Half of Americans Think Their Quality of Life Will Decline Once They Start Collecting Social Security

Social Security serves as a critical income source for millions of retired Americans today. But those benefits have lost a lot of buying power through the years, and unless lawmakers change the way cost-of-living adjustments are calculated, their value may continue to erode over time. Throw in the fact that benefit cuts may be on the table come 2035 or sooner -- whenever Social Security's trust funds run out of money -- and it's no wonder half of Americans believe their quality of life will suffer after they start collecting Social Security. That's the latest from SimplyWise's July 2020 Retirement Confidence Index, which also found that today's 50- and 60-somethings expect Social Security to provide more than 50% of their senior income.

If you're worried your quality of life will decline once you start collecting benefits, the solution is simple: Amass a robust nest egg so you're not particularly reliant on Social Security in retirement. Otherwise, you may find that your seniors years are, in fact, plagued by financial struggles.

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Don't count on those benefits alone

Social Security pays the average senior today around $1,500 a month. If you're planning to not save anything for retirement, then chances are, your quality of life will indeed decline once you leave your career behind. On the other hand, if you take steps to ensure that Social Security is not your only source of senior income, then there's a good chance you'll thrive financially in retirement -- and possibly enjoy your life even more so than you did when you were working.

So what should your main source of retirement income be? If you don't have a pension coming in, a solid 401(k) or IRA is your best bet. And the good news? If you give yourself plenty of time to save, you won't have to part with a painful chunk of your income each month. Rather, you can part with a few hundred dollars on a monthly basis, and let it grow over time via smart investing -- namely, by loading up on stocks and letting them work their magic.

Imagine you have 25 years until you're set to retire. Let's also imagine your investments in your 401(k) or IRA manage to deliver a 7% average annual return, which is a couple of percentage points below the stock market's average. Here's what your savings balance has the potential to grow to, depending on the amount you manage to contribute each month:

Table and calculations by author.

Now, imagine you're sitting on a $455,000 nest egg. If you withdraw from that balance at an annual rate of 4%, you're looking at a little more than $18,000 a year from savings alone. Add in another $18,000 from Social Security, and suddenly, things aren't looking so bleak. Therefore, while half of Americans may be gearing up for financial woes once they retire and get on Social Security, it doesn't have to be that way. Use Social Security to supplement your savings, not replace them, and you may be surprised at how comfortably you're able to live.