Working Americans are often warned to save for retirement because Social Security alone won't be enough to sustain them once their paycheck goes away. Yet many workers neglect their savings, focusing more on near-term expenses, and understandably so.

But knowing how much income Social Security actually provides may help you change your tune on the savings front. In 2020, the average monthly benefit for Social Security recipients is just $1,503. That includes the 1.6% cost-of-living adjustment that takes effect this year. Prior to that raise, the average monthly benefit was $1,479.

Older man adjusting eyeglasses while holding item in supermarket.


Now, if you take a look at your monthly expenses and see that they total roughly $1,500, then you may not need to worry so much about saving for retirement. But if you typically spend a lot more, which is likely the case, then ignoring your savings is apt to leave you cash-strapped during your golden years. And frankly, your senior self deserves better.

Social Security alone won't cut it

Social Security is designed to replace about 40% of the average worker's preretirement earnings. Most seniors, however, need roughly twice that amount to pay their bills while maintaining a comfortable lifestyle. If you don't make an effort to build savings, and you don't have a pension or obvious source of income on top of Social Security, then you're likely to struggle financially once your career comes to a close.

A better bet? Focus on building some savings during your working years, even if it means cutting back on some of the expenses you're used to. If you manage to sock away $300 a month over a 30-year time frame and invest your savings at an average annual 7% return, which is a few percentage points below the stock market's average, you'll retire with $340,000. Withdraw from that balance at a rate of 4% per year, which aligns with what many financial experts recommend, and you're looking at $13,600 of annual income from savings. When you add that to the roughly $18,000 a year in Social Security the typical senior collects at present, that doesn't paint such a terrible picture. But without that extra income, you're facing a much more dire financial situation.

Even if you don't have 30 years between now and retirement, saving as much as you can is better than contributing nothing to an IRA or 401(k). At the same time, though, you may want to consider extending your career to not only give yourself a few extra years to save, but also to buy yourself the option of holding off on Social Security as long as possible. If you're eligible for your full monthly benefit based on your earnings history at a full retirement age of 67 but wait until age 70 to claim benefits, you'll boost your monthly income by 24%.

Though millions of seniors rely on Social Security to pay the bills, those benefits, in reality, don't amount to very much in the grand scheme of what your senior living expenses could look like. Make an effort to save independently so you don't wind up straddling the poverty line at a time in your life when you deserve to not have financial stress.