave your job and take a par-time job working for less money. you kick up your contribution to your 401-k , let say 70 % of your salary, so you are deferring your taxes until your age of 66 and then you can take it out with no penalty....

  • Report this Comment On August 10, 2014, at 1:19 AM, exclusive1 wrote:

    You can't take it with you, but, it's sure nice to have, for all the things you still want to do or need to take care of. Keep investing and enjoy the rest of your life and maybe have some left over for your family and the next generation to get started toward the good life too!

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