As of January 2024, the average Social Security recipient collected a monthly benefit of $1,907. That's an annual income of just under $23,000.
You may not be able to get by in retirement on Social Security alone if your monthly benefit is somewhere in the vicinity of $1,907. But what if Social Security is paying you a lot more?
The maximum monthly benefit Social Security is paying this year is $4,873. To get that benefit, you need to earn a high wage throughout your career and delay your Social Security filing until age 70.
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On an annual basis, a monthly Social Security benefit of $4,873 translates to $58,476. Meanwhile, Motley Fool research finds that among Americans aged 65 and older, the median retirement income in 2024 is $50,290.
As such, it's conceivable that if you're getting the maximum monthly Social Security benefit, you may be able to get by in the absence of additional income. But that doesn't mean you're getting the retirement lifestyle you want.
Living on Social Security's maximum benefit could be a serious downgrade
For some people, a retirement income of $58,476 may be well beyond what they're getting today. But here's why you shouldn't plan to live on Social Security alone, even if you're in line for the program's most generous monthly benefit.
To qualify for that maximum benefit, you need to earn a very high wage for at least 35 years during your career. So chances are, if you're getting $4,873 a month from Social Security, it means you spent many years living on well more than $4,873 a month. Settling for an annual retirement income of $58,476 could mean having to give up a lot of the luxuries you're used to.
Let's imagine that in recent years, you were earning somewhere in the ballpark of $175,000 annually. You may not need that much money as a retiree, especially if your home is paid off by then and you're shedding an expensive commute that had you paying hundreds of dollars of month just to park in a big city.
But going from an income of $175,000 to $58,476 means taking a serious pay cut. You may be able to afford your basic expenses on that income. But that could mean having limited funds left over for the things you were hoping to enjoy in retirement, from travel to local activities.
If you're able to snag Social Security's maximum benefit, you're probably able to save to some degree
You cannot be a low or even moderate earner to qualify for Social Security's maximum monthly benefit. To be eligible for it, your wages must meet or exceed the Social Security wage cap for 35 years. For context, last year's wage cap was $160,200. This year, the wage cap is $168,600.
Now in the past, the wage cap was lower. It tends to rise each year in line with inflation.
The point, however, is that if you're earning enough to claim Social Security's maximum monthly benefit, you're probably earning enough to save at least some amount of money for retirement. So frankly, there's generally no reason to be in a position where you have to retire on Social Security's maximum benefit alone.
Sure, there are exceptions, and you may be one. But for the most part, once your earnings reach a certain level, it's more than reasonable to fund an IRA or 401(k) plan consistently to some degree. And having that supplemental income could make your retirement a lot more enjoyable.
