Social Security is one of the most important income sources for many retirees because it's guaranteed to last for life and can't run out -- unlike savings. But both current and future retirees need to have a realistic idea of what their retirement benefits will actually do for them.
That's why it's so important to know what the average Social Security benefit will be in 2024, as the amount may surprise you. Here's what it is.
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The average Social Security benefit for 2024
In 2024, the average Social Security check will provide $1,907 in monthly income. That's up from $1,848 in 2023. The average benefit increased thanks to a cost of living adjustment (COLA) occurring in 2024 that will result in larger payments to help retirees keep pace with inflation.
While the average benefit amount did increase for next year, you'll probably notice that it is not a very high number. If you get a payment of just $1,907 per month, that would give you an annual income of only $22,884. That's not exactly a fortune, especially when you consider all the costs you'll have to pay from it, including housing and healthcare.
Why is the average benefit so low?
Unfortunately, it's not a glitch that the average benefit provides such a limited amount of money for retirees to cover all their essentials. The reality is that Social Security was designed to replace only about 40% of pre-retirement income. So, even if your benefit is well above this average, it will still provide you with only a small fraction of the money you received when working.
Social Security wasn't designed to provide more than about 40% of the money you were earning because it was meant to be one of three sources of retirement income. Savings and a pension from an employer were supposed to be the other two sources. And that becomes a huge problem for people whose employers don't provide a pension, who didn't save, or who saved but may not have saved enough or invested wisely.
To be comfortable in retirement, seniors will need to replace about 80% to 90% of their pre-retirement income (or more) depending on just what they're hoping to do with their time (and whether their health is good). That means anyone wanting a comfortable retirement will need plenty of money besides what Social Security offers.
If you are a long way from retirement, hopefully, seeing this low average benefit will prompt you to make a serious effort to increase the amount you're saving and investing for the future. Start putting away as much as you can into a 401(k) or other tax-advantaged retirement account today so you'll be ready when your day comes to leave the workforce.
And if you are already in or close to retirement, it's important to look for extra income sources beyond Social Security. You can also make major lifestyle cuts, including choosing an area with a low cost of living if it turns out that you're over-reliant on these benefits and you discover they don't go as far as you hoped they would.
