You'll often hear that Social Security won't go very far in helping you attain financial security in retirement. And that's true. The average senior today collects $1,519 a month, which translates into a little over $18,000 in annual income. But while a monthly benefit of $1,519 may not pay for all of your expenses once you stop working, here are a few big-ticket senior expenses it can cover.
1. Your Medicare Part A deductible
Though Medicare Part A, which covers hospital care, doesn't charge enrollees a premium, you will be liable for a costly deductible each time you're admitted to a hospital. Fortunately, the average monthly Social Security benefit is high enough to cover the $1,484 deductible you'll face in 2021.
Image source: Getty Images.
2. Close to a full year of Part B premiums
Unlike Medicare Part A, Part B does charge enrollees a monthly premium. If you're not subject to a surcharge for being a higher earner, you'll pay a standard monthly premium of $148.50 for Part B in 2021. That means the average monthly Social Security benefit could cover more than 10 months' worth of premiums.
3. Your rent
Some seniors opt to rent a home in retirement rather than take on the risk of owning property at that stage of life. If you decide you'd rather rent, you should know that in 2019, the median monthly rent for a one-bedroom apartment was $1,078, according to Abodo, an apartment rental service. For a two-bedroom, it was $1,343. The average monthly Social Security benefit can cover either sum.
4. Your car
Though many seniors no longer have to commute to a job, they still face their share of transportation costs. After all, you'll still need to grocery shop, visit the doctor, and have a means of getting around town, and unless you live in a city with robust public transportation, you'll need a vehicle to do so. In fact, it costs $773.50 a month, on average, to own and maintain a car, reports AAA. Thankfully, the average monthly Social Security benefit can cover close to two months of vehicle expenses.
5. Your annual long-term care insurance premium
Since Medicare won't cover long-term care, seniors are often advised to buy insurance to defray the often-astronomical costs associated with it. The average 65-year-old single male in optimal health pays $1,400 in annual long-term care insurance premiums (that's for an initial pool of $162,000 in benefits), according to the American Association for Long-Term Care Insurance, which means the average monthly Social Security benefit is enough to cover it.
Now that you know how far your monthly Social Security benefit has the potential to go, you may have an easier time factoring that income source into your retirement budget. Of course, you'll still need income outside of Social Security to stay afloat as a senior. In fact, generally speaking, your monthly benefit will replace about 40% of your former paycheck, and you may need double that amount to live comfortably. But understanding what those benefits will pay for will help you better plan for the future.
