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Much Ado About Nothing Saved for Retirement? Why Social Security Alone May Be Enough

Much Ado About Nothing Saved for Retirement? Why Social Security Alone May Be Enough
March 13
01:46 2018

A recent survey suggests 42% of workers have little to nothing saved for retirement. The 2018 GOBankingRates Retirement Savings poll on retirement savings concludes “about 42% of Americans will retire ‘broke’” because they’ve saved less than $10,000 for retirement. Maybe the real reason why more than two-thirds of American workers have little to nothing saved for retirement is too obvious for many to believe: they simply don’t need to.

Here’s why.

While this usually isn’t a good idea, there are people who retire on Social Security alone and are happy with their retirement. “For roughly 1/5th of seniors in the United States, Social Security is their only retirement income source. For roughly 1/3rd, it is more than 90 percent of their income and for 2/3rds it is more than half,” says Jamie Hopkins, Professor of Retirement Income Planning at The American College in Bryn Mawr, Pennsylvania. “The reality is that Social Security is still the primary income source for most American retirees. It is the backbone of our retirement system.”

Are There Really Retirees Who Survive on Just Social Security?

“‘Survive’ is the optimum word,” says Richard D. Quinn, a retired Vice-President for Compensation and Benefits at a Fortune 200 company. “That’s barely what they would do. I’m not sure about their comfort level, but I know of a few seniors who live on Social Security alone. My parents did, but only because they lived with family members. I know of another person who does; he lives in a trailer in Montana. Living on Social Security alone is not a happy prospect. On the other hand, at least today those who do rely on Social Security probably have been very low income or poor all their lives. That may not be the case in the future.”

It may be true that many who have had low income levels live off income from Social Security, but circumstances occur when other people must face this same fate. “Retiring with just social security benefits is less than ideal,” says Michael Dinich, founder of Your Money Geek in Sayre, Pennsylvania. “Life, however, does not always work out as planned. People may get divorced late in life or even disabled.”

Despite the hyperbole from the GOBankingRates survey and the subsequent CNBC story on it featuring the headline “42% of Americans are retiring broke” (they even left the quote marks off the word “broke”), the reality is people are living on just Social Security. Dan Wesley, a columnist at Forbes and and founder of, says, “It is true that many Americans do not save for retirement and rely solely on Social Security. While this is not advisable, it is doable.”

Not that this doesn’t present some practical challenges. “If Social Security is all you have there is only one word to what your retirement will look like – tough!” says Richard Reyes of The Financial Quarterback in Lake Mary, Florida. “I’m not going to say that having a retirement where your only income is provided by Social Security can’t be done (unfortunately many seniors do it). Life, however, gets more expensive while you will not have the resources to keep up.”

Under What Circumstances Will Social Security Be All You Need?

We’ve all heard stories of thrift and the financial advantages of living a Spartan lifestyle. This offers some insight in how so many have been able to maintain a contented retirement on only Social Security. “I know of some family members who are retired and live on Social Security alone,” says Ryan Boggs, Investment Adviser Representative at FourStar Wealth Advisors LLC in Chicago, Illinois. “One of the most common characteristics of them is that they live frugally, but comfortably, and are disciplined to maintain and religiously follow their budget.”

Roger Young, Senior Financial Planner for T. Rowe Price in Baltimore, Maryland, offers this example detailing how a married couple could adjust their spending to fit Social Security. He says, “If you haven’t been saving at all, you would need to cut your spending sharply to live only on Social Security. Based on our analysis (including several assumptions), a household earning $30,000 – $70,000 would need to reduce spending by around 30-60%. Here’s an example (numbers rounded): Married couple, with one spouse earning all of their $40,000/year income before retirement. Pays $3,000 payroll tax and $3,000 Federal/state income tax. So they bring home and spend $34,000. They reduce expenses by $13,000/year (38%) to $21,000. They get $14,000 Social Security for the working spouse, plus $7,000 spousal benefit, for a total of $21,000. Now they pay no income tax, so that covers their spending. (Note—Social Security could vary widely based on claiming age and earnings history.)”

Cutting expenses prior to retirement has two benefits. First, it conditions to future retiree to live a more modest (and therefore more affordable) lifestyle. Second, it presents the added bonus of freeing up money that can then be saved for retirement. “Not saving for retirement for the vast majority is a choice; a dumb, shortsighted one, but a choice that puts current lifestyle spending ahead of prudence,” says Quinn. “Look at how Americans at all levels spend their money.  Finding money to save by changing that spending is not that hard if one tries. It is unlikely that any combination of government programs would allow them to maintain their standard of living. But they are certainly shifting the burden of sustaining them in the future to the rest of society.”

