Can You Live on $845.89 Per Month?

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 only be able to pay 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:


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 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

AT&T (NYSE: T  )



Chevron (NYSE: CVX  )



Pfizer (NYSE: PFE  )



Cisco Systems (Nasdaq: CSCO  )



Apple (Nasdaq: AAPL  )



Philip Morris International (NYSE: PM  )



Coca-Cola (NYSE: KO  )



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 did not own shares of any company mentioned in this article. Pfizer is a Motley Fool Income Investor pick. Pfizer and Coca-Cola are Motley Fool Inside Value selections. Apple is a Motley Fool Stock Advisor pick. The Fool owns shares of Pfizer. The Fool has a disclosure policy.

Read/Post Comments (6) | Recommend This Article (3)

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 September 22, 2008, at 1:52 PM, kellyjam wrote:

    If you think the Baby Boomers are going to allow the Government to cut our SS you are crazy. We will have the White House, Capital, and the Pentagon in downtown DC before we allow a cut. Remember we vote and if you think Politicians kowtow to seniors now just wait to we retire en masse.

  • Report this Comment On October 15, 2008, at 3:24 PM, sandrewapic wrote:

    In 2041, won't you baby boomers be dead?

  • Report this Comment On October 15, 2008, at 5:38 PM, menefer wrote:

    So should I use 10% or 7% growth. I'm a little confused as the S&P's performance over the last 8 years has been negative. I thought the amount it would take to save social security was a big number, but not anymore. The bank bailout will make saving social security look cheap!

  • Report this Comment On October 15, 2008, at 6:15 PM, electronhauler wrote:

    Maybe the SSA would like to furnish retirees with a promise to deliver 1 oz of gold per month or 30 Oz of Silver. That should pretty much take care of the inevitable debasement that is now underway.

  • Report this Comment On October 15, 2008, at 9:55 PM, TMFBigFrog wrote:

    Hi menefer,


    The most important thing is to have a goal and work towards it. It beats not saving or investing at all, which is what typically happens when people don't have their retirement savings as an active goal.


    Personally, I aim for a 12% long run return (I'm well behind that goal this year) but contribute as though I'm targeting an 8% long run return. The net effect of that is if I meet my goal, I get to retire early and/or very comfortably, but if I miss my goal, I still have a significant buffer before it gets really bad.


    Best regards,


  • Report this Comment On October 16, 2008, at 11:25 AM, Brettze wrote:

    Employees can ask thier keogh administers to suspend their contributions to keoghs for now. It is far more sensible to use the keogh contribution money to pay off credit cards and mortgages now despite the tax benefits of keoghs... many credit cards are fetching 18-25% interest which supersede the tax beneifts of contributions . Because you will end up paying the same tax when you withdraw from your keoghs... We are so kind to MasterCard, Visa, Discover, AmEX issuers with payments of outrageous interest rates, fees, etc.. Those credit card sharks are bleeding us!!

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