Millions of seniors today get a monthly benefit from Social Security. And for many, it's that very benefit that allows them to maintain their homes, put food on the table, and cover different costs as they arise.
But retiring on Social Security alone is a very bad idea. And if it's a route you're thinking of taking, you may want to reconsider. Otherwise, you could end up sorely unhappy throughout your retirement.
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Why you need other sources of income
Many people don't save for retirement because their plan is to simply cut expenses once they stop working and get by on Social Security alone. But that's a decision that might easily backfire on you.
Even if you're willing to live frugally as a retiree, you may not manage to get by solely on Social Security income. Those benefits will only replace about 40% of your pre-retirement wages if you earn an average salary. And even if you're willing to do things like downsize your home and cut back on leisure spending in retirement, you may not be able to manage your bills after taking a 60% pay cut.
Furthermore, many people underestimate the cost of staying entertained in retirement. Work is not only an inexpensive activity by nature, but it's one that pays you while keeping you busy.
When you stop working and need a way to fill your days, you inevitably put yourself in a situation where you're more likely to spend money. If you retire on Social Security alone, your options for staying entertained may be minimal. That could make for an unhappy existence.
Finally, you might think you'll manage to cover your senior living costs on Social Security alone, only to run into health issues that leave you with mounting bills. Healthcare could easily end up being your largest ongoing expense in retirement, and it's one you really don't want to skimp on. But if you retire on Social Security alone, you might, sadly, have to.
Try your best to build savings
Saving for retirement isn't always easy, especially when things like surprise bills get in the way. But it's important to carve out some money for retirement savings purposes so you have income at your disposal to supplement the benefits you collect from Social Security.
If you sock away just $100 a month in an IRA or 401(k) plan over a 30-year period, and your investments in that account generate an average annual 8% return (which is a bit below the stock market's average), you'll end up with about $136,000 in savings. That's not a ton of money for what could be a 20-year retirement or longer, but it's better than nothing and gives you more spending leeway.
All told, if you actively decide you're going to retire on just Social Security, you might end up very unhappy with that choice throughout your senior years. The sooner you realize that, the sooner you can start carving out money for your savings and avoid years of regret.
