According to its most recently published snapshot, the average Social Security recipient gets about $1,519 per month in benefits from the program. From that amount, recipients aged 65 or older generally see at least $144.60 deducted for Medicare Part B premiums. That leaves around $1,374 per month for most retirees who depend on Social Security for their retirement.

That raises a huge question: Is that enough to cover your costs of living? Can you really retire on only $1,374 per month? If you're relying only on Social Security for your retirement, that's what you may very well find yourself with. That's a key reason you need to build a retirement plan that provides you with more than what Social Security will be able to offer you.

worried senior looking at a pile of bills

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Why are average benefits so low?

If you're still earning a salary and check out your personalized Social Security statement on your My Social Security Account, you might notice that it projects a much higher benefit for you. That's because of the way Social Security projects your benefit on that report. It assumes you'll be earning about the same in the future as you're earning today, all the way until your full retirement age. Social Security isn't exactly lying to you, but it may be making generous projections that assume a healthy future.

There are two key reasons why that could be optimistic. First, age 62 is the most common age to collect Social Security, and that's well below anyone's full retirement age. Collecting early drives a permanent reduction in monthly benefits for the rest of your life, which means you won't collect as much as your statement projects would be your full benefit.

Second, your Social Security benefit is based on your highest 35 years of earned income. If you end up retiring early due to something like health or job downsizing reasons, some of the high-income years that the system is projecting for you may not actually take place. That could turn some of those future projected earnings years to $0 or low income in reality, suppressing the benefit you receive.

Why it might actually get worse

Broken piggy bank inside a Social Security card

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On top of those existing reasons, the ugly reality is that even with those relatively low benefit levels, Social Security is on a path to see its benefits get slashed even further. If nothing changes, by 2035, the program's trust funds will empty, cutting benefit amounts by more than 20%. Importantly, those projections were made based on data available through the end of 2019. That time period ended before the COVID-19 pandemic struck the United States, which means that the impact of the economic slowdown put in place to fight that virus isn't included.

Social Security depends on payroll taxes to cover benefits. With unemployment spiking due to the measures put in place to fight the virus, there's a very real risk that the trust funds will empty sooner, cutting benefits more quickly than previously anticipated. Depending on how bad things get and how long it takes for employment to recover, Social Security's trust funds may even empty before the end of 2029, less than a decade away.

What you can do about it

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First, recognize that Social Security was never meant to be your only source of income in retirement. The stronger your overall retirement plan is, the easier it is for you to cover for the gaps in Social Security, no matter what the driver is of those gaps.

Second, realize that the sooner you get started on your plan, the easier and cheaper it will likely be for you to be able to cover those gaps. This is because investment compounding works best over longer periods of time to help you build your wealth. The less time you have on your side, the more you'll have to rely on your contributions rather than their growth to cover that gap.

Exactly how much you'll need to have saved up by the time you retire depends on how large you expect your spending to be compared with what you'll get from Social Security. It also depends on how long you anticipate your retirement will be.

A reasonable rule of thumb to help you get started on your plan is something known as the 4% rule. Under that rule, you can spend 4% of your portfolio in the first year of your retirement and increase your withdrawals in line with inflation every year after that. History suggests that with a balanced and diversified portfolio, that withdrawal strategy has a very good chance of allowing your money to last at least through a 30 year retirement.

Flip that guideline on its head, and it means you'll need around 25-times your expected annual shortfall in order to have a good chance of your money lasting. So if you think you'll need $2,000 a month above-and-beyond what Social Security will pay, that works out to $24,000 a year. That suggests you'll need a portfolio of $600,000 by retirement to cover the expenses Social Security won't.

Get started now

That might seem like a high goal if you're starting from scratch, but the sooner you get started saving toward it, the easier it will be to achieve. The table below shows how much you'll have to sock away each month to reach that target, depending on how many years you have until you get there and what rate of return you earn along the way.

Years to Go

10% Annual Returns

8% Annual Returns

6% Annual Returns

4% Annual Returns


























Data source: Author's calculations.

Over the long term, the market has delivered results near that 10% annualized level, but its performance is not guaranteed. Regardless of what the market does deliver, however, notice how that regardless of the rate of return in that table, the longer the time you have available, the less you need to sock away each month. That is why getting started quickly is the most important thing you can do to protect yourself from being forced to figure out if you can retire only on $1,374 per month.