Only 40%? That's right -- Social Security has been designed to provide roughly 40%, on average, of your preretirement income. So don't assume that it will provide enough cash on which to live somewhat comfortably.

That means most of us need to be saving and investing for retirement in order to supplement our Social Security income. Here are five steps you might want to take to improve your future financial security.

A silver-haired woman is smiling, holding hundred dollar bills.

Image source: Getty Images.

1. Save and invest more

If you're only socking away 10% of your income, that may not be enough -- especially if you haven't been doing so since you were young. Consider saving more aggressively and investing effectively -- aiming to at least match the stock market's average over the long run. Your simplest and easiest choice is a low-fee, broad-market index fund.

Here's how much you might amass over time:

Growing at 8% for

$10,000 invested annually

$15,000 invested annually

$20,000 invested annually

5 years




10 years




15 years




20 years




25 years




30 years




Data source: Calculations by author.

2. Load up on dividend-paying stocks

Index funds pay dividends, though at various times, their yields won't be substantial. The S&P 500 recently yielded about 2.6%, for example. You might include a few dividend-paying funds or solid dividend-paying stocks, as they can deliver more income in retirement without you having to sell any or many shares.

A portfolio with a total value of, say, $300,000, and an overall average yield of 4% will generate $12,000 in income -- $1,000 per month (though much of it will be delivered quarterly). Double that, and you can collect an average of $2,000 per month -- which might top your Social Security check.

There are plenty of familiar names offering substantial yields these days:


Recent Dividend Yield

AT&T (T -1.31%)


International Business Machines (IBM -0.72%)


Chevron (CVX 0.82%)


AbbVie (ABBV -1.09%)


Verizon Communications (VZ -0.96%)


Walgreens Boots Alliance (WBA -4.05%)


Merck (MRK -2.63%)


Cisco Systems (CSCO -0.30%)


Coca-Cola (KO -0.29%)


CVS Health (CVS -3.44%)


Data source: Yahoo! Finance.

3. Consider fixed annuities

Another solid way to generate income for yourself in retirement is via one or more fixed annuities. You choose the best-rate insurance company or companies and hand over a fat wad of money in exchange for their promise to deliver regular income to you for a specified period or for the rest of your life and/or your spouse's life.

This isn't the most perfect time to buy an annuity, as interest rates are super low -- you'll be offered bigger checks if you buy when rates are higher -- but it's hard to argue with almost-guaranteed income requiring no studying of stocks or funds or anything like that. If you're still far from retirement, you can simply keep this option in mind, hoping to snag bigger payments later, at higher interest rates.

Two hands have written more income on an index card.

Image source: Getty Images.

4. Get creative

Thinking inside and outside the box can yield more retirement income, too. For example, while a reverse mortgage is not right for everyone, it might be right for you, allowing you to draw income from your home equity until you move out of your home (perhaps due to death) -- at which time the debt comes due and is typically settled by selling the home. This can leave your heirs with little, but might serve you well.

Another strategy is just working for a few more years than you originally planned to, as that allows you to save more and perhaps remain on your employer's health insurance plan, while shortening the period of time that your nest egg will have to support you for. You might also get a side gig for a few years or many years -- ideally one you enjoy, such as tutoring kids, selling crafts online, or driving for a ride-sharing service.

5. Increase your Social Security benefits

Finally, know that there are ways to increase your Social Security checks, too. For example, your benefits are based on the 35 years in which you earned the most (adjusted for inflation), so if you've only worked 30 years, the formula will be incorporating five years of zero earnings. Work a few more years, and your benefits will increase. Timing is critical, too, because you can make your checks bigger by delaying when you start collecting them.

Don't plan to just settle for Social Security checks, because they probably won't be enough -- the average monthly payment was recently just $1,547 -- or about $18,500 per year. Start thinking and planning now for how you'll build yourself an additional income stream or two in retirement.