It also helps to live in the right circumstances. Jakob C. Loescher, a financial advisor at Savant Capital Management in Rockford, Illinois, says, “I know of only a few individuals that can live solely off Social Security. The most common situation is with a widow or widower who is able to claim a larger survivor Social Security benefit and is in a rent controlled environment where property taxes are not a concern. Generally, these folks live in the Midwest where overall state taxes are lower. Oftentimes, these individuals still comb through coupon booklets to save costs on food, and will generally have a Medicare Advantage plan which offers lower overall costs for HMO formatted healthcare design. Sometimes, if these individuals are homeowners, they are mortgage free and also can take advantage of property tax freezes, if offered, due to lower than average income and age.”

If you find yourself increasingly likely to rely solely on Social Security income during retirement, Andrew Rosen, a partner at Diversified, LLC in Wilmington, Delaware, offers a few key rules of thumb you should follow. He says, “In general, to be able to live on Social Security alone you would need to be debt free including a mortgage. You will also naturally have to live a very conservative lifestyle as even on the highest payouts these funds aren’t enough. Best advice is you know this is going to be you is work as long as possible (or at least to age 70 if able) and then turn on your Social Security so at very least you are receiving the highest amount your Social Security would be.”

Things do get a little rosier if you’re married. Loescher says, “The best case scenario occurs if both spouses earned maximum benefits due to high average income during a working career. In this case, each spouse could claim $2,788 per month if benefits are taken at full retirement age for 2018.  Combined, this would mean that the annual household income from Social Security benefits would equal $66,912 before income taxes and Medicare cost reductions. For some people, this is enough in many geographic areas, but these figures are quite unrealistic.”

Still there are practical risks in depending too heavily on this strategy. “Where this exercise falls short is basing the assumption on both spouses having worked and earning a maximum benefit,” says Loescher. “If the couple, pre-retirement, lived off combined income figures well over the Social Security taxable maximum (in 2018, $128,700 per taxpayer), it would be unrealistic to suggest that they could live off a combined Social Security income of only 25% of pre-retirement income. In fact, only a very small percentage of taxpayers even hit the Social Security taxable maximum each year, which would mean that the likelihood of each spouse claiming a maximum retiree benefit is quite low. The reality is that the average Social Security benefit for a retiree in 2018 is only $1,404, a far cry from the maximum and nearly 50% less household income.”

Worse still is what happens when one spouse dies. “The surviving spouse will not be able to continue to receive both benefits,” says Reyes. “They will automatically be reduced to one benefit (the higher benefit). So if you found it tough to survive on two Social Security benefits. You will find it even tougher to go down to one.”

In the final analysis, though many Americans would find it difficult or impossible to be happy with their retirement income being limited to Social Security, a sizable group of other Americans can and do live their retirement with Social Security as their sole income source. “The reality is that for people to just ‘get by’ in retirement you do not need a lot,” says Hopkins. “If you own your home, have Medicaid, and a small Social Security benefit to pay out of pocket costs, food, and essentials you can get by. In fact, it’s how millions of people get by every year. Now this might not be thriving in retirement, but it is also important to remember that there are less seniors in poverty as a percentage than there is of the total population. Social Security, SSI benefits, and Medicare do help provide a baseline of care for retirees.”

Christopher Carosa is a keynote speaker, journalist, and the author of  401(k) Fiduciary SolutionsHey! What’s My Number? How to Improve the Odds You Will Retire in Comfort and several other books on innovative retirement solutions, practical business tips, and the history of the wonderful Western New York region. Follow him on Twitter, Facebook, and LinkedIn.

Mr. Carosa is available for keynote speaking engagements, especially in venues located in the Northeast, MidAtantic and Midwestern regions of the United States and in the Toronto region of Canada.

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Christopher Carosa, CTFA

Christopher Carosa, CTFA


  1. Dennis Myhre
    Dennis Myhre March 14, 15:08

    Chris, a good, “plain talk” approach to a worrisome, but manageable problem for retirees. I am one of those you speak of… high earnings for years, then retired in 2010 after losing most of my 401(k)… sold my fully mortgaged $300,000 home on a golf course in Branson, Missouri, and moved into an Fannie Mae auction home I purchased for $60,000 in Idaho, to live closer to the grand-kids.

    I sold my golf clubs and started writing about financial fraud in the 401(k) industry (cheaper hobby). My wife of 54 years and I are living comfortably with no debt, we own a couple affordable cars, and do it with $3200 monthly income from Social Security checks, and loving retirement!

  2. Dennis Myhre
    Dennis Myhre March 14, 15:10

    In fact, I could swear the guy in your photo is me…. have you been to Idaho lately??

  3. Christopher Carosa, CTFA
    Christopher Carosa, CTFA Author March 14, 15:21

    LOL! No, but a friend of mine is trying to get me to go out to South Dakota and Wyoming.

  4. Dennis Myhre
    Dennis Myhre March 14, 15:48

    I was born in South Dakota, and lived in western Wyoming for a few years… you will love it!

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