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:

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

PepsiCo (NYSE:PEP)



Wyeth (NYSE:WYE)



Occidental Petroleum (NYSE:OXY)



Exelon (NYSE:EXC)



Lowe's (NYSE:LOW)



Boeing (NYSE:BA)



UnitedHealth Group (NYSE:UNH)



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.

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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 Lowe's. UnitedHealth Group is a Motley Fool Inside Value and a Motley Fool Stock Advisor selection. The Fool owns shares of UnitedHealth Group and has a disclosure policy.