Is it possible to retire on Social Security alone in 2024?

Are you hoping to retire in the near future but have nothing saved for retirement? Never say never. Social Security benefits are not intended to guarantee everyone’s entire retirement income, but most people will be able to receive some amount of benefits when the time comes.

The question is, given today’s cost of living, will Social Security alone be enough to maintain a modest lifestyle in retirement?

Probably not.

Eye-opening numbers

I don’t mean to discourage you, but the average monthly Social Security check retirees will receive this year is just over $1,900, or about $22,800 per year. This is a far cry from the $72,967 the U.S. Census Bureau reports the average household spent on basic items such as food, clothing and shelter in 2022.

But keep both of these numbers in perspective. A typical monthly Social Security payment is just one of the benefits of the average retiree, but two retirees may live in the same household. The average household’s spending also overrepresents the needs of a family of three or more, which of course requires more spending than a household with one or two retirees. They’re also more likely to own their home outright after retirement, but people in their working years often pay a mortgage or rent.

Still, it’s unlikely that an income of $1,900 per month will cover all of your expenses in retirement. Even if you live frugally.

By the way, the Census Bureau reports that nearly half of all people between the ages of 55 and 66 living in the United States have no money saved for retirement. The Federal Reserve confirmed the results. Clearly, many retirees are trying to make do with Social Security alone, or soon will be.

The good news is that even if you haven’t saved enough for retirement yet or haven’t saved anything at all, there are a few things you can do to better fund your future.

Playing catch-up

Don’t panic! You’re less likely to make wise decisions when you’re panicking. Rather, take the time to think things through before taking action to close the gap between what you have and what you need.

There are two main categories of people in this predicament. Those who are already retired and receiving benefits, and those who are not but will soon be retired.

If you have already started receiving Social Security retirement benefits, is You can pause and resume later (it may get bigger). However, this option has limitations. One of them is that you must have started your benefits within the last 12 months. You must also repay any amounts already received.

This means you’ll not only need to prepare a sizable lump sum, but you’ll also need another source of income until your benefits start again. If you’re worried about living on nothing but your Social Security benefits, you probably don’t have any other income.

So for most Social Security beneficiaries, the more feasible option is also the most obvious option. It’s just about continuing to work.

Image source: Getty Images.

This is clearly not something that individuals thinking about retirement want to do at this stage of their lives. But if the alternative is getting into debt or losing your home, it certainly makes sense to have a work-based income. This includes starting a small business.

You can earn a significant amount of money without affecting your Social Security payments. If you haven’t yet reached full retirement age (or FRA) this year, you can earn up to $22,320 before Social Security reduces your benefits. Nonetheless, the program only deducts $1 from your benefits for every $2 you earn over this limit. These income limit rules become much more generous in the years you reach FRA. You’ll also get credit for those deductions, so working doesn’t mean you’ll lose those benefits entirely.

If you haven’t yet retired and don’t receive Social Security benefits, your best option is to delay the date you finally stop working. Not only will this save you more time, but it will also strengthen your final Social Security payment. You can claim as early as age 62, but each hour you wait will add 5 to 8 percent to your monthly benefit.

Whichever scenario applies, know that there is no added benefit to waiting to claim Social Security benefits once you turn 70, and there is no penalty of any kind for earning other forms of income after you reach FRA.

Scenarios best avoided through a lot of initial planning

Of course, the best way to avoid facing such a difficult situation is to never get into it in the first place.

However, problems such as bankruptcy or health problems can reduce your savings. In some cases, your circumstances may not allow you to put additional funds into your retirement savings account. None of this is a judgment on people who plan to only receive Social Security income in retirement.

But whenever possible, it’s worth it to do everything you can now to generate a final income that exceeds Social Security benefits later. Saving an extra $100 each month and investing it in a stock index fund could be worth more than $200,000 in 30 years, based on an average annual return of 10%.

Understand that time is the biggest burden on investors. That’s why it’s important to start as early as possible, even if it’s a small start.