New research shows that many Americans count on Social Security to be a key source of retirement income — but it typically covers less than half of their monthly expenses.
In a recent survey, MFS — a global investment management firm — found that 87% of workers expect Social Security to be a source of income in retirement. The survey also determined that 68% say they expect it to make up less than half of their retirement income. Another 21% expect Social Security to account for at least half of their income later in life.
However, when retirees are asked about their actual income sources, they report that Social Security makes up about 41% of their monthly income. It’s the largest single source of funds for many, but that leaves a majority to come from savings, investments and other sources.
The average retired worker currently receives about $1,976 per month from Social Security, according to the Social Security Administration. Meanwhile, the average retired household spends about $5,400 per month, according to the U.S. Bureau of Labor Statistics.
That gap highlights why Social Security alone isn’t enough to cover ordinary retirees’ monthly expenses.
Retirement doesn’t always go according to plan — and sometimes it arrives sooner than expected. Nearly half of retirees tell MFS they left the workforce earlier than they planned, often due to health issues, caregiving responsibilities or job cuts.
Just 15% said they had savings when they stopped working. And for those hoping to ease into retirement, options are limited: Only 22% of plan sponsors offer a program that lets employees gradually transition out of the workforce, according to MFS.
Working longer might seem like the obvious fix for inadequate savings, but it’s not always realistic. Still, a growing number of people are facing the financial reality that retirement isn’t an option anytime soon. An analysis by Asset Preservation found 51% of employed Americans 65 or older have no plans to retire, citing financial insecurity as a key factor.
The future of Social Security, at a glance
Today’s retirees are already navigating the difference between reality and their expectations, making retirement planning more important than ever. Looking ahead, the future of the federal benefits program adds another layer of uncertainty.
According to the Social Security Administration’s most recent trustees report, released June 18, the trust fund reserves that help pay benefits are projected to be depleted by 2033. At that point, incoming payroll taxes would be enough to cover roughly three-quarters of benefits.
All beneficiaries at that time could see nearly a 25% cut unless Congress takes action.
That doesn’t mean Social Security will go broke — benefits will still be paid at reduced levels if nothing changes. However, concern about the program’s future is widespread: 80% of workers and 70% of retirees polled in the MFS survey say they fear significant changes to the U.S. retirement system, including the impact the impending benefit reduction will have on their income in retirement.
The bottom line? Social Security remains a crucial part of retirement income, but it’s increasingly not enough on its own. Workers need to plan with realistic expectations and prepare for a future where Social Security payments may not stretch as far as they hope.
More from Money:
Over Half of Older Employees Plan to Work ‘Indefinitely’ and Never Retire
Social Security’s Trust Funds Will Run Out of Money in Less Than 10 Years
Americans’ ‘Magic Number’ for a Comfortable Retirement Has Dropped $200K
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Recent research from MFS, a global investment management firm, has revealed that a large majority of American workers rely on Social Security as a key source of retirement income. However, this income typically covers less than half of their monthly expenses. The survey found that 87% of workers expect Social Security to contribute to their retirement income, but 68% anticipate it will make up less than half of their income. Only 21% expect it to cover at least half of their income in retirement.
However, when retirees were asked about their actual sources of income, they reported that Social Security only makes up about 41% of their monthly income. While it is the largest single source of funds for many retirees, it still leaves a majority of their income to come from savings, investments, and other sources. This highlights the fact that Social Security alone is not enough to cover ordinary retirees’ monthly expenses.
Retirement does not always go as planned, and sometimes it arrives sooner than expected. The survey found that nearly half of retirees left the workforce earlier than they had planned, often due to health issues, caregiving responsibilities, or job cuts. Only 15% of retirees reported having savings when they stopped working, and options for easing into retirement are limited, with only 22% of plan sponsors offering a program for gradual retirement transition.
While working longer may seem like a solution for inadequate savings, it is not always a realistic option. However, a growing number of people are facing the financial reality that retirement is not an option anytime soon. According to an analysis by Asset Preservation, 51% of employed Americans aged 65 or older have no plans to retire, citing financial insecurity as a major factor.
Looking ahead, the future of Social Security adds another layer of uncertainty for retirees. According to the Social Security Administration’s most recent trustees report, released on June 18, the trust fund reserves that help pay benefits are projected to be depleted by 2033. This means that incoming payroll taxes will only be enough to cover approximately three-quarters of benefits. If no action is taken by Congress, all beneficiaries could see a 25% cut in their benefits.
It is important for current and future retirees to plan for their retirement, as the reality often differs from their expectations. With the future of Social Security in question, it is more important than ever to have a solid retirement plan in place.
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