Quick Read
The average Social Security benefit pays roughly $25,000 annually, less than half of the $61,432 the typical senior household spent in 2024.
Saving just $100 a month over 40 years at an 8% return builds roughly $311,000, adding about $12,500 in annual retirement income.
Two retirees, same $1 million, same 4% rule, buy one finished with $1.4 million, the other hit $0 in 12 years. Our free reader guide explains the flaw that separated them, and the income-first method built to avoid it.
A lot of people look forward to getting Social Security in retirement. And after years of paying into the system, you may be eager to get your hands on those monthly checks.
But if you aren’t saving for retirement on your own, you may be in for a financial shock. That’s because the average Social Security benefit today probably won’t cover even close to all of your expenses.
What the typical benefit looks like today
As of June 2026, the average retirement benefit paid by Social Security was about $2,084. On an annual basis, that’s about $25,000 of income.
If you have extremely low expenses, that may be enough to cover your essential needs. But a $25,000 annual income may only be enough to pay for your basics — things like housing, food, utilities, and medication. It may not leave you with much or any money left over for things like leisure and entertainment.
A $25,000 annual income may also not provide a buffer for unplanned bills and emergency expenses, such as if you need to make a home repair or you end up with higher medical costs than expected due to an injury or illness. If you don’t have savings outside of Social Security, you could risk ending up in debt in retirement.
For context, as of 2024, the average senior household spent $61,432 on expenses. If all you have coming your way is Social Security and you’re getting about $25,000 a year, that’s not even enough to cover half of what the typical senior household spent two years ago.
The 4% Rule is Broken, Built On A World That No Longer Exists
Every retiree knows about the 4% rule, but it frames retirement as a slow liquidation and still causes retirees with seven-figure accounts to agonize over a dinner out.
There’s a different way to run the math that makes more sense today. Build an income floor — dividends, interest, and Social Security that cover your essential bills every month — and you never have to sell shares into a down market just to pay them.
Our free reader guide, The 4% Rule Is Broken, walks through it in about 15 minutes. Access the report here.
And keep in mind that costs may be higher today than they were two years ago thanks to inflation. That puts you at even more of a disadvantage.
Don’t let yourself retire on Social Security alone
While Social Security may play a big role in your retirement income, it shouldn’t be your only source if you can help it. The good news is that saving modestly for retirement could go a long way if you invest that money and fund an IRA or 401(k) consistently for many years.
Let’s say you don’t earn a very large paycheck and therefore can only scrounge up $100 a month for your long-term savings. If you contribute that $100 a month over 40 years and your investments generate an 8% return during that time, which is below the stock market’s average, you could end up with almost $311,000 in savings.
Many financial planners recommend withdrawing from savings at a rate of about 4% per year. With $311,000 saved, that gives you almost another $12,500 in annual income to supplement your Social Security checks.
It may still not be quite enough to cover all of your bills, and you may need to spend carefully and/or be willing to work part-time in retirement to make up the difference. But having that savings should put you in a much stronger position to cover your costs than retiring on Social Security alone.
And also, this example assumes you can only save $100 a month for retirement throughout your career. You may only be able to eke out $100 in monthly savings when you’re first starting a full-time job. But as your wages grow, your retirement plan contributions might pick up nicely.
Either way, understand that if you’re in line for the average Social Security benefit and have no other income, you may have to retire on $25,000 a year. If that sounds impossible to you, it’s important to prioritize savings as soon as you can.
Before Your Next Withdrawal, Run One Number ( It’s Not The 4% Rule Everyone Knows)
Take your essential monthly expenses and subtract your guaranteed income — Social Security, plus any pension. What’s left is your income gap, and how you close it determines whether retirement runs on share sales or on a paycheck your portfolio writes you every month. Our free reader guide, The 4% Rule Is Broken, shows exactly how to close that gap with portfolio income: a worked example (one retiree needed about $480,000 in income-producing assets to cover his essentials for good), an eight-point conversion checklist, and the 20-year numbers comparing dividends to withdrawals. It’s free and takes about 15 minutes to read. Get the guide here before you take your next withdrawal.
Contact editorial@247wallst.com for any questions or corrections.
