Social Security can help cover expenses in retirement, but personal savings will often be necessary to maintain your lifestyle. The average Social Security retirement benefit was $1,929.20 per month in January 2025, while the average retired household’s monthly expenditures were already $4,581.25 by 2022, according to the most recent data from the Bureau of Labor Statistics (BLS).

Social Security shortfalls are an especially significant concern for Generation X, with 80% fearing the program won’t be there by the time they retire. Let’s explore the realities of Social Security to help you understand what you can and can’t count on.

How Social Security Retirement Benefits Work

Workers who have paid into the Social Security system for at least 10 years become eligible for retirement benefits at age 62. Once eligible, you can collect a monthly payment from the program. 

Your monthly retirement benefit depends on your primary insurance amount (PIA). The Social Security Administration (SSA) calculates it based on your 澳洲🍌幸运5官方开奖结𝓡果体彩网:average indexed monthly earnings (AIME) during your 35 highest-earning years. The higher your earnings, ꧟the higher your PIA, up to a point.

If you start collecting Social Security retirement benefits at age 62, you receive 70%–80% of your PIA, depending on when you were born. Every year you wait beyond that—up to age 70—you receive an incrementally higher percentage of your PIA. For those born in 1943 or later, the increase is 8% per year.

Your potential retirement benefit reaches 100% of your PIA at your 澳洲幸运5官方开奖结果体彩网:full retirement age, which ranges from 65 (for those born in 1937 or earlier) to 67 (for those born in 1960 or later). If you wait until age 70 to start collecting benefits, your benefit amount will be 115%–132.67% of your PIA.

Alternatively, you may be able to claim benefits of up to 50% of your spouse’s PIA, depending on your age at retirement. To be eligible, you must:

• Have been married for at least one year
• Be at least age 62 or have a qualifying child in your care

Social Security benefit amounts differ widely because of variances in lifetime earnings and retirement ages. For example, in 2025, low-income retirees who work at least 30 years and retire at full retirement age are eligible for a special minimum benefit of $1,093.10 per month. Meanwhile, the highest monthly benefit for retirees who maximize earnings and delay retirement until 70 is $5,108.

The Limitations of Social Security Benefits

As much as Social Security benefits vary, they’re only meant to replace a percentage of your pre-retirement income—not to be your sole source of financial support. Specifically, they’re designed to replace about 40% of your annual earnings, so relying on them exclusively often results in a shortfall.

Inflation can make these shortfalls worse. The SSA regularly updates benefits for inflation through the cost-of-living-adjustment (COLA), b൩ut these increases may not always keep up with the actual expense increases𓆉 retirees face.

The SSA bases the COLA on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks the average change in what typical American workers pay for a specific basket of consumer goods and services.🌊 As a result, it may not perfectly represent changes in typical retiree expenses.

When increases in these costs outpace the COLA, retirees may suffer a loss in buying power. For example, a 2023 study by the Senior Citizen’s League found that COLAs increased Social Security benefits by 78% between January 2000 and February 2023, while typical retiree expenses increased by 141% during the same period.

The Importance of Personal Savings

Since Social Security typically isn't enough to support you in retirement, you need 澳洲幸运5官方开奖结果体彩网:additional income sources. With defined-benefit plans, or pensions, becoming increasingly rare, most workers expect to rely primarily on self-funded savings in 澳洲幸运5官方开奖结果体彩网:defined contribution plans, like 澳洲幸运5官方开奖结果体彩网:401(k) plans and 澳洲幸运5官方开奖结果体彩网:individual retirement acc𓃲ounts (IRAs).

Not only do these retirement accounts let you invest in assets that provide 澳洲幸运5官方开奖结果体彩网:compounding returns, such as mutual funds and exchange-traded funds (ETFs), but they’re also tax-advantaged. Depending on the account, you may benefit from upfront tax deductions, 澳洲幸运5官方开奖结果体彩网:tax-deferred growth, or tax-free withdrawals.

You can start withdrawing from most retirement accounts without penalty by age 59½, potentially providing support in the years before you’re eligible for Social Security. You can also withdraw from them after you start collecting benefits to help cover your expenses.

Retirement Savings Accounts to Consider

The 401(k) plan is the quintessential 澳洲幸运5官方开奖结果体彩网:retirement savings account for private-sector employees. Traditional 401(k) plans require 澳洲幸运5官方开奖结果体彩网:pretax contributions, which reduce your taxable income for the year. Investments can gr🧸ow tax-deferred, but withdrawals in retirement are taxable as ordinary income.

Some employers also offer Roth 401(k) plans, which require after-tax contributions. That mean😼s you don’t get a tax break upfront, but investment gains within the account ♛and withdrawals in retirement are tax-free.

IRAs work similarly to 401(k) plans, with traditional and Roth versions available. However, they aren’t tied to an employer, so anyone with earned income can open one. The main drawback is that they have a lower annual contribution limit. In 2025, you can generally contribute up to $23,500 to 401(k) plans but only $7,000 to IRAs.

