Sources of Retirement Income: Expectations vs.
Key contrasts include Social Security, where 58% currently rely on it but only 35% expect to, and retirement accounts like 401(k)s or IRAs, expected to be a major source by 50% of nonretirees but a major source for only 29% of retirees.
Insufficient Income
On average, Social Security benefits replace about 40% of pre-retirement income, which is often not enough to cover basic living expenses, let alone healthcare costs, leisure activities or unexpected emergencies.
Nearly half of Americans retiring at 65 risk running out of money, Morningstar finds.
Ninety-five percent of never-beneficiaries are individuals whose earnings histories are insufficient to qualify for benefits. Late-arriving immigrants and infrequent workers comprise the vast majority of these insufficient earners.
The amount a person receives in Social Security benefits is not directly affected by their current income or wealth. Therefore, even if someone is a millionaire or billionaire, they can still receive Social Security benefits if they have a qualifying work history.
If your spouse dies, do you get both Social Security benefits? You cannot claim your deceased spouse's benefits in addition to your own retirement benefits. Social Security only will pay one—survivor or retirement. If you qualify for both survivor and retirement benefits, you will receive whichever amount is higher.
Having no savings means that you will be forced to rely on your Social Security benefits for income in retirement. According to the Social Security Administration (SSA), among Social Security beneficiaries, 12% of men and 15% of women rely on Social Security for 90% or more of their income.
The median income for Americans 65 and older is $50,290. The mean (average) is $75,020. Average annual expenditures for Americans 65 and older are $57,818. The average Social Security retirement benefit check is $1,907 as of January 2024.
As of July, the average monthly check for a retired worker was $1,919, or about $23,028 per year. In other words, some Americans may be able to meet their basic retirement needs with Social Security benefits alone but for many households, it won't be enough.
Upper-Class: With an upper middle class net worth between $500,000 and $1 million, upper-class retirees enjoy a comfortable lifestyle. They have sufficient savings and investments to cover their needs without financial strain. Rich: Those who retire wealthy have a net worth exceeding $1 million.
Federal law prohibits Social Security from paying benefits exceeding its available funds. Even if the trust fund runs out in 2035, the program will continue collecting more than $1.6 trillion each year in payroll tax contributions from workers and income taxes on Social Security benefits.
Let's say you consider yourself the typical retiree. Between you and your spouse, you currently have an annual income of $120,000. Based on the 80% principle, you can expect to need about $96,000 in annual income after you retire, which is $8,000 per month.
Starting in 2025, tax Social Security benefits in a manner similar to private pension income. Phase out the lower-income thresholds during 2025-2044. Memorandum containing this or a similar provision: Warshawsky 2008.
The majority of retirees are not millionaires but it's possible to reach $1 million in savings if you're strategic in your approach.
Downsize or Sell Assets
Selling the house or downsizing are the practical, popular solution for seniors to finance their senior care and future expenses when they are short on funds.
Older adults with lower incomes have a number of financial options available to help in retirement. Programs such as Medicare, Social Security, food stamps, Medicaid, and Supplemental Security Income (SSI) are available to those who qualify.
20 percent of adults ages 50 and over have no retirement savings at all. 61 percent are worried they will not have enough money to support themselves in retirement. Perhaps most startling, only 40 percent of men who are regularly saving for retirement believe they are saving enough. For women the number is 30 percent.
Each survivor benefit can be up to 100% of your benefit. The amount may be reduced if the women start benefits before their own full retirement age, but they don't have to share — the amount isn't reduced because you've had more than one spouse.
Surviving spouse, at full retirement age or older, generally gets 100% of the worker's basic benefit amount. Surviving spouse, age 60 or older, but under full retirement age, gets between 71% and 99% of the worker's basic benefit amount.