Navigating Retirement with Social Security in 2025: This is What Your Monthly Income Might Be
Struggling with retirement savings isn't unusual. Many folks grapple with building a nest egg due to factors like stagnant wages, medical bills, and unexpected expenses that cut into regular IRA or 401(k) contributions. If you're planning to retire solely on Social Security this year, you might be in for a challenging financial journey ahead. Allow me to shed some light on why this strategy might fall short.
Meager Return on Investment
The average retired worker collects $1,976 per month from Social Security, accounted for by a 2.5% Cost-of-Living Adjustment. Yearly, this sum amounts to a little under $24,000. Unfortunately, the Bureau of Labor Statistics reveals that typical senior expenses exceed this amount by a considerable margin, with expenses for Americans 65 and over reaching an average of $57,818 per year.
In other words, Social Security benefits only cover about half of the typical senior's expenses. While it's true that some individuals may have few financial commitments and opt for a frugal lifestyle, it's crucial to avoid sacrificing basic comforts like adequate food and heat.
Alternatives to a Lone-Wolf Social Security Retirement
If your retirement date is fast approaching and you haven't saved much for retirement, don't abandon hope just yet. You still have opportunities to improve your financial situation.
Firstly, who's setting your retirement date? If it's you, consider pushing back your retirement date by a year or two, if financially viable. This extra time allows you to accumulate more savings.
Postponing Social Security payment can also yield benefits. For each year you delay your claim, up until the age of 70, your monthly benefits gradually increase. So, while a Social Security-alone retirement might not be ideal, delaying your Social Security payments can boost your benefits significantly.
If your retirement date is unavoidable, and you've missed the opportunity to save, examine your home as a potential asset. Consider selling your current property and downsizing to a more modest home. With the funds from the sale, invest wisely for regular income.
Another approach could be to rent out a section of your home, such as a finished basement or garage. Another route is to monetize your driveway if parking in the area is premium.
Last but not least, embrace part-time work in your golden years. Social Security regulations allow you to work part-time without dedicating excessive time or compromising benefits. From a few shifts per week to freelance jobs, supplementing your income can help bridge the gap between Social Security benefits and living expenses.
In light of the high cost of living for seniors, relying solely on Social Security might leave you with insufficient funds for basic necessities, as the average benefit only covers about half of typical expenses. If you're planning to retire soon and have limited retirement savings, consider delaying your Social Security claims to increase your monthly benefits or consider part-time work to supplement your income from Social Security, as this can help bridge the gap between your expenses and your Social Security benefits.
