As the COVID-19 pandemic continues causing massive economic disruption, and job losses climb, you may be thinking about retirement if you’re older and you’ve lost your job.
If you don’t have savings to support you and are considering leaving the workforce, you may be wondering if you can live on Social Security alone.
Unfortunately, doing so might be very difficult (if not impossible) if you’re on track to get the average benefit amount.
Is the average benefit enough to live on?
Social Security benefits help seniors support themselves, but they aren’t designed to be their only source of funds. In fact, they’re meant to replace only around 40% of pre-retirement income, so the checks you get aren’t very high.
If you receive the average benefit in 2020, you’d end up with just $1,503 per month. That would give you an annual income just $5,276 above the federal poverty level for a household of one.
Not only would your income put you just above the poverty line, but it would also fall far short of the amount you need for necessities, even in the cheapest states for seniors. The amount you’d actually require to cover the essentials has been calculated at around $21,012 annually, assuming you’re living in your own home with no mortgage. So in a best-case scenario where your house is paid off and you don’t live in a high cost-of-living area, you’d be almost $3,000 short of covering the basics using Social Security alone.
The program’s buying power has also been on the decline because the financial index used to measure cost-of-living increases for seniors isn’t a very accurate reflection of how expenditures of retirees actually rise over time. So as you get older and likely begin experiencing more costly health problems, you’ll probably find relying on your benefits as your sole source of funds will only get harder.
Look for alternatives to living on Social Security alone
As you can see, the average benefit isn’t going to provide you with the money you need to live a comfortable life. It’s simply not enough for most people to survive on, even if the goal is just to cover necessary costs.
And while your benefit may be higher than the average, there’s also a chance it will be lower, especially if you retire before your full retirement age due to the coronavirus. That could make surviving on Social Security alone even more difficult.
You don’t want to spend your senior years worried about having enough cash. So if you don’t have a supplemental savings account, look for alternatives to retiring and relying on benefits, such as claiming unemployment until you can find new work if you’ve lost your job.
If you can find a new position, or stick with your current work during this time of economic uncertainty, it’s important to prioritize building a retirement nest egg that will give you additional funds so you don’t have to try to live off benefits that don’t stretch far enough.