The Harsh Realities of Living on the Average Social Security Check
Imagine that you left one job for another and immediately took a 58% pay cut. That’s what many seniors face when they leave the workforce and start drawing Social Security retirement benefits.
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The average Social Security payment for retired workers is $1,825 a month, according to the Social Security Administration. During the first quarter of 2023, median earnings for full-time workers were $1,100 a week or about $4,400 a month, the U.S. Bureau of Labor Statistics recently reported. That’s roughly 65% more than what you get with the average Social Security payment.
If you want an idea of how small an $1,825 monthly check is, consider this: It is not much more than the federal poverty level for a family of two, which comes to about $1,643 a month, according to Healthcare.gov.
The average Social Security check isn’t going to make much of a dent when it comes to paying the bills. A new report from Rent.com found that the median national rent alone is $1,937 a month. As recently as 2021 — before last year’s soaring inflation rate kicked in — average monthly expenditures for U.S. households were $5,577, according to the latest BLS data. For individuals, average expenditures came to about $3,400 a month, according to data from the St. Louis Fed.
Needless to say, depending on Social Security alone is nearly impossible for most Americans — yet the SSA estimates that 12% of elderly men and 15% of elderly women rely on Social Security for 90% or more of their income.
These numbers underscore the importance of building retirement savings before you leave the workforce. As The Motley Fool reported, even if you save only $100 a month in an IRA or 401(k) over a period of 30 years, you’ll end up with around $136,000, assuming an average annual return of 8%, or slightly less than the stock market’s average.
Stretched over 19 years — the average lifespan beyond age 65 in the United States — that $136,000 equals about $7,158 a year or just less than $600 a month. It might not sound like much, but it can come in very handy when you live on a tight budget.
In addition to building retirement savings, it’s also important to get into the habit of living on a fixed-income budget. One step many seniors take is to move to more affordable areas when they retire.
Your next step should be to craft a detailed budget that assigns a place for every dollar that comes in. This not only helps you avoid going into debt, but it also gives you a good idea of spending areas you need to cut back on.
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If you find that you can’t make ends meet in retirement, check out government assistance programs such as Supplemental Security Income (SSI), which provides benefits to low-income Social Security recipients with a disability; and the Supplemental Nutrition Assistance Program (SNAP), which provides food purchasing assistance to low-income households.
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This article originally appeared on GOBankingRates.com: The Harsh Realities of Living on the Average Social Security Check