If you've ever looked into your projected Social Security benefit, you know that living solely off your government check isn't a great option. On average, Social Security only replaces about 40% of your working income, which spells a massive pay cut if that's your only source of cash in retirement. To head off a major lifestyle downgrade, you need savings -- at least enough to double the income you'll make off Social Security alone.

There is good news, though. If you have time on your side, it only takes a few hundred bucks monthly invested in an S&P 500 index ETF to meet that savings goal.

Why double your Social Security income?

Financial experts estimate that most people will need 80% of their working income to cover living expenses in retirement. That number assumes you'll stop making 401(k) contributions and spend less on transportation and eating out.

Man in suit wearing glasses holding money.

Image source: Getty Images.

Your Social Security benefit should replace about 40% of your working income, which gets you halfway to that 80% number. Unless you have a pension or another source of passive income, the other half has to come from your savings.

So, how much are we talking about here? As of September 2020, the average monthly Social Security benefit for a retired worker is about $1,500. To generate an equivalent amount of income from your savings today, you'd need to have about $450,000 on hand. If you apply the 4% rule to that balance, you can see that it safely supports annual retirement withdrawals of $18,000, or $1,500 monthly.

But the math gets more complicated when you're looking out into the future. That's because your target balance will change each year for the same reason your Social Security check will get cost-of-living adjustments -- the culprit is inflation. The table below shows how a 2% inflation rate affects the savings you need to support future withdrawals that would have the same purchasing power as $18,000 today.

Year

$18,000 Today, Adjusted for Inflation

Inflation-Adjusted Savings Target

2065

$43,881

$1,097,025

2055

$35,998

$899,950

2050

$32,605

$815,125

2045

$29,531

$738,275

2040

$26,747

$668,675

2035

$24,226

$605,650

2030

$21,942

$548,550

Table Data Source: Author calculations

The index ETF that can help

You can reach your savings goal in various ways, but one simple strategy is to invest in an index ETF like the Vanguard S&P 500 ETF (NYSEMKT: VOO). The fund mimics the S&P 500 index, a basket of about 500 of the largest publicly traded companies in the U.S. There are other funds with similar portfolios, but this one is appealing because of its low expense ratio. Only 0.03% of your invested dollars go toward fund expenses, which allows more of the fund's returns to flow through to you.

The amount you need to invest in VOO monthly to reach your goal is a function of your age and the fund's returns. Returns are hard to predict, but we can look to historic market performance and the fund's track record for clues.

Since VOO was launched in 2010, it has recorded average annual growth of 14.19%. Sadly, that number is too aggressive to use for planning. The last 10 years included the most impressive bull run in stock market history and that isn't going to continue indefinitely. It's more realistic to use a number closer to 8%, which aligns with the S&P 500's longer-term growth over the last 50 years.

How much to save monthly

The table below shows the monthly contributions required to reach the inflation-adjusted savings target based on how old you are today, assuming your investments grow at 8% annually.

Your Current Age

Monthly Contribution

Projected Savings Balance at Age 65

25

$310

$1,096,951

30

$385

$895,305

35

$540

$816,064

40

$765

$738,000

45

$1,120

$669,618

50

$1,725

$606,599

55

$2,950

$549,836

Data source: author calculations.

There are two major takeaways here. First, if you start saving before your 30th birthday, you only need to invest about $400 monthly in VOO or a similar fund -- or less if you get employer matching contributions -- to reach your target balance. But also note how quickly the required contribution ramps up if you delay saving. Wait until your 50s and you have to set aside at least four times as much to reach the goal.

Also, the longer you wait to start saving, the more you have to worry about short-term market volatility. Although stocks grow over the long term, the market can be up or down double digits from one year to the next. Our assumed 8% growth rate does make sense when you're projecting out for decades, but it becomes less reliable as you look at shorter time periods. In other words, if you only have 10 or 15 years to save, that 8% growth assumption could be overly optimistic.

A word on taxes

The figures above assume you are saving and investing in a 401(k) plan where your earnings grow on a tax-deferred basis. Note that the highest contribution level shown above, $2,950 monthly, exceeds the maximum 401(k) contribution allowed by the IRS. For this year, that maximum is $26,000 annually for savers aged 50 and older and $19,500 for everyone else. Fortunately, employer matching contributions don't count against that limit, so those can help you make up any shortfalls.

If you don't have employer match, save the excess either in an IRA or a taxable brokerage account if possible.

Save and invest now

To double your retirement income from what you'd earn on Social Security alone, start saving and investing now. An index ETF like VOO gives you access to market-level growth, which you can ride for a few decades until you reach that target savings balance.