Can you make do in retirement with only 13% of your current income?
For most people, the answer is definitely “no.”
That’s why we can’t emphasize enough how important it is to save for your own retirement. Social Security is simply not enough.
It starts with about 40% of your current income.
Wealth Management magazine reports that Social Security benefits now replace on average only about 40 percent of your pre-retirement income. That figure is expected to slip to only 36 percent by 2030. So if you are relying on Social Security alone, you’ll have only 40% of your current income to spend once you retire. Will that be enough?
But wait, it gets worse…
If that’s not bad enough, there’s more.
Health consulting firm HealthView calculates how much of your Social Security benefit needs to spent on health care expenses like Medicare Part B and D premiums, dental insurance premiums, and out-of-pocket costs, including copays, hearing and vision expenses. They estimate that health care expense will consume 67 percent of Social Security income for someone retiring this year.
So how will you manage with only 13% of your current income to cover all your other living expenses?
Let’s do the math. Your Social Security benefits will replace, on average, only 40% of your current income. And 67% of the benefits you do receive may be needed to cover your retirement health expenses.
That means that if you rely on Social Security alone, you’ll be left with only 13.2% of your current income to spend in retirement for housing, food, transportation, travel, clothing and all your other expenses, excluding health care.
Can you make do with only 13% of your current income?
If the answer is no, take a good, hard look at what you are putting aside now for retirement, and see if it’s not time to tweak your savings and investment strategy.