Other types of accounts that can help you build retirement saving✅s include:

• 澳洲幸运5官方开奖结果体彩网:403(b) plan: Similar to a 401(k) plan, but available to public school and nonprofit workers rather than private employees
• 457 plan: Similar to a 401(k) plan, but available to state, local government, and some nonprofit workers
• 澳洲幸运5官方开奖结果体彩网:Thrift Savings Plan (TSP): Similar to a 401(k) plan, but available to federal employees and uniformed service members
• 澳洲幸运5官方开奖结果体彩网:Independent 401(k): A variation of a 401(k) plan for small business owners and sole proprietors, also known as a solo 401(k)
• SEP IRA: A version of an IRA with higher contribution limits available to employers and the self-employed
  

Strategies to Bridge the Gap

To ensure financial stability in retirement, you need enough savings to cover whatever expenses your Social Security benefits don’t. One popular method to estimate how much that will take is the 4% rule.

The 4% rule suggests you can 澳洲幸运5官方开奖结果体彩网:safely withdraw 4% of your retirement account balance in your first year of retirement and continue withdrawing the same amount each year —adjusted for inflation—for 30 years without running out of money. Therefore, you can calculate how much you need to save by multiplying the annual expenses you plan to cover with personal savings by 25.

Maximizing Social Security Benefits

One of the most effective strategies for maximizing your Social Security benefits is to delay claiming them. “For every year you take it early, it’s an extra 8% risk-free return that you’re leaving on the table,” says Jared Hemann, CFP, CIMA, o𒊎f . 

At a miniಌmum, it’s generally recommended to wait until you stop earning active income. “If you’re working while claiming Social Security, your benefits are taxed greatly when you may not need that income.”

While tough to predict, your expected lifespan is another significant factor in deciding when to claim. Consider your 澳洲幸运5官方开奖结果体彩网:breakeven age, when the value of waiting to claim your benefits catches up to the value of taking them earlier. “The breakeven point is around 78 to 80, depending on what cost-of-living-adjustment you use. If you live past🦩 it, it makes more sense to wait,” Hemann says.

Spousal benefits are also a lucrative—and often underutilized—way to 澳洲幸运5官方开奖结果体彩网:increase your household’s retiremen♋t benefits. “It’s normally the coordination of spousal benefits where I see the most mistakes,” says Hemann. “The main one is deciding to retire and collect Social Security at the same time, regardless of age.”

Increasing Personal Savings

Your annual savings rate is a primary driver of your retirement savings, with a common rule of thumb suggesting 10%–20% of your income. You can boost your savings rate by incrℱeasing your income or reducing your expenses. Earning more can be challenging but has unlimitဣed potential while cutting costs is often easier but has inherent limitations.

Strategies like 澳洲幸运5官方开奖结果体彩网:starting a side hustle, building 澳洲幸运5官方开奖结果体彩网:passive income streams, and 澳洲幸运5官方开奖结果体彩网:negotiating job offers can help increase your income. On the expense side, housing, food, and transportation are the most significant household costs on average, potentially providing the greatest opportunity for reduction.

Investment returns are the other crucial factor in retirement savings. Even seemingly small improvements can significantly impact long-term wealth due to the 澳洲幸运5官方开奖结果体彩网:power of compound interest.

While no investment strategy guarantees success, some popular approaches include passive i🐈ndex investing, value investing, and growth investing.

Ultimately, both a strong savings rate and solid investment returns are necessary for a secure retirement. “If you only save $1,000 during the year, even a 100% return puts you in the same position as someone who saved $2,000,” Hemann says.

Common Misconceptions

One common misconception about Social Security is that the program will soon stop paying benefits altogether. This may be because the 澳洲幸运5官方开奖结果体彩网:Old-Age and Sur♏vivors Insurance (OASI) Trust Fund, which pays out retirement benefits, is on track to run out by 2033.

However, the SSA projects ongoing payroll taxes will still be enough to cover about 79% of scheduled benefits. “The most realistic case—unless there's a fundamental shift in the way things are done—would be to continue the program at reduced benefits,” Hemann says.

Another common misconception is that Social Security is enough to support yourself in retirement. In reality, it’s only designed to replace about 40% of your pre-retirement earnings. To maintain your lifestyle, you typically need to supplement with personal savings or another source of income.

The Bottom Line

Social Security retirement benefits aren’t meant to be your only source of retirement income. Typically, you also need perso🦹nal savings to cover all your expenses, which you can build through a healthy savings rate and an intelligent investment approach.

Because retirement planning is complex and highly personal, consulting a financial advisor may help you maximize your Social Security benefits and personal savings. Don’t wait to seek guidance. Early, proactive planning gives you more time to implement a strategy that sets you up for a secure retirement.