Many seniors get a lot of their retirement income from Social Security. But those who fall back on those benefits without any other income at their disposal could end up in a world of financial stress once retirement rolls around.
If you're planning to retire on just Social Security and you're single, you may be forced to live on just $1,657 a month, or $19,884 a year. That's the average monthly benefit individual seniors are in line for come January of 2022, once Social Security's recently approved 5.9% cost-of-living adjustment takes effect.
If you're married and plan to retire on only Social Security, your monthly income might amount to $2,753. On a yearly basis, that's $33,036.
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If you happen to live an extremely frugal lifestyle and intend to continue doing so during retirement, you may be able to get away with living on the numbers listed above. But for most seniors, Social Security alone is apt to fall short. And the sooner you realize that, the sooner you can take steps to save for retirement and avoid a world of financial heartache.
Build your own nest egg
Many people are intimidated by the idea of having to set aside funds for retirement. But you may be surprised at how little money you have to part with on an ongoing basis to grow wealth.
Say you're only able to put $50 a month into a retirement savings plan, but you do so every month for 40 years. If your invested savings average an annual return of 7%, which is a few percentage points below the stock market's average, you'll end up with $120,000 in savings to supplement your Social Security benefits. Make it $100 a month, and you'll have a $240,000 nest egg to tap.
Have a backup plan
Of course, if you're nearing retirement and have basically missed the boat on saving for your senior years, you can't exactly go back in time and fund that IRA or 401(k). But what you can do is come up with a plan to supplement your Social Security income. That could mean taking a part-time job or renting out part of your home and using the money you collect from a tenant to help pay your bills.
Social Security may provide you with a decent chunk of retirement income, but most seniors who live on those benefits alone will risk struggling. And so it pays to do whatever you can to avoid that fate.
One final thing -- if you're almost ready to retire and are missing a nest egg, consider extending your career a few more years. Doing so could allow you to put some money into an IRA or 401(k).
But just as importantly, if you work a bit longer, you can give yourself the option to delay your Social Security filing beyond full retirement age. For each year you hold off past that age until the age of 70, your benefits can grow 8%. And if they'll be your main or sole source of retirement income, it pays to give them that boost.
