Is Social Security Enough Money for Retirement?

Social Security benefits can provide a good financial base, but they aren’t designed to be the sole source of retirement income. According to the United States Social Security Administration (SSA), Social Security replaces about 43% of a worker’s preretirement income for medium earners.¹

So, is Social Security enough to retire on? Living on Social Security benefits alone can be done, but it often requires very careful budgeting and planning to maintain financial stability. If you are nearing retirement, consider what you can do now to ease your transition, and start looking for ways to supplement your income now and after you retire.

Why Social Security Alone May Not Be Enough for Retirement

Many people are comfortable with their standard of living before retirement and usually want to maintain it. To do so, financial experts estimate you'll need 70% to 90% of your preretirement income to sustain your lifestyle when you stop working.²

That means if you currently bring home $100,000 a year, you’ll want to have somewhere between $70,000 and $90,000 a year. Relying solely on Social Security may not provide enough to maintain that level of income. For context, the estimated average monthly Social Security retirement benefit for January 2025 is $1,976.³ This amounts to $23,712 per year.

Something else to consider is that people often underestimate how much they will spend in retirement. According to the Employee Benefit Research Institute:⁴

• 31% of retirees said their spending is much higher or a little higher than they can afford
• 1 in 3 (36%) retirees have experienced unexpected spending needs since their retirement

Will Social Security Benefits Replace the Same Percentage of Income for Everyone?

The short answer is no. While the SSA tells us that Social Security benefits will replace around 43% of the income of the average wage earner in the U.S., many people fall either above or below that number. The SSA says the benefit income replacement percentage ranges from as much as 79% for very low earners to about 28% for maximum earners.¹

Also worth noting is that the government withholds Social Security taxes from your paycheck only up to a certain point ($176,100 in income in 2025).⁵ That means the dollar amount you eventually receive in benefits could represent a lower percentage of your previous annual earnings.

Social Security Disability Insurance Benefits

If you must leave the workforce due to health issues before your full retirement age (FRA), claiming Social Security Disability Insurance (SSDI) benefits may be a better financial option than claiming your retirement benefits since it will not start the clock on your retirement benefits. It’s important to note that if your disability improves and you’re deemed able to return to work, you will no longer qualify for SSDI.⁶

With SSDI, you’ll receive monthly income from the Social Security Administration, but it won’t reduce your future Social Security retirement benefits. You become eligible for Medicare after 24 months of SSDI coverage.⁷

How to Maximize Social Security Benefits After You Retire

One strategy to get a higher payment is to delay claiming Social Security benefits for as long as possible. Your full retirement age is determined by the year you were born. If you claim your Social Security benefits before reaching FRA, you will have a permanent reduction in monthly Social Security income.⁸

On the other hand, delaying your claim allows you to earn delayed retirement credits, which can permanently increase your monthly Social Security benefits until you reach age 70. Your benefit will increase 8% for each full year you delay receiving Social Security benefits beyond your full retirement age.⁸

Another thing to keep in mind is that you may have to pay taxes on your Social Security income.⁸

Federal taxes

The percentage of your Social Security benefits subject to tax is determined by your income and filing status:⁹

Most tax filing programs will do these calculations for you, as will professional tax preparers.

State taxes

In addition to federal taxes, some states also tax your Social Security payments. If you’re considering relocating after you retire, you may want to move to one of the 41 states that do not charge state taxes on Social Security benefits.

The nine states that tax a portion or all of your Social Security benefits are Colorado, Connecticut, Minnesota, Montana, New Mexico, Rhode Island, Utah, Vermont and West Virginia. Each state has its own formula for determining tax rates, so make sure to learn what your local tax rate will be.¹⁰

Adjusting and Budgeting for a Comfortable Retirement

While enjoying life is the goal of retirement, setting and sticking to a reasonable retirement budget can help keep financial stress off your mind.

In addition to your standard living costs, it’s important to consider healthcare costs when planning your future expenses.

In 2022, nearly 3 in 10 Medicare households spent 20% or more of their total household spending on health-related expenses.¹¹ Add in housing expenses, which are the largest expenditure for most people, and you can see that there may not be much left to cover other needs.¹²

Adding to Your Retirement Income Before You Retire

If you haven’t yet, find out if supplemental savings plans are available where you work. Don’t hesitate to ask questions about what you are eligible for and how to maximize the amount you can get when you retire.

In addition to retirement savings plans that might be available through your employer, there are also plans available through financial institutions, and these are often tied to tax advantages.

Know Your Numbers

Overall, the best way to prepare for retirement is to know what to expect. Social Security benefits are calculated based on an inflation-adjusted wage average of your highest 35 years of earnings.¹³

If you didn’t work for a full 35 years, the SSA will count the years you didn’t work at $0. This calculation is called your average indexed monthly earnings, or AIME.¹³

Find out about your benefits by creating a “my Social Security” account with the SSA.

Once you know how much your Social Security payments will be, think about other ways you can supplement your income in retirement to help bridge the gap between your Social Security income and your expenses.

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Author Bio

Dawn Papandrea is a journalist with more than two decades of experience covering personal finance and consumer issues. She has written for leading financial publications and organizations, including U.S. News & World Report, Investopedia, Bankrate and others.